The belief that the Federal Reserve kept interest rates too low, for too long, is one that's now nearly universally held. Well, outside the Fed that is. Here's a smattering of quotes that show how the view of Alan Greenspan's loose monetary policy (and now Ben Bernanke's) varies from group to group, and from year to year.

"The best response to the housing bubble would have been regulatory, rather than monetary."-- Fed Chairman Ben Bernanke, January 3, 2010

"Given the decoupling of monetary policy from long-term mortgage rates, accelerating the path of monetary tightening that the Fed pursued in 2004-2005 could not have prevented the housing bubble."-- Former Fed Chairman Alan Greenspan, March 11, 2009

"The reason I wrote this book was so that the average person could understand the scope of the housing bubble, and what its bursting was going to mean and… where blame should be placed… at Greenspan's Fed."-- William Fleckenstein, on his book Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve

"Bernanke has done a great job, post-Lehman. But going into this crisis, he really was the architect, if not the co-collaborator, in creating some of the conditions in the economy that led to the recession."-- Stephen Roach, chairman of Morgan Stanley Asia, Ltd, August 25, 2009

"We artificially lower interest rates. It's been going on for 10 years and longer and now we're bearing the fruits of that policy."-- Ron Paul (R-TX) at Chairman Bernanke's testimony to the Joint Economic Committee, November 8, 2007

This series has spent time laboriously scratching the surface of complex macroeconomic trends with a few over-simplified charts, and will now analyze every single US housing market by looking at sales data in two cities.

As Cirios Real Estate wrote in April 2009, "The bifurcation of the real estate market continues, as troubles in the high end are picking up the slack while low-end markets grope for a bottom."

This trend has persisted for months, and as foreclosures creep into higher-end markets, we believe the trend will persist for the foreseeable future.

Below are sales transactions for the past 10 years in East Palo Alto. East Palo Alto, which in 1992 had the dubious distinction of being "murder capital, USA" by tallying the highest murder-per-capita rate in the entire country, has undergone a renaissance of sorts. Sort of.

As Silicon Valley wealth swelled during the dot-com boom, so too did housing prices. One of the last bastions of affordability on the Peninsula, real estate speculators flocked to this rough town for high risk, high reward development. The town experienced a decade of gentrification on steroids, as home prices became completely unhinged with the economic prospects of the area's residents.

This story was repeated in cities across the country, each with its own unique flare. Vegas condos went through the roof. Track homes in Phoenix were flipped monthly by amateur and professional real estate speculators alike. Waterfront homes in the quiet town of Cape Coral, Florida approached $1 million apiece.

But now, as prices in these markets have returned to Earth, buyers are wading back in, armed with government loans, tax credits, and a newfound fear of the stock market. Inventory is being constricted by ongoing foreclosure moratoria and in certain markets, prices have begun to stabilize.

The arrow below points out the steep price declines from 2007-2008 on few sales transactions. The shaded circle shows buyers stepping back in and prices groping for a bottom.

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