Well vacancy rates are still super low so it would take quite a while for people to find no tenants.. though I agree you will see people who bought at a high price without checking what they could get for rent or expecting way higher rents than what's realistic are going to be burned. As they should be, making decisions without doing your homework first is dumb.
As for a $400k price not being realistic compared to costs, when as the cost of making something had anything to do with the cost of how much it sells for? Residential real estate prices are dictated by supply and demand. There are plenty of cities out there with much higher prices for far crappier places, while there are also places where I could sell my normal house here and buy a huge stone house with a pool.
I don't think this is the beginning of the crash that everyone's been predicting for years now (always at this time of year too)... The current situation is supported by the economics, what economics are chaging to cause the crash (beyond the "it's not fair" angle)?