Via Calculated Risk:
Some of the blame on this can be placed on Secretary of the Treasury Tim Geithner. Â Geithner, who wants to protect banks from risk more than he wishes to protect our free-market system from political favoritism, has provided zombie banks with the capital to keep operating without requiring that they price their assets at market rates. This has allowed a large stock of hypotically priced assets to accumulate, which of course have no buyers.
In a rational market, goods decrease in price until a buyer can be found. However, Geithner has so broken the supply-and-demand system of housing that instead of having a functioning real estate market (at, say 70% off market prices), we have an artificially chilly housing market at hyponetically exagerated prices.