I sense a theme.
2004: Home prices rise. Be very afraid.
2005: Home prices rise. Be very afraid.
2006: Home prices drop. Be very afraid.
/2007: Shark! Be very afraid.
By the way, locally, I've seen properties drop over $100K so far this year (20%+).
In my Sunday paper, there were several articles about people dropping house prices and still not selling. These people interviewed were quoted as saying they've dropped their prices anywhere from $40K to over $100K and still haven't sold.
There was a large article about condo-conversions, and how the developers have had to put the properties back to rentals since they couldn't sell them
Then there were ads from the large home builders, that actually listed new properties for sale. In these ads they actually listed the original asking price and then the amount of each price reduction, trying to tempt buyers. These reductions listed averaged $40,000, but several were higher, with one reduction of $100,000.
I'd say there's a lot of evidence of more then a brief "price correction".
2008: Snakes in a house ! Snakes in a motherf$$$ing house !!!
. . . with your Realtor(tm), Samuel L. Jackson