As mortgage interest rate falls, it decreases the bankruptcy risk of the borrowers and, hence, decreases distressed sales.
When we talked to Mark Zandi last month, he said it's likely to be a year or so before the percentage of distressed sales falls and the housing market gets back to some semblance of normalcy.
Prices would have gone down even further had not transactions dried to a trickle (see chart). Owners are loth to sell into a falling market, although some distressed sales are occurring.
