I agree with ThriftyDifty: It can (and will) get much, much worse.
I think that stock market valuations are inherently worthless right now, mainly due to bloated corporate earnings. Standard valuations based on traditional methods are therefore not going to be worth much.
IMHO, there are three bubbles right now: Housing, Credit and Stock Market. I also believe there is a coming credit crunch and that is where things will get really ugly.
The majority of mortgage resets are still over the horizon and yet we have seen some seriously bad bloodletting as of late. Wall Street has now taken to punishing risk taking, as evidenced by the last week or so in the market.
If you speak with anyone in banking right now, the message is one of the coming crunch. I would have to believe that with a huge inventory overhang, tightening lending standards and declining values, the RE market will probably be on the front end of the bust, with the stock market not too far behind.
The Japanese learned this particular lesson the hard way, and, to a certain extent, have still not gotten over the effects.
