Terminal Velocity

Second quarter 2009 median home prices down a record year-over-year decline figure of 15.6% from second quarter 2008.

In the vast majority of metro areas -- 129 out of 155 -- median prices dropped year-over-year. Some of the decline can be traced to an increase in the percentage of foreclosures and short sales. They accounted for 36% of all transactions during the quarter.

These "distressed properties" are usually sold at discounts of at least 15% compared with traditional sales.

Patrick Newport, a real estate analyst for IHS Global Insight, while admitting the year-over-year results are still awful, said recent evidence indicates that prices are stabilizing.

"The state sales data show sales picking up across the country," he said.

Newport expects prices and sales to trend down again, especially when the impact of the first-time homebuyers tax credit starts to fade. The credit ends December 1. "Afterward, sales will take a hit," he said.

His forecast is for prices to drop another 5% this year, driven down by added inventory as the foreclosure plague continues to worsen.

Still a long way to go, prices will continue to fall well into next year and possibly beyond. All that lost real estate waelth will smother the recovery effort. It's going to be a long couple of years. That's the problem with happy face calculus numbers: when your rate of descent has stopped accelerating and you've hit terminal velocity, you're still falling.