Using the S&P/Case-Shiller® Home Price Index for comparable sales of single family homes in the Boston MSA, the peak of the late 80's / early 90's market occured in July 1988. Plotted below in black are the percent price declines in the subsequent 106 months relative to that peak.
The market did not bottom until ~36-48 months after the peak. One way to interpret this plot is that on aggregate, a home purchased in July 1988 would be sold at a loss for the next 106 months (>8.5 yrs). A home purchased when half of the ultimate price decline was complete (-8% @ ~24 months) would be sold at a loss during roughly the next 56 months (>4.5 yrs). These are NOT inflation adjusted prices. This does NOT include commision costs.
There is no reason to expect history to repeat itself exactly, but the yellow bars on the plot show very similar price declines from the recent September 05 market peak. The arrow indicates the most recent data release for January 2007. The final five bars in the plot correspond to the CME futures for the Boston MSA for the next 12 months (as of March 27).
Only time will tell whether the current bear market wil match or exceed the severity of the previous cycle. But the plot does provide cautionary evidence that purchasing in a falling market is no protection from potential losses for extended durations. Next time someone tells you "now is a great time to buy," keep this in mind.