Why does it seem reasonable that house prices will go up, or earnings will go down? The US, as well as most stable economies, have historically had a fairly low income to home price ratio. High gini coefficients and transient workers might explain prices in places like Hong Kong and Singapore. I've always had a hard time figuring out why an apartment in Warsaw costs more than one in New York while at the same time rental yields are much, much lower.
Just take a look at 2009, use that as a basis to do a bit more research.
In vast swaths of the US, housing never went through the bubbles that occurred on the coast. Pulling Austin for instance, median household income was around 50k and houses values were 280k. Nice ratio, real estate has been appreciating at around 3-5%, the rate of inflation (and still is appreciating).
In San Diego, the median household income is 55k and houses are going for 495k with houses appreciating 20-30% a year to get to that level. No surprise that they are coming back down.
I have no personal financial interest in property prices dropping, but I think it's pretty sad when a university professor can't afford to buy a decent house in the city that they teach in. PAIiIZ seems pretty proud that salaries in Poland aren't raising near as quickly as other countries, the government seems to be supporting that to promote investment.
That is the fact :-) Interpretation of that fact lies only in your personal preference.
Asset bubbles deflate the same way that they grew. If it took 7 years to get to current levels, it will take 7 years from them to get back to stable prices.
Just to add a bit, congratulations to people that purchased property to live in and have no problem making their mortgage payments. Even if housing prices drop, you'll still be doing ok in 30 years if inflation stays its course. Speculators...well, housing is just like trading any kind of asset.