A 10% annual reduction in price might seem like a slow rate of decline, but it adds up pretty quickly if that trend continues for more than a couple years. The drop of the 90s that “trapped” so many people in their homes only amounted to a 25% – 30% decrease in pricing over 5 years.

A 30% cumulative reduction in nominal prices over 3 years + a 10% cumulative increase in inflation = a 40% reduction in value. That’s nothing to sneeze at, and with average prices in the $600k ranges were talking about people losing $200,000 real-life U.S. dollars. Most working people cannot afford to take such a loss.

Don’t forget how many of the jobs that make enough money to buy these homes are, or more correctly, were RE related; and how unlikely it will be that some of the people in those jobs who are now being starved out to replace those incomes in other occupations. There are a lot of people who have the means to hold on during the downturn, but only barely – they have to hope they don’t so much as catch a cold. I guarantee some of them won’t make it.

I haven’t seen so many short sales and bank-owned foreclosure sales since the mid-90s. I don’t think we’re anywhere near a turning point.