This is a pretty good set scenario analyses around the housing bubble. The author, a writer for a great economic and technology periodical called "The Always On Network" (which I highly recommend to keep track of the world of business), makes a pretty sound assumption that housing bubbles don't pop, but they deflate in stages based on work done by a pretty well circulating study by Northern Trust economist Asha Bangalore. This sentiment is's echoed in places as far ranging as the Wall Street Journal to Businessweek so I'd say the consensus is pretty sound. The idea is that because housing assets are not as liquid as say the stock market, the downward trajectory will be fraught with plateaus as housing values deflate and varying capital buying bodies (keeping note of the enormous amount of cash liquidity in hedge funds and asset managers still on the sidelines) make incremental moves, and keeping in mind that transaction flow is on a longer time-frame than the wheeling and dealing of stock markets, he believes it will take 10-15 years to reach equilibrium.
I have no empirical evidence to support this, but my belief that shaving a good 5 years might be more realistic. Given the building boom, I'd venture to say that when demand dries up, there will be a big pendulum swing to the sudden realization of oversupply. The real estate market already "baked in" the demographic trend of baby boomers settling into their new empty nests and demand for new housing simply can't be expected from the Generation X'rs, who like me, are still settling into their careers. Just my hunch, thoughts?