There are 6 stages to the decay of a house in most instances, and possibly 7 in the occurrence of unexpired rental contracts. These stages, in order of their occurrence, are:
1. Like New
2. Slightly Worn
3. Somewhat Worn
4. Fairly Worn
5. Greatly Worn
6. In Danger Of Collapsing
7. Demolition Pending (see notes below)
According to UO-Support page the length of time for a house to decay can vary from 4 to 7 days, with each stage of decay generally lasting anywhere from 1 to 2 days. Experience shows that each stage last about 24 hours, except for Like New (about 50 minutes) and In Danger of Collapsing (reportedly 7 hours and 13 minutes).
When a house has passed through all decay phases and "collapses", the house and all of the add-ons in that house (ovens, looms, forges, etc) will disappear. Any remaining items in that house will fall to the ground. Clicking once on these items will release them so they can be picked up and moved.
If a house "In Danger of Collapsing" has vendors in it at the time of collapse, it will enter a "Demolition Pending" phase and appear as being owned by OSI. This phase can last as long as it takes for all Vendor Rental Contracts to expire, plus 9 days for the vendor owners to retrieve the items from their expired vendors. During this period, the house decay status may be automatically refreshed several times to keep the house from collapsing. Once these waiting periods have passed, the house will be allowed to decay normally once it goes through its In Danger of Collapsing phase.
Houses that enter this "Demolition Pending" phase have done so after going through a normal house decay process. This is done so that players with vendors in one of these houses will not unexpectedly lose their goods due to the house owners negligence.