Government efforts to prop up the market have only served to reduce sales volumes and eliminate an important component of the move up market.

The shadow inventory looms large over all of us. Home prices have already started to slide back down. If and when foreclosures begin to flood the market again, we would be in for a violent few years…but we would come out stronger on the other side.

Rumors are swirling that Obama will soon announce a principal-reduction initiative that would reduce mortgage debt for millions of underwater homeowners. The story quickly went viral. Though the administration just confirmed the story is false, they are no-doubt scrambling to create some positive economic momentum heading into this November’s election.

How the hell can Fannie and Freddie pay a 10 percent annual dividend on the shares owned by taxpayers when they are losing billions of dollars a year? Secondly, can the Fed unload the $trillion in Fannie and Freddie debt on its balance sheet without disrupting the market?

Strategic default provides a major stimulus to the California economy. Nearly $2,000,000,000 per month flows into the local economy that used to flow out to debt holders in other places.