The bottom line: Real estate prices eventually correct themselves. And unfortunately for homeowners, it often takes years before home prices start to rise again, especially after a big run up. National City recently studied 66 major metro regions over the past 21 years that suffered through a 10 percent or greater decline in prices for at least a two-year period of time. It found that home prices, once they begin to correct, tend to decline 17 percent on average before markets heal themselves. "And the average duration of these adjustments is 3.5 years," says DeKaser [chief economist at National City].
And remember, your losses are exaggerated by the leverage you used (using Other People's Money works both ways!), so true losses are probably several times that percentage.
As I pointed out in my piece back in September, time is your friend, so if you intend to stay put for 5-10 years, the odds are in your favor, but if you're a 20-something year-old flipper, God be with you, 'cos you're gonna need Him.