I felt nostalgic reading this. I understand the negative equity dilemma faced by lenders, and home owners, but when viewed through the prism of the actual causes of the bubble and its ensuing collapse, sympathy joins the ranks of large deficits. One particular statement will rankle with many market watchers; “Washington is considering new mortgage regulations that would shift more responsibility for bad loans away from taxpayers and investors and toward banks.” What an admission!

To my mind, the “conveyor belt” was wholesale securitization of mortgages, and not the move up market.

Also important is the high failure rate of loan modifications estimated at 53%.

I bought in a new development in Maui, which recently seems to be doing OK. A few vacation buyers, but the majority appears to be FTBs persuaded with tempting offers of “$1,000 gets you in”. When you speak with these buyers it is very clear many have very little understanding of the market, because bubbles, cheap credit, and high prices are the new normals, and is all they (FTBs) know.

The problem is the huge emphasis on home ownership, and the importance placed on its role in the economy. The wider correction which is the lost decade being talked about, is the housing market finding it’s rightful place and role.