An ugly picture

This is what happens when you allow significant distortions in the real estate market (especially mortgage interest deductability):

Okay, it's clearly not the whole reason for the distressingly large number of "underwater" mortgages, but it clearly has some responsibility for the result. When people are given incentive to over-invest in housing through tax deductions, everything works well . . . as long as the price of housing continues to rise. This is what happens when that is no longer true.

H/T to James Lileks (for extra depressive realty/reality, watch the video clip in this post).