Obviously the numbers out this week show that residential real estate is on life support. The scary part is that things could be worse. For a long time now a lot of lenders have been holding off on foreclosing on homes and even for those they now own have been holding off on putting them on the market. I have reported on this numerous times before but the situation is very much still continuing, and perhaps in some respects getting worse.

The GSEs have picked up the foreclosure rates a bit of late and real estate prices will likely suffer more over time for it (the median was down even more in this week's report), but if the banks start foreclosing and stop kicking the can, then all hell will break loose. The market is collapsing, sales are at record lows despite record low mortgage rates and prices are continuing to fall, yet there are over four million homes over 90 days delinquent and the banks are holding off on foreclosing big time. There are a number of "possible" reasons for this including the banks not wanting to come clean on the impact of their problem loans. What this will do is prolong the housing crisis for a very long time. I thought we would come out of the forest on residential RE next year but am now having second thoughts.

Not helping things is the percentage of homes under water. We are talking 11 million, or 23% of all homes with mortgages, are under water. That is a tad better than last quarter but largely because of foreclosures taking homes off the list. Think about that - 23%. That kind of pain will take a very long time to heal as house prices are not likely to recover to any significant degree for quite a while - not with all the foreclosures that will come on the market.

Mind you, housing in most areas is priced below what it costs to build new housing and expectations are for further drops in prices. It could take a long time for home builders to be competitive and other than certain folks who insist on new homes, they probably have a few more tough years ahead.

Commercial real estate is no better off and it will likely suck wind for at least a couple of years too. In some markets there are improvements, but the reality is that malls are still overbuilt, consumers are continuing to cut debt (thank goodness), which does not bode well for malls and the like, businesses have rebuilt profitability by letting people go, which does not bode well for commercial RE, and so forth and so on. Did you know that the U.S. has 50% more retail space than the second closest country? Go figure. Really, go figure what that means for commercial RE when consumers are cutting back, facing high unemployment, homes under water and the like. Ain't pretty at all.

Most recessions were fixed by housing rebounds and/or consumer spending. This recession is not going to be fixed by either. So what will fix it? I am still trying to figure this out myself.