No one knows how long it will take the real estate bubble to fully deflate. But it will happen. It is happening. Here's a very hopeful data point from Washington D.C.'s outer suburbs.
In Prince William County, the number of residential sales in June, July and August was roughly double the comparable months in the summer of 2007. You can see the numbers here as well as comeuppance for an astonishingly inept bit of reporting in the Washington Post.
The sales are up because prices have collapsed, which is actually a sign of health for the housing market and a prelude to recovery. The median price for those 1,000 August sales in Prince William and the city of Manassas was $205,600, down 43 percent from the year-earlier median of $362,500 and a level not seen since 2003. See the complete data set here at the extremely informative Northern Virginia Housing Bubble Fallout blog.