Reverting to pre-bubble...

The US economy hasn't been able to work its way out of the great recession chiefly because of the recent real estate bubble and subsequent crash that was one of the major cause for the economic downturn. Ever since 2008, real estate professionals as well as the financial sectors have tried to sweep that reality under the rug, hoping that through some “act of God,” things would turn around and home sales will regain some healthy pattern.

At first, home prices stayed the same and progressively eroded. In some markets that were particularly crushed by the crisis, like Arizona, Florida and Nevada, to name just a few, prices have come down so much that there's indeed some noticeable rebound in real estate activity. In other markets in which average prices are well above the national norm (resort town being a prime example), everything seems still frozen and showing no sign of rebounding.

The reason is quite simple: Prices continue to be out of synch with the real market and there's no demand at these levels. What would be required is a general re-set of home prices that would rejoin the levels of say, 2003 or 2004, just before insanity seized the market and inflated the bubble. Until such a move takes place, we're going to witness a continuum of the slow and painful adjustment to more realistic prices that has existed since 2008 and that will continue to paralyze the economic health of the nation.

How to reset to normality? By having the real estate community switching to a honest narrative instead of fooling sellers into thinking that their asking price might work, just for sake of getting a listing. But again, that breed of people is too unlikely to be willing to face the music and act with a courage it lacks in the first place.