There are many homeowners who would like to sell but aren’t financially required to do so. Many of these people are waiting in the wings for the opportune moment to jump back into the housing market. In fact,  Zillow.com reported about 7% of homeowners surveyed said they were very likely to put their home on the market this year if they believed the housing market was improving. In addition to this already existing group, the number of homes with equity has grown this year, from 52% last year to 63% this May. This could pose a problem since many of these sellers will have unrealistic views about how much their homes are worth which in turn could influence the housing market.

About 4.5 % of mortgages in the greater San Francisco Bay area are at least 3 months behind in mortgage payments and not yet in foreclosure. This default limbo is different from other real estate crashes because previously there were fewer troubled loans which meant the banks moved quickly on those who fell behind on payments. Today with so many homeowners underwater, lenders just can’t keep up or are purposely avoiding foreclosures in fear of flooding the market with homes. Some underwater homeowners have used the lender default limbo to their advantage deciding to simply stop making payments on their mortgage. Instead using the foreclosure limbo time to save money rather than pour it into a property that may never gain equity. It is all bad news for homeowners causing market instability that could last for years.

Loans backed by the Federal Housing Administration, the Government National Mortgage Association, the Veterans administration, Fannie Mae and Freddie Mac have increased the government’s debt by $512.4 billion. TARP inspector general, Neil Barofsky said  "Treasury’s refusal to provide meaningful goals for this important program is a fundamental failure of transparency and accountability that makes it far more difficult for the American people and their representatives in Congress to assess whether the program’s benefits are worth its very substantial cost."

Nationally banks repossessions are up 38% in the second quarter from a year ago. However, California foreclosures are down 24% from last year. It appears that the banks are purposely holding California homes back from foreclosure in order to avoid flooding the market but this is only prolonging the inevitable. California’s real estate market is far from being out of the woods due to the highly inflated prices from the real estate boom and the current high rate of unemployment it will  one of the last areas of the country to recover.