"National housing price declines and foreclosures have not been as severe as some analyses have indicated, and they are not as important as financial manipulations in bringing on the global recession, according to a new analysis of foreclosures in 50 states, 35 metropolitan areas and 236 counties by University of Virginia professor William Lucy and graduate student Jeff Herlitz."
...they claim that "66 percent of potential housing value losses in 2008 and subsequent years may be in California, with another 21 percent in Florida, Nevada and Arizona, for a total of 87 percent of national declines."
We all know intuitively that there are dramatic local and regional differences in foreclosure rates and home price declines, but it is startling to see 4 states make up 87 percent of the problem. Perhaps more important though is the observation that there was no "reverse gear" to extract non-performing mortgages from packaged mortgage securities and fairly revalue the remainder. As a result, a (relatively) small excursion in home values and default rates has resulted in a tsunami through the financial markets.
