[DB]

I don't think prices will fall to much less than what it costs to build the same house today in today's dollars. There are many expenses from permit fees, water meter fees and material costs that aren't going back down again. Copper, wood and concrete are much more expensive today than they were in 2002 due to world demand and the devalued dollar. That demand is unlikely to decline with China and India finally modernizing. In addition our devalued dollar buys less.

The bottom line is demand for housing and the value of the dollar. If our population continues to grow, which it certainly looks like it will, there will be an ever increasing demand for housing. Since dollars are worth less it will take more of them to buy what one could when the dollar was worth more. Two trends that are unlikely to change anytime soon.

[fightinJAG]

If prices do not fall, or lower prices do not sufficiently bring back buyers to the market, the only other thing that can happen is (1) new housing starts completely stop (except for paid-for custom homes)+(2)only people who MUST sell their homes put their homes on the market (IOW, no “just want to move” sellers to increase inventory).