My question is how far do prices drop in a typical correction/recession? 

You didn't post many details but I have a feeling you are just hoping to make your goal of houses in your area work.As previously mentioned, townhomes don't seem to appreciate as much as SFH and seem to lag a bit coming back from a recession. 

So for example I'm very conservative and don't want any debt on them because I feel this hardens them in case of a severe recession.

It has recession resistant employment as it is great at everything but a master of none. 

Please be aware that the credit card liens were judgements against JOHN that were filed against JOHN (after the banks recession) were recorded at the County Recorder's Office against JOHN but were never filed specifically against the property.A couple of months after the rescission of the foreclosure, JOHN was quit claimed off the property.

In the recession the rental values went down significantly.

Tough tenant base, and in Hillsborough, although it does fine when the economy is roaring along, at the first sign of a recession, people move closer to jobs and it tanks. 

I have had as many as 22 properties, until the recession hit, so I kept the ones that were paid off.

As the assignee, if the buyer has a right to seek recession of that sales contract, then the third party assignee will as well.

I think this is a major factor where people got burned during the Great Recession.