Sure, plenty of people made many thousands of dollars selling their old properties at inflated values, but only the smart ones will come out ahead in the deal. Many people out there sold property and then used their money to buy even more expensive property that they had assumed at the time they would be able to sell a couple years down the road for even greater gains. Sadly, many of these people are now feeling the pinch of variable interest rates, while foreclosures are rising at an alarming rate.

A couple weeks back, Jonathan Berr pointed out that there is an estimated $2 trillion worth of adjustable rate mortgages that are due to reset at higher interest rates in the next few years. With foreclosures climbing 90% during May, you have to wonder just how bad things are going to get once the $2 trillion of adjustable loans reset. It could get mighty ugly, and if I had to guess, I would say that sales and prices are definitely headed lower in the latter part of this year.

How low can they go? Right now your guess is as good as mine. For all the sellers in the market, it has definitely been a tough couple of months. For everyone else who is looking to buy a first home, things have never looked rosier. Hang in there a little while longer -- your dream house is definitely headed down into your price range.

For information on the status of new housing start ups (which are running 24.2% below this time last year), be sure to visit my article last week that discussed what builders reported in May. Here is a hint . . . with builder confidence running at the lowest levels in the past 16 years, it's not a pretty picture.

Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.