Christopher Thornberg calls housing crash "slow moving train wreck", says housing prices "easily 30% to 35% overvalued"

Thornberg argues that home prices will stay flat for years and years, leaving the devaluation up to the ravages of inflation to get back to their true worth. I agree on his 30 to 35% call, but disagree on how the excess will be washed away.

I think we'll see both - an immediate crash in prices, combined with ongoing inflation-led devaluation for years and years. Very similar to Japan, but more harsh on the front end as people panic as they're doing right now. Also, we have a massive amount of dead inventory out there, and in order to move it, it has to come down in price, and that price cut will be led by the builders, who can cut all the way to the bone, where they break even or lose a bit.

Individual homedebtors having to compete against builders to move inventory will have to drop prices in many cases way below what they paid. To the point of bankruptcy and foreclosure. It's a housing blue light special in aisle three America.

The housing bubble already has burst. The only question is how badly. That was the conclusion of a UCLA economics professor who spoke Wednesday at a conference in Torrance.

"At the end of last year, the real estate bubble popped. And right now, we're in the middle of the bubble popping," Christopher Thornberg said at the South Bay Economic Forecast Conference. "The real question is, of course, is it going to be a hard or soft landing?"

Thornberg, who also serves as principal of Beacon Economics, described the housing situation in harsh terms: "This is a slow-moving train wreck."

"Prices are easily 30 to 35 percent over-valued," Thornberg said. "Whether prices go down or stay the way they are, you can pretty much guarantee that whatever the value of your house now, that's going to be the value of your house in 2011."

Starting in 2003, home buyers bid up home prices by chasing the upward trend in a "feeding frenzy," he said.