The mess really hit the fan when lenders decided to give money to anyone with a pulse. Having bought and sold houses from 1990 to 2007, I can tell you that I was blown away by lenders starting in 2003. I started flipping homes like crazy because I knew that anyone could now buy. Take a market that’s got decent demand and open up the funding spigot. You get massive inflation caused by incredible leverage. This makes a bubble. Bubble burst once it is recognized that they cannot sustain their growth rates and/or the debt can no longer be serviced that got them the growth. When leverage unwinds, it’s an ugly downward cycle. That’s what we’re seeing in the RE market now. Falling prices = no equity. No credit. Add unemployment and you’ve got a perfect storm. Even when prices get down to historical levels, like 5 times annual income, there will not be much demand due the psychological distruction of RE as an investment and the fear of job loss. When this happens, there will be real deals in the RE market. But then, we may take a lot longer to recover than in past RE cycles….