There's a long way to go to get to a real housing decline. In Houston in the early 80's, entire blocks would have every home for sale, many on the market for 4-5 years.
But despite that, they didn't radically go down in price. Maybe 10%. The fact is that mortgage holders won't pay someone to take their house (they'll walk away first). And lenders with forclosed homes won't sell for less than they have in it either, because they weren't looking to get their money back for 30 years in the first place, so a year or three isn't a big price to pay to avoid crashing the market and losing even that.
Yeah, prices won't go up this year. But you'll be waiting a long time to find a real steal. Even then it will be about the same price as you could have paid in June '05 and you'll think it's a great price.
Maricopa county real estate is forecast to increase in price 3.3% this year after last years 45% run up. There are a "normal" number of houses for sale in Fountain Hills where I am, after practically nothing for sale this time last year. And that's after plenty of new construction.
You are right, to an extent. What has changed is all the interest only loans and arms are going to cause IMHO a real drop in some market. I live in Pasaden TX, and I figure I will be able to pick up a house for about 90 to 95 cents on the dollar in a few years as arms go up forcing people either out or to seel for near what they owe.