You may not know this but in some places in the U.S. we are back to 2006 prices. That's right, we're right back where we were at the peak of this mess, but there's one huge difference. The banks are now completely in control of it and the forces of supply and demand are literally meaningless.

A few years back when the inventory starting gaining ground very few people watched the FED, government and banks moves to control inventory. The government put a crack down in place on the banks, the FED was buying mortgage back securities to lower interest rates and the banks were controlling inventory from short sale approvals to REO's. Fewer notice of defaults were given and today it's much less.

Now we have a MUCH BIGGER problem. With economies struggling in various parts of the country home prices are going up at a drastic rate. Now the impact may be smaller in small town America, but in places like San Francisco, Los Angeles, San Diego, where prices are much higher, we are seeing 10% gains in periods as little as one month. So the dilemma for the banks now is to loosen up criteria for appraisals and banks continuing to loosen up their criteria for lending.

On the flip side FHA loans now have mortgage insurance in place for the life of the loan. So doing what AIG did, from a more subtle perspective.

So as prices continue to skyrocket in both high and low demand areas due to the huge lack of inventory, the banks are still controlling a majority of inventory through stalled notice of defaults and much slower than normal short sale approvals. But here comes the flip side. In spring, as these prices continue to go north, homeowners will now be positive equity and homes will come back on the market. This could derail the entire market, it's uncertain what affect this will have but we could see another interesting market meltdown, although highly doubtful with the amount of control the banks and FED currently have.