Home prices fall 7.7% in past year, according to Case-Shiller Index

Capitalism and Free Market Dynamics of Supply and Demand, coupled with Cheap Money ("Carry Trade"+ foreign bond buying), Liquidity of printed money; (M4-Money Supply). Makes quite a money machine for the main brokerages who did not want to question the gravy train. (except for Anally Mortgage (NLY) and Goldman Sachs)
The Mega Money Centers make money, while managing defaults to "acceptable" risk controls. But almost no one understood how to value these models. (The risk was muddled horribly by financial engineers of the MBS + CDO's (Mortgage Backed Securities instruments + Collateralized Debt Obligations) They layered the best loans with some moderate loans (but Underwriting changed every month to compete with other lenders), rates would fall bringing more competitition (then Underwriting changed the layering of risk level loans that is where it got SUPER "muddled) Leads to easier underwriting terms, with cheaper money. Until "we all fall down". I saw it coming 3 years ago. I'm amazed it took this long. I called it the sneaky Resolution Trust Corporation, end around. We sold the MBS instruments all over the worlds so our (we) taxpayers wouldn't shoulder the entire risk. Thought I'd share my thoughts. Good news is Refinancing rates are back down. Better get it while the getting is good.

Reality Check: This scenario is the result of the fact that we have shipped billions of dollars overseas, buying oil so we can drive 80 miles an hour in a 55 mph zone. Then the foreigners, having nowhere else to invest, put their money into Wall Street--the banks were pushing money out the door, starting in the mid-nineties, resulting in an increase in competition between banks to push money out the door, which resulted in a lowering of credit standards-don't blame the lenders-the same $1,500 per month mortgage payment would now buy much more house, and the realtors blew smoke at the sellers to get the listing-house prices skyrocketed far beyond the intrinsic value of the house for at least the past 10 years-in the meantime, builders put up far more homes than the society could absorb- many of the sales in recent years were to investors- now, this "liquidity bubble" has vanished, and the investors on Wall Street and overseas are writing down trillions of dollars in losses. If anyone believes that they don't have to take a "haircut" in this process, while trying to sell a house, they're dreaming-this is like a game of musical chairs, and the music has stopped. Now, "subprime" has been re-defined, so that if you have a credit score below 680, you're "IT". The greater fool theory has come into play, in its final act: if you own a home, I hope you like what you bought, and can stay there for awhile. The homes being sold at auction today are those that were foreclosed in 2006-there was a 400% increase in foreclosures in 2007, and 2008 is expected to produce a tenfold increase over 2007. We're only about 10% into working out this mess. Good luck.