patrick.net

swebb says

I'm not sure why you would think 2012 would be so different from 2011 in that regard.

It seems to take ~12-18 months for a foreclosure to show up at auction, and I'm seeing an increase in foreclosures at auction now. It seems something is pushing them higher suddenly.

I was never in the origination market so I don't know all loan details, but a lot of people were buying houses with 80% equity by getting 25% seconds, using the extra 5% for closing costs & renovations. I don't know how many ARMs were secondaries, but I haven't done all the title work to see if the current foreclosing entities are firsts or not, either.

Many ARMs were below-market rates, though, and when they reset you had to make up the difference in lost interest. This is what I refer to as the 'balloon'. A quick search online doesn't find the data, but I do see references to 7 and even 10-year ARMs as well. If I recall, these products weren't significantly cheaper than a 30 fixed so I may have just forgotten about them.

RentingForHalfTheCost says

The only problem would be what is normal. My guess would be about 30-40% price reduction from where we sit today. Doing the above 3 things would remove the smoke and mirrors from the equation and make us all realize how crappy this housing economy really is today. Even the Asian buyers would disappear. ;)

I like ThomasWong's definition: 1995 + 1.5 appreciation. That being said, if the 3 things I mentioned disappeared, we would get even lower prices. It's kind of eye opening how far the government has reached to prop up this market.