Depressing Market

We have some friends that used to live down the street from us.  They have the same house we do but they put in a few more upgrades.  I was VERY depressed today when I looked up their house on a realtor's site to find that it is under contract for $85,000.  That just sucks!!!  If all these forclosed houses are selling for so little, why won't the banks work with people who want to stay in their house. And, why can't we do a loan modification???????  Let's just say the Las Vegas Housing Market sucks for homeowners but is amazing for those wanting to buy a house right now!!