It’s going to take a long, long, long time for things to settle down. Imagine this situation:
* Couple buys nice home for $500K in 2000.
* Property appreciates to $900K+
* Couple divorces and wife gets the house OR husband retires.
The wife (divorce case) or husband (retirement case) can’t really afford the payments on their reduced income but has got a lot of equity, or so they think. So they use the HELOC a couple of times a year to make up the difference.
These folks will not sell until there is no more HELOC money, all possible rooms have been rented out, all of the stuff has been sold, the 401K is empty, the credit cards are drained etc… Although they have no business being in the house they will slowly consume all of their resources to remain there.
I believe that there are lots and lots of people in this situation, slowly digging themselves further and further into the hole in order to keep up appearances and continue living as they have been for the last 8 years.
Once these people start losing their homes en masse we will be near the bottom. I think that is still a good 3-5 years out.
Of course I could be wrong and prices will never come down in NC, La Jolla, Mission Hills, etc…