I am a believer in the fundamentals camp.

House prices will level when:

Supply = Demand
(work through all the foreclosures)

Price = the historical 3to4 times peoples annual incomes
(current median income in CA is like $60K)

cost to buy = a little more than renting
(still cheaper to rent)

Other physcalogical factors:

People not fearing losing there jobs
People not losing their asses in the stock market

This is my uneducated opinion…