Prelude to a Depression?

Lately I've taken it upon myself to try and educate myself about finance and economics, and I don't like what I've been seeing.

I've been looking into buying a house for several years now, but I've never been able to find a reasonably priced house in the Bay Area that wasn't a total dump. Maybe it's because this area doesn't experience harsh weather conditions, but it seems to me like the houses out here weren't built as sturdy as their East coast counterparts. Anyway, even when I did find a place I liked, the numbers never quite added up to the point where I could feel comfortable pulling the trigger.

It should be obvious to anyone that housing prices are out of control here, but I also know that I'm slow to commit to making any big decision, so my hesitation is in part due to my just being a pansy. In any case, it's probably good I didn't jump in and take on too much mortgage debt.

The recent subprime lending problems have been getting some attention in the media lately, especially as they relate to the housing bubble and the day-to-day fluctuations of the stock market. But taking the long view, isn't this just a symptom of the bigger problem--mainly, that Americans are in the habit of getting themselves into a ridiculous credit hole? Actually, let me take that one step further--aren't Americans in the habit of creating the illusion of wealth for themselves?

Maybe I'm overreacting, but could another Great Depression be around the corner? There are some signs--increased consumer debt, over-speculation in the stock market and housing sector, weaker dollar value, etc. I don't really know enough about this stuff to really be sure, but I can think of a few more parallels between present day and "The Roaring 20s."

I hope I'm overreacting and that I've just been reading bad financial analyses. But I'll tell you what's NOT comforting--arguments for a severe economic downturn appear to have a lot of hard data backing up their claim, whereas arguments for "US economy is still strong" almost never point to meaningful numbers to support their analysis.

Seeing as how I'm still trying to sort out my thoguhts on the matter, I'd welcome any opinions on the general state of the US economy (housing market in particular).