It's not that home prices will return to where they were, they won't, why? Because the average wage is still around $50-60K/year. Based on that, the average house they can afford is going to be $150-180K, if both work some more, but not that much. Why are people walking away? Because they don't see why they should pay for a grossly inflated house. How did we get here? Greed, realtors, appraisers, banks, investors etc. So, a suggestion: All the people who made huge profits on housing pay a 30% windfall tax that goes towards lowering the cost of the mortgages to realistic levels, refi at that point and we all move on. If not, the bottom is a long way off.

What's the big deal. Of course the average house price has to come down to what the average buyer can afford. That would be 2.5 times their gross with 20% down with a stable job and good credit. Either the prices come down or inflation brings up the wages. You don't need a PhD in economics to know that. I don't suppose anyone expects us to go back to EZ credit and liar loans.

Agree to the word greed but,also the words short sighted. All these people ,who felt thier homes would never go down,continuously borrowed against them,bought Mercedes,little Johnie and Jane ponies,trips and dinners forever.Now let us put the ponies out to pasture,sell the car at a big loss,dinner for all,with a coupon at McDonalds and figure out who they as fools, can blame.Greed..let them eat cake.They were fools and now let them try to keep up with the Jones. That is ,if they even hold on to thier jobs, let alone the house!!It IS thier fault and no one elses!!

Hey . . . ABSOLUTELY cannot have any sympathy for these people in CA. This is nothing less than a REPEAT of the housing bubble burst that CA went through YEARS AGO . . . remember that one. If these people didn't learn from the previous real estate bubble burst, then "shame on them" . . . .

And just remember that for "every "loser" (sucker) then WAS A WINNER, the person who sold them those houses at such exorbitant prices . . . Hey, "BUYER BEWARE . . ." Isn't that the most basic principle of business from BUSINESS 101 course in any business school???

How is it that ANYONE expects the taxpayers to bail these irresponsible and foolsh people out of their irresponsible financial predicament?

The American taxpayers, and those who responsibly lived within their means have had enough of all of this foolishness.

EVERYONE seems to be overlooking the fact that: for "every "loser" (sucker) there WAS A WINNER, the person who sold them those houses at such exorbitant prices . . . the buyers just entered into BAD BUSINESS DEALS . . . BUT the sellers walked away with a lot of PROFITS in their pockets . . . and those sellers are STILL out there somewhere throughout our economy, right?

So, why are "we the people" being expected to "make these "foolish and irresponsible buyers "whole again"????

If Congress had not allowed all of this mortgage FRAUD, then we would not have this national economic crisis.

Now wouldn't it be "poetic justice" if those sellers who made all of those exorbitant profits had invested those profits into the FIs and stocks that have now gone bust or been substantially devalued? That would be somewhat a form of "justice".

However the irresponsible homeowners are still on the hook and responsible for the mortgages that they agreed to pay for also. And look at all of the money that the CEOs and management, brokers, etc. made out of it all.

The bottom line is that it all amounts to a severe REDISTRIBUTION of WEALTH, and a severe disruption of our economy and our social structure. . . . you can blame Congress for most of this . . . both the Republican AND the Democrats in Congress (like Barney Frank (D-MA)).

This is what occurs when we lose our national business integrity . . . but there are a lot of bad guys (sellers and CEOS walking off with a lot of ill gotten monies).

Because California is the land of leverage and excess. Californias coffers and morals are bankrupt, home prices and egos inflated, and in it's vain, elitist desire to be on the cutting edge, it seems they've fallen off. I am glad I moved.

The problem here is spiraling prices due to speculation primarily in the western states coupled with people tapping into equity to keep their heads above water and then inflation due to rising oil prices which raised energy, food costs. Once equity was used, they started tapping into unsecured credit. Here is a fix I propose and is posted also on my husband's blog http://www.call4action.info/. What we need is have negative equity buyout. It consists of the following:

A) Artifically set bottom house costs those at 2002 levels.
B) Have a program adminstered by lenders to buy up the negative equity with government money. C) With the money received for the negative equity from the government, the banks will be required to offer debt consolidation loans for homeowners and others at rates closer to home mortgage rates.

What does this do:
a) Actually define where housing prices can go in a market.
b) Reduce the mortgage on homes so that they are more affordable to those houses currently underwater. This also frees up cash so that the economy can be stimulated.
c) Prevent impending credit/unsecured debt defaults by providing a way for people to pay down the debt at lower interest rates.
d) Making homes more affordable to the average wage earners thus increasing home sales across the board.

Please read http://www.call4action.info/ for more information. If you agree contact your Congressmen.

This is wonderfull. It feels good to be part of the 10% living in Mountain House that is not upside down on there mortage. Unless you live in or around the outskirts of the bay area you would have no clue how things work out here. Mountain House is a bedroom community, no businesses only one small store "Wicklund Market". This article didn't state that the median income for Mountain House is 90,000$. This figure is 15,000$ more than any of the other surrounding towns. I purchased my home on S.Vecindad St. last year. They wanted 645,000$ originally, not but a month later negotiated price in half. The people that bought homes at those prices 7-800,000$ would be upside down no matter where they bought. A Mountain House home in that range would be around 3,500sq ft, 5-6 bed,3-4 bath in an almost crime free and family living enviroment. Now you can spend the same money in the Bay Area and have the same upside down mortage right now with only 1,500sq ft, 2-3 bed, 1-2 bath in a 50 year old house, riddled with crime and congestion. Either way the other 90% are fuc---.

I think its B.S. that all this is happening .. no house should have never cost that much in the first place .. why are houses here in California 5 and 6 times what they are in other states .. why cause people are trying to have better then the next person, and the TV flaunting what celebrities that get paid way to much for the jobs they do having nice things and regular people try to emulates that and its not right . There is severe over pricing of everything especially in California ..
I didn't not go buy a house cause I knew I couldn't afford it and bad as I want to own my own home or just have a larger house for my family ( we live in a one bedroom ) we didn't get ourselves into the mess that so many other people did .. just cause someone gives you a loan doesn't mean its the smart thing to do .. now who's going to be paying to get these people out of their troubles the tax payers even smart ones that didn't get themselves into this mess and aren't going to get to own a home because of this bail out crap .. but they will be paying for other peoples houses now .. its so unfair that we that didn't get ourselves into this mess are going to pay for it and own nothing in the end .. between this and the fact that our government gives people from other countries money to buy new houses and cars and for school when they come live in this country and help them for years and years .....yet people born in this country cant get crap is B. S too .... yep this is the American way ... lets see is Obama even tries to fix immigration ... I doubt it

I don'ty see housing staying down long maybe 2-5 years it can't everything has gone up the last couple of years to reflect these prices I see adjustments some will drop hard but like the stock market struggle back up. But let's get the facts straight as long as our populations keeps doubling as it has in the last 20 years from 200 to 250 to a whopping 300 million people we will pay for land and houses. As the population grows yes the immigrate population grows simply land will not grow and the supply will become outstripped with the high demand as it has done the last 60 years so hang tight and remember homes are for living in not making oodles of cash with. Live in them pay for them and wait a life times as I have done and you will see your investment grow.

Get ready, people--there is going to be more than enough misery to go around so I wouldn't start feeling too self righteous. My business has been here for twenty-six years. When the local economy crashed--bubble related--most of us who had not done the sub-prime, equity loan, living large life-style were equally superior to most of you commenting. I was one of them.

Then sales dropped fifty percent. I layed off a third of my workforce and cut expenses. Things were going to get better, right?

Then the credit markets dried up and the lines of credit that I have used in the past to get through became unavailable. Okay, I should have expected it. My bad!

I whipped through my 'retirement' savings to make ends meet--most recessions last a year--things would turn around. I am now using credit cards to cover shortfalls--a sure kiss of death sign for my business.

My wife and I work non-stop. It just isn't enough. We bought our house the old fashioned way--we had a solid down and loan and until last month, I have never missed a mortgage payment in over thirty years--this is not the only home I have owned. But the value of the home has plummeted, still not underwater--but can't sell it because there is no market at any price.

So, at sixty, I am facing foreclosure, bankruptcy, and worse. I made the right decisions--I followed the rules. None of them apply any more. Get ready--that loud thud on the horizon isn't just the falling of the housing market. It's the end of it for all of us.

Feel smug and superior while you can, karma has a way of coming around to us all.

It is real simple. From the government to business and consumers have spent well beyond their means. Money was easy to get. Now it is time to pay up and those of us who have lived with in our means are now expected to help pay for the ones who were either not smart enough to know how to handle money or the other just plain greed. I say let them all sleep in the beds they made.

This happens when people dont live within their means then expect pity. You have to expect the unexpected like job loss, sickness,death divorce, would you be able to afford it if any of these things happened. If you know basic math it should be simple how are you going to buy a house if the mortage is $800 your salary is $3500, heating cost $500, food $500, carloan $350, car ins.,health ins.$150(these are exsamples) so that totals $4600 so your already over your monthly that not buying clothes school supplies taxes,ect. what would happen if your spoues became ill, lost job that means your more then almost 65% over you means, but we Americans we always want more even when we dont need it just to say I have it. well gues what you really dont need it! We need to start living within or below our mean and buying cash only. Because these banks/credit card companies are just legal loans sharks who's corporate bosses pocket the monies in fringe benefits ,raises and severence pays even though their corperation is in or about to be bankrupt and the citizens are left holding the bag. But since we let it happen its our fault is it?

Mountain House is a joke. It's a housing-boom manufactured community built damn close to the middle of nowhere: smack dab in between a cow-town (Stockton) and a small city (Livermore), but not near enough to either to make the commute worthwhile (average: 40-50 miles a day). Someone from Mtn House tried to convince me that the commute wasn't so bad, but I was working on the Peninsula....thanks, but a $100/month reduction in rent doesn't make up for the extra 80 miles (one way) I would have been driving every day.

Sandra very well said. my mother worked for years got hurt on the job which made her perm. disable and now she cant even afford to pay for her med, buy food sometimes it sad but her are people(americans) that havent worked a day in their lives recieving ssd, & ssi what that he** is that? so its not just the immigrates reciving free hand outs but american freeloaders also since our Gov has become an enabeler meaning it enables lazy people to eat and live with out putting any effort into giving anything in return. which is sad since our vets get crap and military personnal families go without sometimes and 1/2 dont qualify for gov help. SO VErY VERY SAD!

i rented a house from an older couple that was coned into a mortage. before they bank forclosed on it they they bank tried to sell it , buy getting their own sister realty to sell it which the agent never came to show off the house, they bank for forclosed and then bought it right back and sold it again. before they did this they had to let us know about it so the sent the realtor they hired and showed us in front of the owners that the house cost $65,00 monthly installments where $700 and the couples income a SSD check of $600 a month they owned nothing else but still got this mortage.and now live in bankrupcy with judgements againts them, but i aske my self why did the bank give them this loan if the could see they would never be able to afford it. They real estate agency was the realtor the bank and the lawyerand the auctineer and buyer dont yu smell something foul in this i did, fraud. the mortage/realty closed and eventually left town after the mortage banks started claiming bankrupcy.

The home values fall - How about the property taxes on the homes? I'll bet the taxes never fall, and in fact, will continue to increase.

California home prices are ridiculous. I know people who paid $500,000 for their home. You think wow a half million dollar home it must be a mansion or on the beach or at least new and really nice, but guess what it was none of those, just a regular 3BR/2BA home nothing special. Common sense dictates with the economy the way it is that prices will continue to fall.

I live by Mtn House. My house was out here long before they built those homes. Those people moved in from the bay area and WAY OVERPAID for those places, and they all just HAD to get in so BADLY they didn't care they couldn't afford them! It was "all the rage" of a "new community". Stupid people! Nevermind that a majority of the homes have 3-4 generations of ppl in them, most foreigners that collect from the system anyway. So, they'll get out of it!