Saving is for Suckers

From Captain Obvious: for the past 30 years, Americans have been saving less while taking on more debt. What's to blame?  Houses.

Before 2007, this didn't seem like a problem.  Houses represented majority of a family's net worth and always increased.  Taking on debt to buy a home(s), not to mention taking advantage of mortgage interest deductions and fancy financing (zero down with below-market rates for the first few years of the mortgage), enabled homeowners to gain the confidence to borrow even more money against their appreciating asset and buy more necessities (pools, boats, granite counter tops, big screen TVs, vacations ...).

The American dream equates to home ownership for many.  The dream was working just fine for decades until the unthinkable happened, housing prices not only stopped increasing, but plummeted in many states.

Currently, the govt is doing its best to prop up the housing market (keeping long-term interest rates low, buying mortgage-backed securities, pushing banks for principal reductions and interest forbearance for homeowners, etc.).  

But what happens if market forces prevail and the bottom falls out causing prices to plummet for areas with large amounts of homeowners with negative equity?  What happens when homeowners run out of savings and stop paying their mortgages?  Answer: they stop paying their mortgages and stay in their homes for over 600 days before the foreclosure process has them removed.

New York: 600 Days.

Florida: >500.

Hawaii: >500.

Maine: >500.

Illinois: >450.

California: >450.

Nevada: >400.

Have all the foreclosures been flushed through the system?  If people know the answer (hint: the answer is NO), then will they buy houses or wait?  Can you entice people to buy a house with historically low rates?  Will they buy a house to save a few percentage points on a 30-year adjustable fixed-rate when they believe that they can buy the home for a 15% discount in 18 months?

Source: http://hosted.ap.org/specials/interactives/_business/debt_addiction/
Source: http://jimersoncobb.com/blawg/2012/01/03/a-speedy-foreclosure-in-florida-%E2%80%93-proper-utilization-of-statute-702-10/
Source: http://www.suntimes.com/business/3055979-420/average-foreclosure-delinquent-foreclosures-loans.html