The single most relevant factor regarding home prices is WAGES. In the absence of a credit bubble, folks must make money in order to be able to qualify for bigger and bigger loans, leading to higher values.
Since wages are and have been falling for most/many, home values should return to 1996 levels and then trade sideways for at least a decade before rising.
Unless jobs start paying more—if you are upside down, better to start over than wait for appreciation that may be 10 yrs off.
The Alt A loans are just beginning to foreclose (which includes MTA Option Arms and there are many billions of dollars of those) and then Prime loans will follow.
The foreclosure waves should cease by the middle of 2011, but don’t assume that will automatically lead to higher values right away…
Also do not forget the baby boomers will be sellers and not buyers, leading to more and more inventory, lower prices.
All real estate slumps usually take a decade or so to recover.