http://moneycentral.msn.com/content/Banking/Homebuyingguide/P37627.asp See the above article about homebuying.
A quote from it:
"After dropping more than 20% in the 1990s, Los Angeles home prices took almost 10 years to regain their peak, says real estate expert John Karevoll, an analyst with DataQuick Information Systems. Anyone who lived here during that time knows people who were “upside down” -- owing a bigger mortgage than the home could be sold for. Thousands of people simply walked away from houses they couldn’t sell, trashing their credit ratings in the process."
My parents' very-nice-area-of-SoCal house went from $450,000 to below $300,000 around 1990-91. Now, of course, it's up around $650,000. Still, I know several neighbors who bought for $500,000 in the neighborhood and then had to sell for $350,000 due to relocation for job purposes, etc. If you have a good chance of sticking it out in the house for 10 years, then you probably will not lose money. If there is a good chance you will sell soon, you could lose a lot if prices do go down. If you "let history be your guide", you will be cautious and buy because that is where you would love to live, not because you think it's a "sure thing".