I noticed that several of you refer to the term "appreciates". The lost value in housing, for the most part; was non-tangible. The reduced amount for which a home may be sold today is market driven, not value driven.

The value of your home is still there, if you don't believe it check what it would cost to rebuild from a total loss. Look at your home insurance policy, the "insurance value" the insurance carrier requires you to purchase to be "insured to value"! Take a look at you property tax assessment, sure some have adjusted, can you sell your home for that amount, probably not. And banks, if you are concerned about buying post the housing bubble burst, do you think they question loaning in this market, of course they do.

The current problem is in a large part due to the method in which the housing industry conducts housing appraisals. In fact, that same system was part of the problem with runaway appreciation in areas where there had been excessive demand for available housing. I believe that with some minor but necessary fundamental changes in the methods used to appraise housing and a program backed by the Federal Government like TRIA for the Insurance Industry and FDIC for banking we can in a relatively short period pull out of this mess.

Keep in mind that the crazy "artificial stimulus" of the Fed's is a short term band aid compared to getting the housing industry back on its feet. All else will correct itself, except of course the enormous budget deficit which will continue out of control with the pointless stimulus plan.

What we have experienced is in fact a paper loss. Why, you cannot pay a reasonable amount for a home if you want to because it will not appraise. By continually using weakened comparable sales (comps) which currently consist of more involuntary sales than voluntary, which are then formulated to determine the subject home property appraisal. Consequently, a street or neighborhood having a number of involuntary home sales (foreclosures, relo's or auctions) will develop increasingly lowered appraisals for the voluntary sales (change of home due to need of larger or smaller home, retirement sale, etc.) as well. This is the direct opposite of what occurred to create the housing bubble. There are certainly other factors, but this is a large part of the cause of the reduced market value and inability to re-inflate the home market. Whats more it is something we can control and replace with a better valuation process.

I put together a paper titled "Home Equity Stabilization Plan" which covers these issues and more. The cost and implementation are little and short respectively. The cost to the government is reasonably little and it would all but stop foreclosures with exit strategies for those who need to "buy down" that is, sell for a lesser expensive home without loosing their equity! What's more this plan benefits every American whether they purchased a home to benefit from the attractively low interest rates or not.

I tried to get this plan to Congress, in fact, after many failed attempts to get someone's attention, I had a representative of Ohio Congressman Steve Lautauret (R) looking at it. He informed me before Congress re-convened last year in the Fall that there was great interest in the plan by someone on Barney Frank's staff with certain questions as well. Later, in mid November I was told that since they were now in the minority that they would not be heard on this proposal. I was sick with disgust. I had invested months of my free time into this, OUR Country was going into financial turmoil and they were not able to get the floor on this proposal. May it had been that the Republican's would prefer to see a Democrat House and Senate fail rather than to then introduce something that may, with adjustments, prevent a financial disaster.

To date, I have not seen anything better introduced!

Not only are prices not through dropping, not only is more shadow inventory now online but also you will overpay for the houses now, because excess liquidity is the only thing keeping the market afloat. In other words, you will be bidding against speculators brandishing cheap dollars. And you won't get the best price or the true value.

Lock in a lease at dirt cheap rates. At the worst housing will bump along the bottom. More likely it goes down another 15-20% at least.

There is still a big hammer to drop. In CA, those prices have dropped, but not on the medium to big ticket homes… those homes have a ways to fall. And when they do, expect some banks to go under.

I think you discount too much the effect of ending the first time buyer tax credit. If it has been such a non-factor, why would Congress even be considering extending it? And why would it be a good idea for anyone to assume more debt right now? The technical recovery from recession is not going to be enough to jump start the US economy right now, especially as the recovery is primarily government created and does not represent a true recovery. We are not going recover from stimulus and we are not going back to the credit driven consumer economy, so what will the basis of the recovery be? Government spending? Watch for housing to drop off when the tax credit ends. In tandem with the newer mortgage crisis and housing is going lower. We are in a deflationary environment right now, worry about inflation in a couple of years.

Decades of cash have bled from our economy, mostly to China and OPEC and America has sustained massive structural damage. We can print paper money all we want, but our economy and our housing market won't get healthy again until we reverse our horrendous foreign trade imbalance.

The two most obvious solutions lie in more domestic energy production and the restoration of domestic manufacturing. But given the behavior of our elected officials, it seems national bankruptcy and default on our debt seem more likely. I suspect that that's what some of them have in mind. Buy gold, not houses.

You seem to expect that any large declines left will occur only in the worst areas. Actually it may be the "best" areas declining. Vulnerable areas could be those that haven't declined much yet, where banks are holding foreclosed homes off the market, gambling on a recovery
http://www.bing.com/search?q=banks+holding+foreclosed+homes+off+the+market

The second point is that because mortgages are usually refinanced, buying at the time of low interest rates may not be that advantageous. It is preferable to buy at a lower price and higher rate and then refinance when rates go down.

I usually find your analysis spot on. I disagree with you here. People make housing decisions based on monthly payment. Purchase price is irrelevant.

It matters not whether rates are 5% or 10%, it's the payment that matters. Purchase prices will adjust to whatever buyers can afford based on existing rates.

Assuming Congress doesn't do something stupid like pass the $15k housing bill, housing most decidedly is going lower in the year or two ahead.

Cheers!

http://realestateconsumernews.com/financing/setting-up-the-next-leg-down-in-housing/