> artificially inflated Keep in mind that at least in the US, many people own homes -- many times with a mortgage, which essentially makes it a leveraged bet,

> artificially inflated Keep in mind that at least in the US, many people own homes -- many times with a mortgage, which essentially makes it a leveraged bet, so small swings affect them more. (If you spend $200k on a $200k home and its price drops to $190k, you've suffered a 5% loss -- ho-hum. If you have $10k equity in your $200k home and its price drops to $190k, you've been wiped out -- suffered a 100% loss.) Many people were "sold" on a mortgage by someone promising them that "it's an investment that will always go up." Because most people are rather ignorant about finance, and a home purchase is the largest single transaction they will ever make, a US politician seriously proposing what seems to be the trend of this discussion -- that house prices should go down -- would provoke an enormous political firestorm from the vast number of people with money on the table, at least as big as the current gun control debate. In an ideal world, we'd implement the policy backed by the soundest argument and the best evidence. I'm not taking a position on what the best policy is at the moment. I just want to note that, if it turns out the best policy is one that calls for substantial deflation of housing prices, politics would likely kill it quickly. Sorry for the double reply, but I think the above paragraphs say something substantially different from my other reply to the parent and really belong in their own comment.