What the nay-sayers do not realize is that financial markets are no longer tied to the gold standard, and value is entirely rooted in perception and expectations. What this means is that the value in anything is only what the market participant believes it is.
Hence real estate markets are vulnerable to the same self-fulfilling prophesy that any other financial market is subject to. They just react a bit more slowly. Moreover, real estate markets are local, so local in fact that two neighboring developments that look more similar than not can have significantly different values. Since the media has been reporting the "crisis" in the real estate markets as a nation-wide phenomenon out of ignorance--another example of their proclivity to act irresponsibly--they, with the help of the nay-sayers who are too ignorant to understand the flaws in the reportage, may bring down the otherwise sustainable markets.
In my market, San Antonio, there was a significant decline in the volume of sales, but the overall average appreciation has been reported to be as much as 8% in '07. In my own neighborhood, 22 properties (3 BR, 2 BA) sold at an average price per sq. ft. of $89.85 from 06/06 to 06/07, and 12 properties sold at an average price per sq. ft. of $98.71 from 06/07 to 06/08.
Anyone who listens to "Market Report" on NPR heard last week that Charlotte, NC, was the only market that did not experience a decline in market values. This week, they would have heard that even Charlotte was in the midst of a 15% nationwide decline!
Yes, even NPR cannot be trusted to get it right! It seems that they are content to rest on their bed of laurels as somehow being better than other media sources based on the (mis)perception of their intellectually superior broadcasts.