It seems there's no easy way out of this housing mess:

Anxious to meet the bank's demands for quick action, Andrew Garcia and his fiancee, BethAnne Hoffmann, rushed to find financing to buy a foreclosed-on house in a lovely tree-lined Baltimore neighborhood.

That was in January.

A month later, the bank that's selling the house broke its own closing deadline. The couple has been in limbo since. In frustration, they turned to their congressman's office for help. Only then did they receive an apologetic call and a new proposed closing date of April 24 -- but still no signed paperwork.

"It's unbelievable. With all we hear about all the homes out there that need to be sold, I have to call my congressman in order to purchase a house," Garcia said. "If that's the process, there's no way we're going to clear all these foreclosures."

As bargain hunters turn their attention to foreclosures, many are discovering the toughest challenge is dealing with the banks that repossessed the homes. These banks are usually quick to accept a bid and write a contract. But the closer buyers get to the settlement table, the greater the potential for bureaucratic bungling and the chance the buyers will give up.

The housing market stands little chance of recovering until the foreclosures are sold. Distressed properties make up roughly a quarter of U.S. homes for sale. Moving them would go a long way toward stabilizing home prices. But working with the banks, which are typically based far from the homes they're selling, is not as simple as buying from a regular homeowner.

"Things go wrong, and it takes the bank a lot longer to deal with them," said Vivianne Couts, a Virginia real estate agent. "There are a lot more people involved, many more layers. The Realtor can't always call the bank and say, 'What's going on here?' "

[...] When their closing date passed and no one could explain the delay, they started digging into court records. They learned that days after the bank had repossessed the home, the previous owner had filed for bankruptcy protection. Garcia said all the bank needed to do was submit paperwork to the court confirming that it had foreclosed on the house prior to the bankruptcy filing. But that letter didn't materialize until their congressman, Rep. John Sarbanes (D-Md.), intervened.

DOWNLOAD (144)

PLAY (142)

Rick Santelli responds to statements about him during the White House press briefing by Robert Gibbs. Matthews gets a shot in on him at the end when he says his name has been iconized with Rush Limbaugh and Sean Hannity.

This isn't a popular thing to say, but the silver lining in this crisis is that housing costs will return to rational levels. One of the things that drove the spiraling debt economy of the past three decades was the rapid shift from housing as shelter - to housing as speculative investment. Those high housing costs drove everything else: Most families needed two paychecks, because wage deflation wasn't keeping up with the mortgage prices:

Home prices were down nearly 20% at the end of last year, according to two new reports. But there is plenty of further room to fall, say economists who forecast where the housing market is headed. The median sales price of existing homes fell to $175,400 in December, down 15.3% from a year earlier, according to the National Association of Realtors (NAR). Looking at the S&P/Case-Shiller index, home prices in 20 cities fell 18.2% in November compared to the year before. Both measures make houses about as expensive as they were in 2004.

And we're likely not done yet. "Our outlook is that home prices will continue to fall, bottoming by the end of this year, but it won't be until the end of 2010, maybe even 2011 that we'll see steady price gains," says Celia Chen, an economist at Moody's Economy.com. Chen and her colleagues predict that home prices, as measured by Case-Shiller, are due to drop some 30% from their early-2006 peak. We're only about two-thirds of the way there.

That forecast, gloomy as it is, still assumes the government is able to create economic-stimulus and foreclosure-prevention programs that work. If not, then home prices could be expected to fall even further. Major layoffs, of which there are more each day, keep downward pressure on home prices since people without jobs are less likely to buy a house — or to make the payments on the one they have. Foreclosures exacerbate the problem since banks tend to sell repossessed properties on the cheap. December saw a surge in existing-home sales, especially out West, but 45% of those were distressed sales at discounted prices, according to NAR.

Beyond the state of the economy, the problem is that in many markets houses still cost too much. Housing consultancy Zelman & Associates compared what houses cost to how much people earn and found plenty of markets — including Portland, Miami, Norfolk, Philadelphia, Los Angeles and Salt Lake City — where homes would have to shed at least another 30% in value to get back to being as affordable as they have been historically.

  Remember when President Bush made homeownership the centerpiece of his domestic policy? How's that working out for America...

Krugman:

“Owning a home lies at the heart of the American dream.” So declared President Bush in 2002, introducing his “Homeownership Challenge” — a set of policy initiatives that were supposed to sharply increase homeownership, especially for minority groups.

Oops. While homeownership rose as the housing bubble inflated, temporarily giving Mr. Bush something to boast about, it plunged — especially for African-Americans — when the bubble popped. Today, the percentage of American families owning their own homes is no higher than it was six years ago, and it’s a good bet that by the time Mr. Bush leaves the White House homeownership will be lower than it was when he moved in.

Exit question: Can you name one positive legacy of George W. Bush's presidency?