Some economists are circulating the new memo -- things aren't so bad out there in the world of real estate.

According to an op-ed for the Cinncinnati Post, by one of my favorite forecasters, Nicolas P. Retsinas, director of the Joint Center for Housing Studies at Harvard University, "The sky is not falling" -- except perhaps for those who had unrealistic expectations of selling their homes for windfall profits.

"Even with too-good-to-be-true mortgages, people cannot afford to buy homes that cost five times their income," Retsinas writes. "Moderation means that prices will stop rising at meteoric rates: The homeowner who expected a double-digit profit after one year will be disappointed. A home will once again be more of a domicile, rather than an investment. In some regions, prices will flatten, rising around the inflation rate, which is the historic average."

Yet, he says that the fundamentals behind high prices will continue to persist, including the formation of more households in the next decade than in the last. When housing booms typically end, it is to allow "incomes to catch up with prices."

Sure enough, housing has never retested previous lows, and only posted the first loss of a relatively minor two percent for the first time in 11 years.

But that may be little comfort to the Chicken Littles worried that new and existing housing sales have receded back to 2004 levels, despite the fact that it was a record-breaking year. However, some economists don't believe prices will likely follow for some time.

"Price reductions come a year or two later," wrote Ed Leamer, Forecast director and author of a report on the California housing market in September's UCLA Anderson Forecast. While the report acknowledges that the state's economy is in a slowdown, it's expected to grow despite the drag from housing which it predicts will "experience significant declines" over the next five years.

The reason? Stubborn homeowners. Leamer says that home builders have been revising their sales and profit forecasts downward, but existing-home sellers will continue to resist. "Their view is they'll hang on till they get the price they think is fair," he says.

That statement raises an interesting question. How many homes are on the market not out of panic, but out of testing the water? If a homeowner can afford to "hang on til they get the price they think is fair," they just might not be in a must-sell position. They may be in a still-trying-to-cash-out-at-the-top position. Unless someone does a survey of homeowners in the midst of selling, the answer to that question will remain unanswered.

In a Newsweek interview with reporter Daniel McGinn, Wellesley College economist Karl Case says that "the fact that the market is finally encountering some resistance is hardly surprising."

Case explains that what happens first in a declining market is demand falls off and sellers either stay in denial or "decide to wait it out." Agreeing with Leamer, he says, "They won't lower their price right away."

"You see existing sales fall off," Case told McGinn, "You see housing starts fall off. That's what we're seeing now for sure."

But conditions are a little different than they were in the last major period of house sale declines of 1987 and 1988, following the trifecta of record oil prices, political unrest in the Middle East, and the savings and loan crisis.

"We don't have a recession going on, at least yet, we have low interest rates still," Case said, "and demographics that are not terrible. So there are arguments for why this should come out okay."