FWIW, Wade here is why I don't believe the housing bubble will drive the market lower:
First, only a relatively small portion of the country has seen the housing bubble. Mostly it has occurred in sunny coastal areas. Lets assume that home prices there have doubled in the last 3 years. Let's say that prices in those areas will lose half of that gain. That still means that while prices would drop about 25%, they still will be up 50% from 3 years ago.
Now look at the stock market. Both the Dow and the nasdaq have only increased about 20% over the last 3 years. That is certainly not a bubble and still is a smaller rate of increase than the bubble bursted housing markets after their correction.
No doubt, there will be lots of sad stories about people who have lost everything, not to mention the poor lenders who in their greed gave them all the big loans with little or nothing down and minimal documentation. But in the grand scheme of things, I sure don't see it breaking the economy. No doubt the media and politicians will continue to focus on it and draw it to our attention, but I really don't see it as being the iceberg that sinks our Titanic economy either. I expect that life will go on despite the screams of some pundits who expect our ship to sink.
I'll continue to look for and buy mispriced and undervalued stocks and take my chances on the general market gyrations.