In reality, the real estate market is already starting to crack, but could begin to accelerate as soon as this month. A catalyst for this (and decline in the stock market) is what's happening this month in Japan. Japan's banks are being forced this month by the government to mark to market on their loans, most of which were secured with stock in the Nikkei. Now that the Nikkei has collapsed, most of that stock is worthless. When the banks mark to market and have to show what in today's environment the holdings are worth, they are going to be doing whatever they can to raise cash. That will include selling off foreign holdings (read: U.S. equities and real estate). The Japanese government has set the deadline for the banks to mark to market for this month. As far as knowing when the worst is over, it will be when the news is worse than you could ever imagine and there is still "blood in the streets". No one can time the exact bottom, and if you jump in a little early you'll still make out great, as over the long run real estate has nowhere to go but up (considering the population keeps growing exponentially but the amount of space to hold it remains the same).
I know this economy will pull out of it's doldrums. We always have. Hell we went through a civil war, two world wars, korea, vietnam and president Reagan. We should pull out. Maybe we are more innovative in some ways than the Japanese. Like zboy said, long term puts on the indexes are a great idea. Putting money into bonds will be great too. But how about short term? I'm guessing the upcoming rate cuts will reduce short term rates and increase long term rates (due to higher expected inflation). So the obvious trade might be long earlier maturities and short 10 yr and 30 yrs.
Another great source of info on macro economic analysis (although with an obvious bias) is www.prudentbear.com If nothing, they are serious practitioners and not susceptible to the Wall Street analysts' conflicts of interest. Another one is www.mises.org (L. von Mises is one of my favourite thinkers)
But its always good to give back. The best forcasts i have seen come from this website. www.insiidetrack.com , and yes that is with two ii's. The guy who runs the site does long term cycle work using all kinds of obtuse theory and spices up the site with some of the most prophetic societal stuff ive seen. If your read the entire site it will freak you out. But knowledge is power. Remember Livermore made millions upon millions shorting the depression. I personally think we are at the end of an age, and like all transitions they are filled with chaos and uncertainty. Its not hard to fathom what the markets reaction will be. Yes thier will be rallies that last for good stretches but I think what we are in for is a very long slow excrutiating bleed out. How long will it last? 7 to 10 years i would say of sideways action with a downward bias. Just more reason to stay with a short time horizon. Happy trading. By the way the age we are ending now mirrors the Roman Empire in cyclic terms. I think we know what happened there. Another thing, everytime it happens the people living during the time say "its different this time" and then the cycle repeats just like it always does. Be ready, make the money, help those less aware or just plain ignorant. Trav