kane

Some of this is a correction in the market. With the recent housing bubble we saw something in this country we ha never had before which is an average home price that the average worker could not afford. The average wage in the US is $16 per hour. The average home (as of about 12 months ago) was around 180K. When you factor in taxes and insurance and an average down payment of 10% it meant that the average person would have so spend about 60-70% of their take home income just on the house. This caused a lot of issues including people over extended on credit to afford other things and more competition for cheaper - below average - houses which caused them to increase in price.

A large part of the downturn is all the people who got sub-prime mortgages and couldn't afford them when the rate changed, but much of it is also the market just coming back to earth. It sucks if you were someone who bought a house at the peak of the bubble and planned to sell it now, but if you are planning on living there for a while in the end you will probably be okay. Still, I don't think housing prices will be going back up for a while and there are some parts of the country that it could take a decade or longer for prices to return to where they were.