Supply and demand did not cause the bubble, they (increased demand and less supply) were the result of loose credit. The loose credit is not there anymore and that is what’s causing demand to drop and therefore supply to increase.
I think trying to say that because there is so much supply, prices have come down and as a result more people will buy this supply at these lower prices is missing the root cause of the bubble and completely ignoring the role that loose credit has played.
Sure, a few people who can still get credit will pick up a few foreclosures, a few people might sell a house in another state and move here, etc. etc. etc., but unless the banks start giving out free money again, demand isn’t going to come back with any force IMHO.
