You have to look at inventory and inventory is still very low. While I agree that prices are out of wracked vs. wages, it does not mean prices will go down any time soon.
You need to ask yourself....what's going to cause homeowners to sell especially at a loss? Unemployment rate is still very low. Even if they are spending 40% of their take home income on their house, they will keep on paying their mortgage just as long as they are still working.
Debt will crush you and will separate winners from losers when bad time comes.
You answered your own question, it's debt in the form of leverage (and those people too stupid to refinance an ARM to a fixed given the Feds gift to them to refinance). I would say that you're right in the sense of those factors (prices will NOT go down anytime soon for producing regions). Here are the actual questions that the housing market is going to have to worry about:
1. How much of this debt is "bad" in the sense that the loan is uncollectable?
2. How much of the underlying asset is there really? Places with mostly settled stock (Portland) will retain value, but I'd argue strongly that house quality in Phoenix, Orange County, and Florida in particular is quite variable and that the useful economic life for some of the shoddier homes is at an end.
3. Gas prices in the longer term projection. When prices are cheaper, commuting is a decent option even for long commutes. When prices per gallon exceed 50% of the minimum wage, then we have a problem as it has quite the effect on labor.
4. Taxation obligations in a district. Not a big deal in the rural districts, but the urban ones and their inner ring suburbs pay increasing amounts due to government complexity and inefficiency.
Housing is like food. There's places that sell you actual food (farmers, cooperatives, grocery stores on the walls), ersatz food (convenience stores and grocery stores in the interior), and things marketed as food (Twinkies, Pizza Hut, and White Castle). Figuring out what's actual housing is a lesson lost on most people I know. It's pretty "sad" (hilarious) to see my co-workers buy in absolute crap districts where it's cool in your 20s (cheap with funky stores), annoying in your 30s (higher crime and regular stores and facilities not nearby), and unlivable in your 40s (no city services like schools worth a damn) where they have to compensate such as buying extensive security systems and sending their kids to Pope Alexander (the Borgia Pope) School for Scumbags.
So people like you living in places that you'd live in anyway taking on debt that you can actually afford (with your job as collateral essentially) are going to be fine if a bit annoyed as things get a little expensive if you want to move. But the speculator, unless they can meet their margins, I do expect them to wipeout. But the housing concerns that "we buy *($# houses", the model works on locations, but they are even having a tough time as question 2 really is a problem (some home builders, Shea and a couple of others, were really crap construction that building code should have never signed off on).
If you look at long stable markets like Germany, it really turns out to be a wash except for the utility of holding onto a particular location. But I would argue that your point that inventory is low should be qualified as *good* in the Georgism sense (location, quality, city services) is low and sales are very hard to come by period.
Since, I'm an owner (without a mortgage, we are paid off), I'm curious and concerned about property taxes and utility access as well as city services (my schools cannot be crap even without children as I don't want to live in a neighborhood without a demographic future). It's funny how those concerns shift over the years. But what I'm not worried about is the quality of safety and policing (we don't have scumbags living in this city, and yes, that unfortunately has class and racial implications as well), my neighbors going "The Purge" on my household, or that the city is unresponsive to complaints. That's worth paying for by me, I hate the drama of living in a city where I have to spend effort fighting for basic service delivery (DC (East side), Chicago, and Portland definitely come to mind).
Georgism sense -
Georgism - Wikipedia
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