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Default notices are precursors to foreclosures (of course, not all default notices graduate to foreclosures). As the rate of NODs increases, it will be followed, a few months down the line, by an increased rate of foreclosures. Increased foreclosures result in reduced property values, which leads to tightened lending, which leads to increased NODs, which leads to.....
Eventually property values will decrease to the point where a critical mass of home buyers will be able to afford to purchase, and the real estate market will bottom out and start rising. This time around, however, there are several factors that will likely blunt the turnaround. These include increasing oil and gas prices; increased cost-of-living; accelerating inflation due to the Fed printing more paper money to pay off the ballooning federal deficit (due to Iraq War spending); a tightening labor market; and astronomical transportation costs (due to increased fuel/oil costs which are due to the Iraq War, peak oil and increased oil consumption by China).
Will this be the largest economic downturn since the Great Depression of the 1930s? Many economists are still touting that we're bottoming out now and that things will start to improve later this year. As long as enough naive people keep buying this b.s. and insist on keeping residence in their world of denial, they will continue to fall off the financial cliff one after another, like lemmings. Eventually America will smarten up and insist on a new, better-regulated direction for the economy, but the only important question is, at what cost?