Jay Butler, head of Realty Studies at ASU, was interviewed by ABC15 in Arizona saying that the number of underwater homes in Phoenix may be as high as 66-67%. This means a complete bloodbath for housing prices is still just beyond the horizon, not to mention that the true state of bank (and GSE) balance sheets is deplorable, and if there was even an ounce of reporting or mark-to-market integrity, most banks would be completely insolvent right now.
And since we now live in a land of endless home-payment subsidies, here is how Fannie Mae is responding to this once in a lifetime perfect storm, courtesy of its homepath.com program, which is now requiring just 3% down for a home purchase (worse than pretty much anything during the housing bubble), and according to some interpretations, requiring essentially no money down after one factors the various consumer-level government stimulus payments. That this will all end in another real estate bloodbath is the clearest writing on the wall ever.
h/t Housing Doom