I also second what Olive said. What America did was CRAZY! They went for the whole 'every american deserves a home' stance and I think lots of people were mortgaged 3 or 4 times over what their house was worth. Lehmen Brothers, Franny Mae and Freddy Mak (the institutions that collapsed and kicked off the financial crisis) were pretty much set up by the gov't to give Americans any amount of credit they wanted regardless of whether they could pay it back or not. It was a stupid stupid economic move. Of course those institutions collapsed because people couldn't afford to pay the money back and once they feel over, so many other banks panicked and did the same thing. They all wanted their money back and people couldn't afford it which meant there was a massive surplus of houses which is why houses were selling for as low as $7000. There were just so many that people couldn't afford and the market was flooded. I don't see things becoming that dire here because we have lending laws that protect us.

Also in America, people can walk away from their houses without having to pay the money back or taking any responsibility for their mortgage. This is a huge difference as well.

Interest rates in America were also very low (less than 1%) and the UK was the same. When the GFC hit, they had nowhere to go with interest rates which is why they suffered so badly with it and why their property and lending markets did as well. Australia, thankfully, had interest rates around 4% (from memory) but we had room for our interest rates to go down which is what kept our heads above water. We are still above water now.

Some economists have been predicting a second GFC though based on what happened - because America has continued to borrow and borrow and borrow. George Bush, as president, borrowed more money than all the presidents before him combined and Barak Obama has borrowed more than George Bush and all the other presidents combined. It is some phenomenal amount everyday with no way of paying it back. It is kind of scary. But our interest rates seem okay and the Reserve Bank is trying to keep inflation under control (even if the ALP is trying to drive up inflation to pay back Australia's astronomical debt) but we should be okay if another GFC hits.

I think the property market will suffer a little, but I don't think it will crash. I would say that it is not a good time to be selling and to hang onto your property if you can afford it. Ride it out and things will even out with wages/cost of living/economy in a few years.

Anyway, there is a little video (about 40 mins) that explains it all. I will see if I can track it down and put up a link. It is really really interesting.