The problem with real estate prices is coming from excess supply. Depending who’s counting we have from one to three or even more millions of excess homes. Lee Adler said that the best way to get rid of those is to bulldoze them, otherwise it will take extremely long time to work out this supply.
My opinion is that all will happen rather fast, withing 3-4 years and the help will come from gasoline prices. When housing prices will fall another 20% and massive foreclosures will free up millions of home for the market at affordable prices the massive relocation of population will start.
I think all the real estate developments that are more than 30 minutes drive from any meaningful source of job will be abandoned. You know that there is a critical line to be crossed. Imagine a housing community in the middle of nowhere with 80%-90% occupancy. When foreclosures hit and the occupancy slowly decline to, say, 60%, the bad things will start to happen. The cost to maintain or destroy the abandoned properties will be a huge burden on those who pay the maintenance fees and taxes. The brown lawns and broken windows will make prices going lower and lower, add here couple of fires and the whole streets will be considered slums. The high cost of commuting will force more and more people to give up and just abandon their properties, moving into rentals in the city. At some point the utility company will turn off water, gas and electricity for the whole community and the remaining owners will flee.
This process will wipe out several million of homes within few years and the properly located properties will start getting increased bids. The next housing bull market will start. Rinse, wash, repeat