Here it is in a nutshell. See the FVREB post above for more commentary.
Sales are really low - nobody wants to buy a house at current asking prices.
There are lots of people who have their house for sale and their asking price is too high.
Consequently, nobody is buying because buyers and sellers can't come to a broad agreement on what homes are worth.
At the current sales rate it would take nearly two years to sell through all the inventory.
Prices are taking a trip in the waaaay back machine and now they are back to February 2007 levels. Oops for all you recent buyers who paid too much.