The source of this picture is the Irvine Housing Blog's Article, Houses Should Not Be a Commodity, which I found care of Peter Viles's LA Land Blog.
It is accompanied by well written descriptions of the stages, which are analogous to the stages of grief.
About the only thing I differ with this at all is that I believe that the overshoot on the downside will be much worse. It may not be recorded in house sales though, as the market is likely to become largely illiquid, so you will simply be stuck with your home and mortgage debt.
In the Irvine blog, the basic point is that when housing simply becomes a traded commodity, it does far more harm than good. It creates wild swings in prices driven by speculators, that alternately price people out of, or wipe out, people attempting to obtain a stable necessity.
Speculation in the housing market gets you here:
Image from the Irvine blog.He has a somehwat more informative picture too:
This scary picture is an artifact as housing as volatile speculatively traded commodity. People use sophisticated instruments to buy into a speculative bubble, because of the desire to purchase a rapidly appreciating comodity, and for fear of permanently being priced out if they do not purchase immediately.
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