When I saw the run-up of housing prices in San Francisco back in the late 1990's, I thought it was crazy. I thought it was unsustainable because housing essentially became unaffordable.

Then I saw the same prices and mentality spread across the country and the world. It may have been crazy but money was being made and people felt crazy like a fox.

The more I learned, the more convinced I became that the forces at work were unsustainable and eventually the music would stop and the pieces would come crashing back to earth.

But I felt like a crank because the music never stopped. Year after year it went on. The hype became the common wisdom. I kept saying the end was near but my friends and family kept saying I was wrong.

Well this week, the end finally is near. I can comfortably say the music has stopped and we are on the road to recovery, a long, slow, painful recovery.

Fannie Mae and Freddie Mac have been taken over by the federal government because the government feared their collapse. (Unprecedentedly huge.)

Lehman Brothers is expected to fail soon. (Bear Stearns already failed.) Morgan Stanley doesnt look much better than Lehman.

WAMU is expected to fail soon. (Following IndyMac and CountryWide.)

Finally. For almost 10 years we have created a Great Housing Bubble. Now we are seeing the Great Unwind of that bubble.

What I expect to see next are hedge fund losses and more financial and bank failures. People that invested in these "safe" companies are going to lose everything and that includes the other banks and pension funds and international banks. The finances are all tied together and the losses will ripple through the economy like a glacier slowly sliding downward.

On the personal front, people will use credit cards to maintain the lifestyles for a while but in a year or two, personal bankruptcies and home loses will climb. Spending will drop on luxury cars and big TV's.

The banking problems will cause lines of credit will dry up. Demands for 15% to 20% down-payment on new mortgages will put a serious hurt on home sales and cause prices to drop. Someone is going to have to determine how to handle short sales and figure out who will take a loss when homes are worth less than their existing mortgage(s) or else housing sales will freeze up.

It wont be pretty but in the end, we will have a more affordable housing system and a more reasonable sense of what we can afford.