Let's just say that telling you exactly how the real estate market will go, is "above my pay grade" to coin a phrase.
Look at this chart (numbers are from 2000): 
See the 2 longest segments for male and female? That is the baby boomers (roughly). Now add 8 years to each range, and that gives you an idea of how old the largest 2 segments of the population are.
On the point you raise about kids needing to buy houses, the answer is that those "kids" are not having children as early, nor in as great a number, as the boomers. So they need less house.
Your point about houses coming down to a reasonable level is accurate, however, what I pointed out was that some houses were bought on spec, that is, the person buying the house, already had a house to live in and bought a second one, hoping to hold it for only a brief period of time before selling it at a profit. That creates an excess of houses for people to actually live in.