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Going to get worse before it gets better. I dont think enough emphasis can be placed on the consumer being more inclined to spend when their living arrangements feel secure.
The fact that we have a relatively large number of defaulted loans already means that (A) many who overbought, will be renting for a few years and (B) House values have and will continue to drop.
The problem with that is those who did not overbuy, and have & will continue to pay on their homes for the next few years means that by the time the first/second round of "defaultees" are ready to buy, they will be buying from the "responsible" parties that have just lost their a$$, just by paying on time. I would expect this to result in a third round of defaultees who will see this as unfair and not within their interests to continue to pay on a debt that many others have long since recovered from.
I dont think this means everybody...just a reasonably large precentage who bought at or near peak values...and subsequently cannot afford to sell without losing 20-30% at least. I think it would take quite a while for these people to just break even...barring some sort of legislation or assistance.
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