Three months into 2008, the bad news about the residential real estate market keeps rolling in, and most analysts agree the bottom so many predicted last year remains elusive at best, and years away at worst.

"I think we are a ways from the bottom -- and a long way from any indicators that would even hint at an upturn," says Mike Simonsen, CEO of Altos Research, a real estate data firm based in Mountain View, Calif.

"It's a gigantic mess," agrees Lewis Goodkin, president of Miami-based real estate analysis firm Goodkin Consulting.

"You had people who wouldn't have been able to qualify for a mortgage with normal underwriting rules using these introductory rates to buy more house than they could afford, says Goodkin. "You had builders selling to people who they would not have sold to under normal underwriting rules, which made their profits go up and then they plowed more money into creating more supply. You had speculators looking at housing as if it were a security, and the lenders having this attitude that they weren't going to have to deal with this because appreciation would allow people to refinance their mortgages, and the appreciation would protect everyone," Goodkin says. "But it was all B.S."

As more houses went up for sale, prices continued to come down.

When people got to the point that their selling price couldn't cover their mortgage, the first wave of foreclosures hit. The market began to crumble and housing went from leading the nation's economy to dragging it down.

Since 2006 wave after wave of adjustable rate mortgages reset at dramatically higher interest rates, says Chris Porter, manager with John Burns Real Estate Consulting in Irvine, Calif.

Facing foreclosure many chose to sell and as listings flooded the market prices began to slip. That sparked another round of selling -- this time among investors who had switched from stocks to real estate with hopes of financial salvation through flipping.

Even as the housing market disintegrated, major housing analysts across the country spent much of the early months in 2007 predicting better days were in sight, a prediction Simonsen says seemed reasonable at the time.

"At the end of 2006 we actually observed some good strength in the economy. The stock market was up, the economy felt strong. Everyone expected housing would follow," he says.

"Even though there was some risk, the ratings agencies fooled the market and the investors into thinking housing was rock solid," says Lawrence Yun, chief economist for the National Association of Realtors (NAR). "It was the speed and the scope of the losses that nobody expected."

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