Why Housing Bears are Wrong, Part 1:
"But even aside from these considerations, you must realize that the government has absolutely no freedom to let prices drop. To expect that from the government is about as realistic as expecting them to abolish the income tax. Theoretically possible, but will never happen. Because the entire financial system that was built on the foundation of constantly appreciating real estate will go belly up as soon as prices retreat merely 10%. Remember how they droped 1.5% this year, and then mortgage companies collapsed, the stock market almost crashed, and Ben had to call in his helicopter? Make no mistake, folks: the government will fight the bearish scenario more vigorously than it fought Saddam, and this alone is sufficient to assign this scenario a probability of zero. What steps it will take when and if necessary - impose a moratorium on sales, ban all construction, bring in 100-year mortgages, drop rates to -2%, impose death penalty for not buying a house - I cannot tell. But I can tell you for sure that it's not going to sit and watch that 20-trillion dollar "funny money" equity fall off a cliff".
From the blog of EScroogejr, Sept 18th.