Rolfe Winkler of Option ARMageddon makes a very simple point, that housing affordability is based on monthly payments, not on house price, and since house prices are falling with historically low mortgage rates, we can reasonably expect further price drops as mortgage rates return to their historical numbers.

With real inflation nearing double digits, and there being an eventual limit to just how long foreigners are willing to supply us cheap money, mortgages have to return to something nearer to their historic rates of around 9%, possibly with some overshoot.

BTW, here is how interest at a given rate influences house price:

By my maths, it looks like we might see an inflation adjusted drop of around 50% from peak, which means that people who bought a house at peak might be under water for more than 10 years barring significant inflation.