The housing sector still has a way to go before bottoming out, with nationwide home prices poised to drop on average of 13 percent before improving, according to Fitch Ratings.
As of the second quarter of this year, home prices have fallen 38 percent from their peak levels and 7 percent year on year.
"Persistently high unemployment levels, together with continued household deleveraging and low consumer confidence, will continue to weigh on housing and pressure current price levels," Fitch analysts write in a report.
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"Furthermore, income growth, which has been one of the largest drivers of sustainable price growth over time, has also lagged over the past several years, with many markets experiencing flat or negative real growth. Until income growth returns, sustainable price levels will remain soft."
The pace of that 13 percent decline remains up in the air, and will depend on how long the market can liquidate distressed inventory, Fitch adds.
Legendary investor Warren Buffett says the housing sector is hurting the overall economy, pointing out that many other industries are healthy based on a look at the many subsidiaries in which he invests through his company Berkshire Hathaway.
"We have more than 70 businesses and some of those businesses have many businesses, so we've really got a cross section of American business," he recently told CNBC. "Of the 70-plus businesses, all but about five are doing considerably better than was the case a year ago," Buffett told CNBC.
"What is getting killed, and what is not in a recession but in a depression is anything connected with residential construction, and that includes things like our carpet business, our installation business, our brick business."
Economists, meanwhile, are expecting a lackluster 2012 economy thanks to a continued weak housing sector.
"We expect to see a slower recovery in the coming quarters than we initially hoped," says Federal Reserve Economist Andy Bauer, according to the Associated Press.
"Going ahead, people are expecting 2012 to be more of a transition year."
Housing starts, an indicator of the sector's health, did manage to rebound in September, with builders breaking ground on privately-owned new homes at a seasonally adjusted annual pace of 658,000 units, marking a 15 percent increase from August, the AFP newswire reports, citing Commerce Department data.
Ian Shepherdson, chief U.S. economist at High Frequency Economics, says the industry does show some signs of improvement.
"The underlying trend does seem to be picking up, presumably because of the sustained increase in demand for rental property in the face of the stagnant purchase market and tight mortgage lending conditions."