Over on the residential side, they're still debating whether the U.S. housing industry has more hill to tumble down, or if the lumps it took towards the end of 2006 were bounces along bottom. But it appears the industry -- and federal budget overseers -- pretty much agree that the hardest part of the fall is behind them.

The debate issue is important to commercial real estate because it underpins the outlook for the wider U.S. economy. The U.S. housing market boomed from early 2003 to the end of 2005 despite anemic job growth (remember the famous 'jobless recovery?), making many Americans feel house-rich and adding to the nation's overall economic growth.

If the worst is over, economists contend, then it would be less likely that the housing downturn will spill over into broader recession. And that view appears to be the consensus right now, based on recent data and surveys.

"With all the wild projections by academics, Wall Street analysts and others in the media, it appears that much of the housing sector is experiencing a soft landing," said David Lereah, chief economist for the National Association of Realtors. "Despite the doomsayers, household wealth will not evaporate and the economy will not go into a recession. If you're in it for the long haul, housing is a sound investment."

While those 'wild Wall Street doomsayers', might agree that the bumps are softer, they also think that the risks of worse are still there.

"Various recent data such as sales of new and existing homes, trends in pending sales of existing homes, mortgage applications and housing affordability, are implying that demand for single-family homes has begun to stabilize, albeit at low levels," said Robert Curran, Fitch Ratings' managing director and lead homebuilding analyst. "For the moment, however, affordability issues, excess supply and poor buyer psychology still dominate, and the sector is not immune to a continued downturn should a recession develop before the current housing correction troughs."

And how about those academics?

According to Wharton finance professor Jeremy Siegel, the data suggests "that we're not falling off the biggest cliff in the world. But housing is certainly not going to add anything to GDP. It's a question of whether it's going to subtract any more than it already has," Siegel said.

Meanwhile, analysts at the Congressional Budget Office forecast the U.S. housing slump to bottom out in 2007, but still act as a drag on overall consumer spending, while business investment is projected to remain steady and corporate profit growth declines.

The CBO projected prices for houses will continue edging down in 2007, stabilize later in the year, and possibly begin heading back up in 2008.

A reduced housing inventory "will encourage a mild rebound in homebuilding during the second half of this year," the CBO said, cautioning that the housing outlook remains uncertain.

Recent data can support either view because the fine print behind the statistics can cause differing interpretations.

For example, the NAR is forecasting 1.51 million housing starts this year, down from 1.81 million in 2006, a 16% drop. The housing starts number, however, includes condominiums and apartments. The multifamily market has not experienced the downturn of the single-family market. Remove apartment numbers from the equation and the drop in single-family starts could be more severe next year.

The build up in available inventory is also subject to varying interpretations. The ratio of homes for sale to homes sold increased sharply last year, with both new and existing inventories around 60% higher than their previously stable level.

But depending on who is looking at the numbers, those inventory levels could be over-exaggerated or under-exaggerated. One side says new home inventories are understated because they do not adjust for contract cancellations (which also surged in 2006). The other side says the discretionary seller (those who didn't need to sell but just wanted to cash out on their property's appreciation) will eventually pull their houses from the market, reducing the inventory of existing homes on the market.

The National Association of Home Builders (NAHB) doesn't necessarily split those hairs over their inventory. If the discretionary seller withdraws from the market, that is one less buyer in the pool of new homebuyers.

"The improvement in market conditions, coupled with the drop in single-family housing starts, indicates that builders are working to control their inventories and positioning themselves for the upcoming spring buying season," said David Pressly, president of the NAHB and a homebuilder from Statesville, NC.

Turning to anecdotal evidence from Federal Reserve banks from around the country, conditions seem to be stabilizing.

Respondents to Federal Reserve Bank surveys now attribute slow housing sales across New England to "buyer patience" and not to unrealistic pricing. Respondents noted that the declines in sales and prices have slowed in recent months and suggest that markets may be approaching a bottom.

Residential real estate agents across the Mid-Atlantic reported a modest pickup in home sales over the last two months of the year.

In the Ohio River valley, residential contractors said homebuilding material costs have leveled off or -- in the case of lumber prices - have come down. Many builders reported adjustments to the size of their labor forces are over and do not foresee laying-off additional workers.

In the Midwest, real estate agents reported improved performance in lower-priced homes.

Agents in the South reported just the opposite and said higher priced homes continued to rise at a modest pace.

Out West, in several previously hot areas, such as parts of Southern California and the San Francisco Bay Area, home price appreciation slowed to low single digits and homebuilders continued to work down unsold inventory by offering significant incentives to entice buyers.

All of which is encouraging news.

"With improving affordability measures, strengthening consumer assessments of home buying conditions and an upswing in applications for mortgages to buy homes, builders are starting to see that the worst is behind them," said David Seiders, NAHB chief economist.

Fitch's economics team is predicting that house prices on average are likely to stagnate through 2007 and pick up to single-digit growth from 2008. While this implies a period of price contraction in real terms short term, the scenario is not as pessimistic as it was last summer.