Photo realism isn't going to happen in the first generation. Game developers are going to have to be creative in art direction and gameplay instead. And for games that do this well you won't ever notice a drop in quality.
To me, that's one of the most fascinating things about games. Breakout hits make the right trade offs to push the platform further than you thought it could go. This stands true since games were put on computers.
At this point, photorealism isn't so much a question of hardware limitations as one of scene complexity and interactivity.
If you have a simple enough subject to start with, and bake enough lighting and shadow mapping into the textures, you can make a photorealistic scene on even previous-generation console hardware. Once you start adding more objects, and allowing more things to move, you start needing to calculate more in real time, and you need more processing and rendering power.
A room with a table and a teapot could probably be made photorealistic on a PS3, even at 90 FPS. A densely populated street with moving cars and pedestrians, however, would have to be fairly visually abstracted to hit that target even on a PS4.
To me, that's one of the most fascinating things about games. Breakout hits make the right trade offs to push the platform further than you thought it could go. This stands true since games were put on computers.