$25 billion in National Mortgage Settlement and other policy efforts have worked to prevent the real estate market from clearing.  At the same time, these policies have harmed those who have done the right thing.

Most people know virtually no financial history, so when we have a financial crisis, it seems like it has never happened before. But it has, again and again. As Paul Volcker, former chairman of the Federal Reserve, remarked: "About every ten years, we have the biggest crisis in 50 years." 

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Government policies promoted a systematic loosening of underwriting standards in an effort to promote affordable housing, which then contributed mightily to the housing bubble, mortgage meltdown and resulting financial crisis.  

Housing markets will continue to go sideways, on average, during 2012, then they will begin their cyclical recovery in 2013.

In 2011, the Government Mortgage Complex accounted for 88 percent of all first-mortgage originations in the United States, with the government also controlling an estimated 90 percent of the student loan market. The government’s growing dominance in the home mortgage and student loan categories is cause for concern, posing a threat to private investors, borrowers, and taxpayers.

Only by ensuring mortgage quality and fostering the accumulation of adequate capital behind housing risk can a robust housing investment market be created without government guarantees.

The fat years of the housing bubble lasted from 1999 to 2006 - seven years. The bubble was deflating by the beginning of 2007 and collapsed into the panics of 2007-09. Since then we have been struggling in its deflated wake. If we get the Biblical sum of seven lean years, the housing and related debt markets will bottom in 2013 - not a bad forecast.