What's your math on that? 6% for 8 years is 1.06^8 = 1.593, which is about a 60% gain. If you are highly leveraged and paying 6% on the money you borrowed then 6% appreciation isn't a gain.
Now the non-housing part of the economy is experiencing significant inflation and lenders are functioning like real lenders, so people have less to spend on housing. Demand for housing has also been suppressed by the financial death of the flippers. The supply side of the equation has been stoked because after 2005 builders, being builders, continued to build and the forclosure rate has increased.
Under these circumstances, why is anyone surprised that prices have returned to 2004 levels. Why should anyone be surprised if prices decline to the levels of 2002 or even 2001. Standing atop the 1995-1999 inflation, the inflation in housing prices in the first five years of this century was not based on any permanent change in market fundamentals. It was based on increased demand which was stimulated by unsustainably easy credit and a speculative frenzy (at least here in San Diego).
The response of the potential sellers in the market has been retreat and, in some cases, denial. Very few homes are being listed for resale. In my entire zipcode only 15 or so homes were listed during the first quarter of this year. Some were priced in a way that may come close to recognizing reality. Others were priced as if we were still living in 2005. Very few have sold.
This market has a bottom. Very clearly we have not reached it.