Matt Yglesias has a great post about housing prices over the past few years.  Tons of people began to actually believe they had a certain amount of wealth, and now they want it back. And they think that the housing market won't be fixed until they have that wealth back.  But the problem is that the prices of the last few years weren't real.  They were made up.  So government policy shouldn't be to maintain a certain phantom price level.  It should be to make sure a healthy market exists, with sufficient volume and liquidity.  Unfortunately, this means a lot of people will feel a lot less wealthy than they have over the past couple years.