I'm an eternal optimist & by no means a preacher of doom & gloom. I'm actually usually the one coaxing people out from underneath their desks & encouraging them that they can still be successful in today's real estate market.

Having said that, there's no question that the economy has slowed down from where it was 1-2 years ago and many people, both directly in the real estate business & not are asking how deep and far it will reach. 

Following is an extremely comprehensive report that Fannie Mae produced explaining what created today's slowdown. It also compares this slowdown to slowdowns of the past.

I think the following completely & simply explains what got us to where we're at & why this is continuing:

The central player in the current recession has been excess leverage within both household and business balance sheets. This excessive level of leverage is being unwound across the entire credit market.

They also have some very good projections of the timing of the market improving, based on past slowdowns.

The report can be found here:  http://www.fanniemae.com/media/pdf/economics/2008/Summary_121908.pdf