house prices in the United States and other advanced countries have already undergone substantial corrections since 2008. So in most countries, house prices have moved much closer to their economic fundamentals (see Chart 3). Our econometric estimates indicate that if the remaining adjustment were to happen over five years, house prices would fall modestly—an average annual rate of between 0.5 percent and 1.5 percent.
For countries such as Spain and Ireland there is an additional reason to expect slow recovery. In these countries, the construction sector grew much more rapidly than other sectors of the economy and became the engine of growth. The housing bust has thus brought severe contraction in construction output and employment. The unemployment rate is now three times its 2000–07 average in Ireland and twice its 2000–07 average in Spain, compared with a 20 percent increase on average among euro area countries.
... and problems in the housing market and the labor market are intertwined: U.S. states where the house price bust was more pronounced are also where employment has fallen the most
(that is, Nevada, Arizona, Florida, California).
In sum, in my opinion, prices should fall a little in the U.S. (particularly in States with high unemployment, and in which the prices have not fallen as much yet, such as Michigan and Rhode Island), and more in Great Britain, Austria, France and Spain (where the actual adjustment has been significantly less than the IMF-predicted adjustment).