SDR, I agree that govt efforts to support inflated house prices are just warming up, and there is lots more to come. Comparing house prices now to what they were 10 years ago, I see a reduction of 50-65% being very possible in a completely free market economy. But most homeowners, and therefore most voters, would be furious with their pols if the pols allowed this to happen, or anything even close to it.
We assume on this blog that the free market influences will, mostly, win out. But what is there, really, to prevent the pols from opening the throttle all the way, and blowing past any free market influences? For example, simply offer to insure against default any new mortages made to people who can fog a mirror. Just dial down downpayment and income and credit requirements to get home prices as high as voters want them to go. Sure, inflation might result, but most homeowning voters will take inflation any day over declines in home prices as big as the prior home price increases.
Home price increases are what maybe half the population of this country have decided to make the linchpin of their future financial wellbeing, and they will just about kill to prevent it being taken away from them.
