One of the tougher things about the environment today is that we do not have a free market. All of the predictions about inventory growth have proven to be pretty much incorrect because of the government. The realization is that it is truly a rigged game and that the government will throw tax dollars at the problem. In the next 2 years I believe you will see the most extensive socialization ever with regards to housing. This will include substantial loan modifications in the form of low interest rates combined with or in addition to pricinpal reductions. This will occur primarly on loans purchased by the government. Also there is no 700B limit. Once the government purchases them and rewrites the loan the loan can then be resold and then more can be bought. Similarly 40B in loans per month will start to be purchased by the defunct GSEs.

This is the effort that the government will put forth to stem foreclosures. To be sure it will indeed reduce the flow but I do not see it halting depreciation. The economy will do a fine job at that and if/when unemployment kicks in there will be possible large chunks of depreciation. If the government can do a balancing act and keep the economy limping along without massive unemployment AND rewrite tons of loans then the depreciation will continue albeit at a more modest pace which is the goal here.

I do not see any stable ground at all. However considerations of hard assets at modest loan rates to hedge against inflation seems to be more on my mind lately although I do not see the interest rates really cranking for a long way off.

Banks are lending/loaning to people now. That is not the issue at all. Nor is inventory an issue at all either right now.

Again we are not in a free market as it pertains to real estate. I cannot emphasize that enough. This is the beginning, the very beginning of what will be substantial changes. This will not stop things yet it will lead to a more Japan style depreciation trend that resulted with a very long slow decline. If massive unemployment hits then all bets are off.