1. I agree the RE market prices continue its downward trend.
2. going "short" the market via stocks: short homebuilders. I believe existing home sales will continue to outpace newly built homes. All asset values still have to be marked down and banks have not done that so they still remain unstable so their share prices will probably remain volatile.
3. a 25 year time frame is a long period to make a realistic guess but on a macro scale, the RE pricing in the USA will feel pressure due to a couple of the factors you mentioned
4. the FHA is very unorthodox in lending practices... for starters, they don't even have a damned risk officer! This is a government sponsored organization run with a politcal arm and disregards business sense b 3.5% down payments, higher credit risks, lax income requirements.
5. FHA loan defaults are skyrocketing. Here's a chunk of info about their future: The New York Times > Business > Image > A Troubled Portfolio ... FHA will absolutely need a bailout. The only question is how much. I like how FHA CEO went on record denying any problems a couple of months ago.... that's exactly what FRE's CEO did and we know what happened shortly afterwards
6. as a result of FRE, FNM and FHA self imploding the credit markets will continue to suffer. Mortgages have already become much harder to obtain due to newly implemented regulations
7. make money from the market: find banks who are able to and in fact doing mortgages. The yield spreads are some of the highest in decades
8. make money in biz resulting from downturn: supply credit counseling services or debt consolidation services, become a bankruptcy lawyer, wholsesale flip properties, buy tax lien certificates.
9. I recently put an offer on a home (my family and I are looking to move) that asked for seller financing. the owner was going to use his retirement fund to buy out what's left of the mortgage and then hold back the paper for e. 3500 sq ft houses with 4bed/2.5ba on .75 acres are plentiful. The ability to sell them is not entirely depending on how well the property looks as much as how easy it will be to buy it....
we're in for some interesting times and there are many more opportunities now then there were just a couple of years ago in the height of the bubble.