It has been close to six years of Bust since The Case-Schiller Housing Price Index reached its Boom high.There is certainly no single explanation of this extreme situation of Profit and Loss that extends to all real estate asset classes.In an earlier paper I identified eight principles of real estate investment.It is my contention that these were ignored; misunderstood or simply rejected with the disastrous results we are still experiencing.The restoration of economic stability requires that they be relearned and reapplied.The eight principles and what went wrong are:(1) Location-The boom encouraged marginal locations to be built upon.Whether these were further out on the ribbon of highways of cities or were previously rejected in-fill sites, they became seen as economically viable.However, this was temporary as these less desirable locations are inherently more vulnerable to economic disruptions and resulting price declines.Today, the over supply of unsold, incomplete, foreclosed, and "underwater" houses in undesirable locations continues to serve as a downward pressure on prices.(2)Financing-The cost, availability, and subsequent leverage of real estate financing became distorted.More and more money was available with less and less required equity.Asset prices rose to unsustainable levels, as did debt financing.Including the absence of credit standards, securitization and other mechanisms of financial engineering, it is evident that the financial system was more susceptible to Bust than previously thought or acknowledged.(3)The Economy-Real Estate does not exist apart from the health of the macro-economy.There is a direct, if not an immediate path from individuals losing their employment to losing their home.No city or region, be it Hotels in Las Vegas, Condos in Miami Beach or Retirement Communities in Phoenix is immune from national economic conditions.The economic determinants of demand were ignored.As the real estate sector reached a greater percent of GDP, it represented more a misallocation of resources than sustained economic growth.The jobs, assets and wealth created by the real estate boom turned out to be more ephemeral than real.(4)Taxation-Real estate is a tax-advantaged investment that as a direct result, enhances its profitability compared to many alternative asset classes.While there were no significant changes in tax provisions during the boom years, their existence fueled and abetted the attraction of real estate investment.New actors, in a new fashion, exploited them with assertiveness and relentless that contributed to the boom.(5)Regulation-No aspect of the marketplace exists without the incentives and disincentives embedded within the scope and direction of the rules and codes of conduct formulated by Governmental institutions.Regulations or the lack of them abetted the boom.They failed by intent, by their own unanticipated consequences, and by the inability to understand the complexity of contemporary finance to fulfill their own goal of ensuring equilibrium in the marketplace.How the implementation of Dodd-Frank will lead to the unwinding of the bust is yet to be seen.(6) Complexity and Uncertainty-The model of Rational Decision Making does not fit reality.Real estate information is incomplete, inconsistent, and oft times misleading.Often considered as proprietary information, it is characterized by anecdotes, rumors, and self-serving promotion.Add the allure of Excel spreadsheets, where any projection is possible by the tap of the keyboard and all purchases look worthwhile, and offer the appearance of analytical rigor.The risk of losing money was not thought of as a possible outcome.Today it is.(7)People-The assumption of the Rational Actor is an illusion, if not an ideology.To say that Wall Street is ruled by the individuals monetary self-interest and greed is both obvious and incomplete.Peoples goals are multi-faceted and include power, status and prestige, and an ego driven ambition to be the winner.Individuals have different personalities and characters.Some are risk takers, and others are optimistic.The feedback loops of the market exchange create their own shifting momentum.As people rushed to buy before prices rose higher, today they wait for prices to decline further.When the Bust will reach its bottom is anyones guess and nothing more than that.Timing, if not everything,still counts for something.The Boom rewarded "Irrational Exuberance" since prudence and fiduciary responsibility were out of style.(8)Markets-The "self correcting" marketplace was nowhere to be found.The "Efficient Market" did not seem to be operating.Evidence of the excesses of price and debt were ignored.Oversupply and a bust followed an unparallel increase in demand and price.Declines are the is in.The US economy has historically demonstrated its resilience and dynamism.As recently as the "S & L Crisis" of the late 1980s, it has recovered from real estate crashes.The crisis today may be different.In the past the meltdown did not morph into the wider financial system, which is beyond the scope of this paper.The current structure of interests and the political climate may not facilitate the necessary adjustments to bring about a healthy recovery.But it is certain, that the structure of finance and the incentives of real estate investment of the past decade or two is not sustainable.The decline in the price of single-family homes has dropped to the levels of the early 2000 s.An entire decade has evaporated.To aim for a recovery that is defined as the restoration of prices as well as practices to those of the peak years is a misplaced goal.Such an expectation will only lead to more disillusion and hardship in society.Instead, as I present in my paper, there is a need to adjust real estate investment decision-making and reorder priorities.