From John Burns Real Estate Consulting.

I wonder what the equivalent graph for Arizona alone would look like. I assume it would show that most of the deleveraging in Arizona has already taken place and our debt is getting close to its historical relationship to our income.

As seen in the chart above, from 2000 through 2008, household debt surged 111%, rising from $6.9 trillion to $14.6 trillion. During this time, disposable personal income grew by less than half that rate, rising 54%, from $7.2 trillion to $11.1 trillion. Moreover, of the $7.7 trillion added to the household balance sheet from 2000 to 2008, $6.1 trillion, or 80%, was attributed to home mortgage debt.

The Fed is trying to engineer a scenario where the debt junkies in society slowly pay down their debts while they continue to spend just enough to prevent another recession. To do this, the Fed will have to keep interest rates low for a very long time to allow principal to be repaid.