This article makes the argument that home prices are still overvalued relative to their 100-year trend of 3.35% price increases per year. If Federal support for the market were removed (e.g. home mortgage interest deduction and government guarantees of mortgages backed bonds from Fannie Mae), prices might drop 20%. Of course the U.S. Government is very unlikely to destabilize the market currently by removing support for the market given current conditions. That being said, investors in residential real estate need to be cautious and should not assume a return to rapidly rising prices.
Access the article on Wall Street Journal online here: Home Prices Are Still Too High
OR, if you are unable to access WSJ online, I've created a pdf of the article for you to read here: Peter Schiff_ Home Prices Are Still Too High - WSJ