Interesting set of charts from a presentation by Columbia's real estate guru Chris Mayer showing house prices relative to 50-year trends:
It looks like there is a bit of mean-reversion going on here, but two factors make Mayer think that there could be an overshoot: Excess housing supply and the high spread between 10-year Treasuries and 30-year mortgage rates --2.52% now versus 1.6% historical.
As Mayer and Hubbard said in their WSJ op-ed Wednesday, the solution they like is the one proposed by the Treasury: lower mortgage rates to spur demand. But not everyone thinks that's a good idea. (Mayer and Hubbard's paper.)