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I’ll agree with your take on this - and add this:

Housing prices were pushed up by an artificial demand. By “artificial” I mean that people who didn’t have sustainable means to buy homes were given outlandish leverage by a very easy Fed policy and banking industry greed following 2002’s agenda of interest rate reductions, plus the Yen carry trade, a confluence of events on Wall Street (securitization of junk paper as AAA paper, which kept rates artificially low and liquidity overly abundant).

That leverage is GONE. Period. See ya. We can see new regulation coming down the tunnel every week now that is going to prevent the sort of lending stupidity of 2003 to 2006 from happening again.

Without that fantastic level of leverage, the demand won’t be coming back. People will have to actually justify to bankers why they should be able to get a mortgage. Bankers won’t be writing mortgages to people seeking to buy houses at 6X their household income. The wave of “ruthless defaults” has already created a response from banks to increase lending requirements, to decrease LTV’s on loans, to freeze HELOC’s, etc. Banks will require at least 10% down, and more conservative banks will likely require more.

Luskin is still playing the typical dumb economist. He keeps looking at the macro economic numbers. This economy and the bond and equity markets have not been driven by macro-econ numbers since last August. Everything since then has been driven by bond market events. And the one picture we can paint from the bond market is that a) too many people confounded “credit” for “cash” and b) they’ll learn (the hard way) that these are two very different things as credit is withdrawn from the US economy in nearly instant regulatory and bank policy changes. The effects of the lack of credit won’t be seen all at once in the macro-econ numbers; it is going to set in over a longer period of time.

The Fed just injected another round of liquidity through auction mechanisms this week, and they’re accepting ever more dubious “collateral” for the treasuries they’re “loaning.” This does not look like “the bottom.”

One more thing: Luskin obviously has never been a trader. One of the truism I’ve learned in trading the stock market is this: When talking heads keep saying “This is the bottom” — you’re nowhere close to the bottom. People have to throw their hands up, express nothing but disgust and despair, the conventional wisdom has to become “No one who wants to make any money would put their money there” before there is a “bottom.”

We’re not at a bottom. Just as bull markets don’t go straight up without corrections, bear markets don’t go straight down. Look at a chart of the NASDAQ stocks in 2001 to 2002 - there were counter-trend rallies that kept people saying “This was the bottom!” time and time again. It wasn’t until we got to October 2002 and March 2003 that we finally hit a “bottom.” By then, people were just chucking in the towel and selling stocks at fantastic discounts.