What the Housing Market's Up Against
The renter mentality invades home ownership. This article from the New York Times shows what is happening to all those no money down, interest-only mortgages. Homeowners are walking away:

Last year the median down payment on home purchases was 9 percent, down from 20 percent in 1989, according to a survey by the National Association of Realtors. Twenty-nine percent of buyers put no money down. For first-time home buyers, the median was 2 percent. And many borrowed more than the price of the home in order to cover closing costs.

“I think I could make a case that some borrowers were ‘renting’ (with risk), rather than owning,” Nicolas P. Retsinas, director of the Joint Center for Housing Studies at Harvard University, said in an e-mail message.

For some people, then, foreclosure becomes something akin to eviction — a traumatic event, and a blow to one’s credit record, but not one that involves loss of life savings or of years spent scrimping to buy the home.

There is no incentive for homeowners with no equity or negative equity to stay in their homes when the mortgage becomes unaffordable. It becomes the banks' problem. Banks and mortgage companies that were so eager to make stupid loans are going to have to deal with the fallout. With no equity, there is no incentive for an underwater homeowner try to keep a home when the adjustable rate mortgage resets to a higher monthly payment. Banks thought they were so smart with these tricky, draconian loans. The one factor they obviously did not consider was a decline in home prices. To avoid further declines, banks are going to have to fix their mortgage problems, not the Government. The banks need to step in and rework these loans that should help stabilize home prices.