The economy must "work through" the current oversupply of homes in order for the housing market to begin a recovery process. It is my understanding that there are enough empty, unsold new builds on the market that occupancy levels wont return to normal until early 2009. Until then, decreasing home valuations (and tightening of lending standards to certain demographics which rely on home equity for cash) will disallow american consumers to continue using home equity to fund purchases. The American consumer, being a pillar of our economy, now has eroded buying power and is more reluctant to borrow against their home. In regards to stagnant household incomes, I do not think stagflation will help this situation. When the market does recover, obtaining a home loan, and home ownership will be more difficult for lower income borrowers as retail banks will be reluctant to take on additional mortgages when they are already laden with packaged loans they cannot sell. Solution?