As you said the real question is simply the projection of how far down you think the market will go. The secondary question is if you are going to sell then are you okay with being a nomad for a few years. If you believe that the local area where you want to live is going to run downhill another 20% or more then logic would dictate BASED ONLY ON FINANCIAL NUMBERS that you should sell.
Realize that when you do want to buy again you may indeed find a different financing market with more stringent policies then you incurred in 2003. Also you will definitely need to be employed, etc… A strong inflationary environment will not necessarly be good for housing prices. Don’t confuse true appreciation with inflation. The nominal means to combat inflation is to tighten the money supply which includes raising interest rates which will depress housing prices.
I believe a safe assumption is that when we do hit bottom there is no way in heck you will see a “fast” runup in pricing again. Just my opinion.
