It's not just prices, it's the foreclosures! The fed needs to cut rates enough to stop the bleeding.

September 18, 2007... I believe I was saying that day I bet Bernanke wouldn't cut rates. (I was, of course wrong)

And that day...

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we crossed the 200k mark on foreclosures for the first time ever. and we didn't just walkover the line, we jumped over it- a 36%+ rise.

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Today, the total properties is 259,085. The fed can afford to put every kind of inflationary pressure to bear on the economy until the rate drops below 200k, and I suspect if they start tightening as soon as the number goes below 200k, they might avoid an overcorrection. But, in the meantime, the price of foreclosures is huge-- it's a nasty misallocation of and manpower in general. We can't expect the economy to grow when the only new jobs are in the field of helping banks kick people out of their homes.