We really don’t want to truly deflate the housing bubble. That would PO the baby boomers, big-time. There’s only one thing that will get people more excited than the chance of getting a free lunch, and that’s the chance they’ll lose a free lunch.
Don’t forget the state governments. What would they do if property taxes suddenly plunged as house values reduced 50%? And don’t forget the banks. What would happen to them if they had to realize 50% losses on their mortgage portolios? The baby boomer homeowners are only a small (and not very influential) part of the pressure to keep home prices high.
Governments seldom get rid of any program or bureau once they have it. When is the last time you saw in the news that the federal government was shutting down some department to save money? The only tool they have is the money printing machine, and they’re going to use it.