In any reasonably free-market system, house prices in So Cal would go down by 50%. But govt reps, desperate to please the majority of voters, will be pulling every lever in the govt control room to prevent big price decreases.
The govt. “nuclear option” is to just lend unlimited amounts of govt money directly to homeowners. By dialing down the downpayment and income and repayment and other requirements, home prices could be pushed up a lot in the short term, and by a significant amount permanently. Of course the program would eventually take large losses, but dumping future losses on the biggest taxpayers (a small minority of the population) is much preferable to most voters than a current loss in their housing ATM/retirement plan.
