This is all just my biased opinion, since I am obviously talking my own book:
Overall there are still going to be many unwanted side-effects. The obvious one would be inflation which probably explained the previous period mentioned. Maybe house prices didn’t drop in the 70s, but every commodity, e.g. gold, did much better. That’s why one should hedge for inflation somewhat if one doesn’t have a house.
The next wanted or unwanted consequence could be that house prices in the Mid-west would rise slightly, while bubble areas would still drop. This would bring them back in line with history, and also speculators (riding the trend) might help this adjustment.
Regarding the long-term rate, and especially the MBS market, those might at some point cave and point to higher rates, if inflation is obvious, or foreclosures do their damage on risk premiums.
Short-term rates in the form of ARMs might not be popular anymore either, since if anyone got in trouble it’s the one with an ARM, and people might be too scared to jump in on that one again.
