Yale's Robert Shiller says the U.S. housing market could overshoot its bottom and end up being below, in inflation-adjusted terms, where it was in 1997.

"We're not quite down to where we were before, but we're getting close," Shiller told Time magazine.

"Overshooting is typical in the stock market, but in the housing market, I don't know. We've never really had such a big, national bubble in the housing market before."

Case-Shiller data show home prices are still falling, Shiller notes, although the rate of decline has slowed.

“There is also some sign of pick-up in pending-home sales,” he says, “but to me the dominant fact is that prices are still falling.”

Looking at a longer rather than shorter time horizon, Shiller says it’s possible things are picking up.

“The other thing that is striking is that home prices have come down a lot, so they're no longer very overpriced,” Shiller says.

A major reason bubbles occur in the housing market is that there’s no way to short housing. The ability to short a given investment is essential to an efficient market for that investment.

“There's nothing to stop zealots from pricing things abnormally high (now)” Shiller says. “We could update mortgages in a way they protect people from things beyond their control, like high national unemployment,” he points out.

Last week, Federal Reserve Chairman Ben Bernanke told Congress the housing market is beginning to stabilize, and the recession should end later this year.

Bernanke testified that sales of resale homes are stable and sales of new homes have recently increased, though both still remain at depressed levels.