[jpiasetz]

> The government hasn't and can't do anything to "prop up" house prices. It only sets the prime interest rate, which affects the ability of people to borrow money (specifically does it affect ARM mortgages), essentially the ability of people to "afford" housing, or the rate at which they'll be able to convert the debt behind their mortgage into equity.

What about implicit and explicitly guaranteeing higher risk mortgage through Fannie Mae and bank bail outs? By taking on some of the risks the government lowers costs which increases the number of people in the housing market increase price.

>Following their mission to meet federal Housing and Urban Development (HUD) housing goals, GSEs such as Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks) have striven to improve home ownership of low and middle income families, underserved areas, and generally through special affordable methods such as "the ability to obtain a 30-year fixed-rate mortgage with a low down payment http://en.wikipedia.org/wiki/Fannie_Mae