This picture is a little scary. If you look at the trend area you can see the trend of how total housing prices of houses for sale should be trading. If you look at the end on the right you can see where they currently are. Even give the current drops in housing prices shown on the far right, it would appear that the total dollar amount of houses for sale, at the median house price, has a ways to go to get back into it’s normal trading range. Could mean more pain for lenders and more foreclosures. It also means wherever you are currently living is probably where you are going to be staying. A fair amount of Americans are underwater on their houses. If you find your dream home you probably won’t be able to move your current home to get into this dream home.
I’d say there is a massive inventory of houses for sale. I wouldn’t expect there to be any new construction for a long, long time.