I guess someone is listening. Or, at least, someone is reading my Phoenix AZ real estate and Scottsdale AZ real estate blog.

Ok, Ok, maybe I am being a little overzealous with my readers. However, to make myself feel better, I will take credit for the following.

Recently, I wrote a story disputing a real estate expert who claimed that foreclosures are not the problem facing Phoenix AZ real estate.

I argued that foreclosures are the problem because until foreclosure stop dragging down prices, banks will not feel comfortable lending. As a result, dropping prices affecting availability of mortgage rates with reasonable down payments are the problem.

Buyers are more and more reluctant to part with down payments averaging more than 10% of purchase price, or more often do not have the cash on hand at all.

The most recent S&P Case-Shiller Home Price national index recorded a massive decline in the third quarter compared with the same period a year ago. According to the report, “With foreclosures soaring at record rates, the economic picture dimming and job losses ramping up, all the elements were in place to push prices lower.”

This news paints a picture why banks will simply not lend money to (virtually) anyone without 20% down payments (there are exceptions.) The reason being that if home prices continue to drop, homeowners are less willing to pay their mortgage if financial problems arise as the home is worth less then they paid. The can simply , and often do, just walk away from the home.

Thus, the banks foreclose on the homes and lose money.

In order to combat the liquidity problem, the Federal Government has made a bold move today and is about to pass a historic piece of legislation.

Stay tuned and keep your fingers crossed.