IMHO, price compression happens at inflection points, both at tops and bottoms. This is what causes the shift in the trend’s direction as the substitution effect causes more moves into different tiers.
We are as far away from price compression as one can get, which is why I think we are only halfway through the downturn, with the lower half closer to “normal” (but still being artificially propped up via interference in the foreclosure market and with artificially suppressed interest rates and various tax credits, etc.) and the upper half moving down to meet it.
The longer they drag this out, the more damage will be done as all of the buyers in the mid-point of the downturn will become potential foreclosures in the future…especially with these low rates and low downpayment programs.
