The housing market has reached bottom, home sales have risen and we are headed for a turnaround! Not exactly true. The home sales have risen (7.2%) in the $100,000 range, which is not the majority of the country. These are pocket areas where the prices had risen considerably with the housing rush and have now been heavily hit by reality. Reality meaning high foreclosure rates, builders going bankrupt and unemployment. Not to be a wet noodle, but if a small down in rural Nevada went from having average home prices of 100k in 2001 to 300k in 2007, did anybody really think that was warranted and sustainable? Yes, people did get hurt, but the people who are buying now are not getting a bargain price but a realistic price. In other word prices are dropping back to where they should have been. Nevertheless, this process will be quite slow in the higher priced homes. Why? Many people who bought homes in the $300,000 range and higher, heavily mortgaged them to either buy them or to pull out the equity afterwards. Statistics say, that a large percent of homes are under water now- worth less than what is owed. In order the sell a home which is underwater, the seller needs to take cash and pay the difference or the lender does. A lender is probably willing to take a hit on an $80,000 mortgage, but how much of a hit (and how many) can a lender take on a 300,000 mortgages? Lenders will only be able to write off so much bad debt until the stockholders start screaming and the government shuts them down because their books are bad. After more than a year of stopping the larger banks from collapsing, the government is now straining from the next wave of collapse- the mid size lender. This lender is more of a regional bank. The local banks that are either new or have been around for generations. The banks that did right by their community and helped local builders create new housing developments and small strip malls; all with good intentions are now crushed in the short sight-ness of the real estate madness. As we watch unemployment continue to rise (NYC continues to loses jobs) and consumer spending fall (restaurants are empty on a Saturday night), foreclosures will continue and housing will remain flat. Again, it is not over yet, and has a ways to go given the big (long term) picture. Inevitably, things will flatten out but only when people go back to work and can spend money again. The mortgage industry has to re-grow the limbs that it lost and the government will need to loosen the leash on lending- all without raising mortgage interest rates. This, is not overnight.

Dale Siegel