The real estate market is collapsing fast. Why? People borrowed more money than they could repay so they could "buy" houses they could otherwise not afford. And the banks that pushed those loans now find themselves the miserable owners of those death support systems for debt. The banks don't want these economic death traps -- so they'll dump them at a fraction of the price at which they were sold. (The Wall Street Journal reports that in June 2008, Credit Suisse sold a 1,230-square-foot home in Corona, CA for $198,000 that went for $450,000 in December 2006).
Bloomberg News reports some stunning statistics about how quickly banks are taking possession of those houses. U.S. foreclosure filings spiked 55% while bank seizures -- when a bank takes ownership of a house also known as real estate-owned (REO) -- skyrocketed 184%. Bloomberg says that "more than 272,000 properties, or one in 464 U.S. households, got a default notice, was warned of a pending auction or were foreclosed on."
This transfer of titles to banks is contributing to a massive loss of wealth. Bloomberg reports that home prices fell "15.8% in May, the most since at least 2001, according to the S&P/Case-Shiller home-price index." And Bloomberg indicates that 33% of home sellers in the second quarter lost money. Moreover, according to SeekingAlpha, 33% of houses bought in the last five years are worth less than the amount of their mortgages.