"If there is a crash in the housing market many people will be forced to sell or will have it done for them by the lenders. One can then expect the price to drop and the demand then to pick up. However home ownership is not without costs - property taxes and maintenance being the most obvious. Will demand pick up to meet the supply? - maybe not. It is a reasonable assumption that if there is massive oversupply then there may well not be buyers for some homes at any price. The source of the oversupply could be in the many empty properties held by speculators, but also in hard economic times people move in with family members to save on costs - all of which conspires to reduce demand.

Empty properties soon deteriorate and a reasonable assumption is that many properties will be abandoned. But, here's the kicker, is the number of abandoned properties likely to be evenly distributed across every neighbourhood with every street taking its ration of a couple of empty houses. I think not - these effects tend to concentrate. There will be always some purchases if the price is right and some neighbourhoods will remain vibrant and others will become sinks in a classic feedback cycle inhibits or promotes purchases in the area. Here's a current google maps picture of the remains of a Detroit suburb after middle class flight - and this happened during a period high housing demand. If you scroll a mile or two either way you start to see progressively more populated areas.

sample map of Detroit neighborhood.

Sooo... assuming the thesis of asymetrical desolation distribution is correct - what will be the determining factors in whether a suburb will survive or (as in the image above) die?

It is possible that the future viability of a location will not be predictable a priori - a bit like chaos theory where small changes can effect improbably large outcomes. For some years in the future it may be that the value of a property could be almost entirely dependent on the maintenance level of the surrounding area. This was always the case, but now the effect may be greatly amplified. In conditions of massive oversupply, it is possible that once an area gets perceived as being on the downhill slide then the surrounding houses will rapidly become unsaleable at any price. In physics this is known as a phase transition (more recently popularized as the Tipping Point) and it happens rapidly. After a housing price crash, until things settle down, this effect could introduce extreme price volatility as the market determines which suburbs flip from being viable to being sinks."