The only answer we hear from the economists is excess supply of houses. Excess supply drives prices down. Buyers are reluctant to buy while prices fall, because they fear their newly purchased house would lose value or because they want to wait for lower prices. This excess supply is only half the equation, however. The other half is insufficient demand for houses to be lived in by their owners.
Why is demand weak? Why so few buyers? To see the answer to this question, we have to look at social issues. The traditional pool of buyers, young families and families moving up, has shrunk. Potential buyers don't have the income to meet tighter mortgage requirements is part of the reason. But most of the reason is that they don't expect to have the income in the near future, because the economy is not growing rapidly enough; they don't see their income growing. Economists established a generation ago that households budget their incomes over their lifetimes. Major purchases are made within expectations of income growth. A family would scrimp, save, and sacrifice to buy a house, expecting that in a few years their income would rise and the value of their house would rise, and they would have the money to make purchases beyond mortgage.
In other words, demand is restricted, because the ladder of social mobility is broken for a large percentage of American households. The way to end the housing depression is to grow the economy and thereby repair the ladder of economic mobility. Demand will rapidly grow. Housing "over supply" will shrink, housing contruction will increase, construction workers will go back to work, the housing manufacturing economy (faucets, furnaces, air conditioners, floor tile and carpets, paint, etc.) will grow, reinforcing economic growth. How do we make the economy grow? That's a different and bigger question, but the answer is assuredly to reduce greatly the regulatory economy that favors large corporations, funds the government, and suppresses small business, thereby making possible entrepreneurial startup businesses. It can be done, but only by a change in the political economy paradigm of progressivism.
Update. July 7, 2011. The disintegration of many families also impedes the abilities of households to move up the economic ladder. Mitch Pearlstein, "Broken Families, Broken Economies" (The Weekly Standard, July 4/July 11, 2011, p. 34) discusses this factor in the housing depression.