"If you are looking at prices relative to income and rents, you could argue that we are at a bottom, and I'm cautiously optimistic that we may be," Thomas Lawler, former Fannie Mae (FNM) economist, told Bloomberg. "It's possible, however, that we could have a second wave of foreclosures and the very small amount of support the economy might have gotten will turn into the reverse."

That second wave Lawler is concerned about involve the more than two million Alt-A loans in the the U.S. in March that will soon start resetting. This includes interest only loans and option ARMs (where people often did not even pay the full amount of interest due and the unpaid interest was added to principal). When these loans reset many people will be facing large jumps in monthly payments, while at the same time the mortgage will be underwater -- they'll owe more than the house is worth.

Banks already hold about $40 billion of mortgages with payments 90 days or more overdue and another $78.8 billion that are 30 to 89 days overdue, according to data from the FDIC. Also about 1.6 million mortgages have been modified since 2007, but between 41 and 46 percent of those loans that were modified may relapse, according to Office of Thrift Supervision.

Survey analysts expect economic recovery to be slow as well. They predict the U.S. economy will grow at a rate of 1.9 percent in 2010, which is much lower than the 3 percent average expected in the first year after a deep recession. So expect even more risk of foreclosures as unemployment stays above 8 percent.

Builders are taking a wait and see attitude. In fact, Toll Brothers (TOL) decided on May 20 to "mothball" 33 communities. It will maintain the grounds of those communities, but wait for housing demand recovery before resuming sales efforts.

The hardest hit states -- California, Florida, Nevada and Arizona -- will be the last to get relief according to David Berson, chief economist at PMI Group (PMI). He thinks prices in those states could stagnate another two years. Fannie Mae expects the national median home price to fall until at least 2011.

So are we at the bottom or will foreclosures continue to mount, driving prices even lower?

Lita Epstein has written more than 25 books including The 250 Questions You Should Ask About Buying Foreclosures.