From The Pragmatic Capitalist:

[Mark] Hanson is painting a picture of a residential real estate market in a death spiral. With some states seeing a sizable majority of potential homebuyers frozen out of the housing market by negative equity, there will be effectively no move-up or organic homebuying.

Folks with less than 25% equity in a house that can be sold today cannot even move laterally, much less trade up, without adding capital that (for the most part) they don’t have to spare.

So mid- to high-end homes become completely illiquid assets at anything like current prices — and illiquidity will drive prices further south as supply overwhelms demand.

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More on housing:

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Millions of "shadow" foreclosures threaten another big drop in home prices