I'm not going to claim that I think I can tell the future based on these data. But I will make some observations and even draw some conclusions therefrom, which the reader is welcome to agree with, criticize or otherwise comment on.
One aspect of the price chart (top) that jumps out at me is the fact that the free-fall that began sometime in 2006, stopped pretty abruptly in July 2009 and actually bounced. Having studied technical analysis of price patterns in the past, I would refer to the July 2009 low as "support," or a level at which buyers began to overpower sellers and we see a price bounce. (Note that volume does matter in technical analysis and I just don't have that data here, sorry). So I see strong, recent support at $330K around July 2009.
It is interesting to note that at the same $330K level as we see strong support in July 2009, we also see an inflection point in the graph around May 2003. In this case, the second derivative goes negative to positive. Even though this happened over several months, ultimately the second derivative gets quite positive. This in my view is the point in time at which the irrational exuberance in home buying really "takes off" -- the point where the chart turns concave UP, like an airplane at take off. It's the point where the upward trend in housing prices begins to accelerate. I'm not suggesting that the "housing bubble" began May 2003, but that date, and perhaps price level, does seem to be important given the change in concavity (inflection point).
My crystal ball isn't working today, so I don't know the future of the market. But as of November 2010, the CA market is clearly back around the $330K support level. My proposition is that if this support level holds, and we see price change go to zero in Dec/Jan/Feb and then higher prices in the spring, then we can say that the $330K support level has been validated. In my view, this would be a positive turn of events for homeowners, and a point at which we could see even more buyers come to the table and price increases. If, on the other hand, we see prices fall significantly below this $330K support before the first derivative gets back to zero again, then our support level has been breached and look out below.
I recognize that there are market fundamentals at work. This market is very complex, with many "structural" issues, such as high-unemployment, a sluggish economic recovery, shadow inventory, government intervention, etc., etc. So this is simply a casual attempt by a non-expert to look at price action and patterns (i.e. technical analysis) to see what the data might tell us. I welcome your comments.
EDIT: Corrected "first" "second" and "third" derivatives. Learning to count is fun.
EDIT:
Here's a more zoomed in chart with a better look at the July 2009 support level and the May 2003 inflection point. Click the chart to enlarge.
