how low the price to be depends on several factors:
1. inflation
2. bailout plan
3. local job market
4. national economy
5. current rent price
6. inventory level
If US loses 10% of its GDP with modest-inflation and unemployment going up to 7-8% in the next 3 years, we will see another 20+% down in RE market (~6-8% drop per year). But if this is inevitable, the Feds will use inflation to counter the damage, so my guesses for what will happen (for the next 3 years) are:
Scenario 1: the economy go downs 10%, the inflation 10-15%, unemployment 6-7%, the house market in bad district down 15-20%, good district 8-10%, another 15-20% of 2004-2006 purchase goes to foreclosure (note already 10% of them sold at a lower price in 2007 as short sale or foreclosure)
Scenario 2: the economy flat, inflation 5%, the house market in bad area down 10-15%, for good district 5%, the another 10-15% foreclosure of 2004-2006 purchases
Scenario 3: in the bottom right now, the economy flat or modest increase, the inflation 5-10%, the house market in bad district down 10%, good district flat, 10% foreclosure of 2004-2006 purchase
Obviously scenario 1 is the worst, for some area, we will expect 20+% drop in price, but not for all the areas.
