If you include all government intervention, then prices were already artificially high, even before the bubble. The tax deduction for mortgages already juiced housing prices, since it makes a given mortgage cheaper. As people compete for houses, the discount is, well, discounted. If you want to argue that this isn’t the case, imagine what would happen to house prices-all other things being equal– if the deduction were taken away.
I think that deduction has a bigger influence on prices, than does this collection of bailouts. Sure, the individuals that get bailed out will make out like bandits, but it doesn’t look like the scale will affect the market much, at least not yet.
