A trifecta of bad policy, from Dr. Housing Bubble:
It should be abundantly clear and obvious that the government and Wall Street want nothing more than to keep home prices inflated and are sticking out a giant middle finger to the majority of Americans. You might have missed the glorious news that our stunningly cunning Senate decided to reinstate the heightened loan limits for Fannie Mae, Freddie Mac, and the FHA (aka the entire stinking mortgage market). Of course the lobbying arms of the housing industry went gaga for this policy even though it keeps prices further inflated in bubble states like California and New York.
Since our politicians care so deeply about working Americans, they are also examining a push at giving residential visas to foreigners looking to buy at least $500,000 in real estate. Forget about the fact that the median home in the U.S. costs more like $170,000 to $180,000.
Then we have the Federal Reserve artificially keeping mortgage rates at historic lows and you hit the trifecta of housing welfare for expensive bubble ridden states while the overall economy falters.
The US is becoming a banana republic. In a banana republic, two simple rules guide economic policy: the poor cannot become the rich, and the rich are protected from becoming poor. The income tax, for example, is not a tax on being rich but a tax on becoming rich. The estate tax is not a tax on old money but on new old money, because the only thing Old Money hates more than New Money is New Old Money.
In the US banana republic, cash-rich foreigners get to bid prices up on housing, because what they're actually bidding on is citizenship. Hugely expensive homes must stay hugely expensive instead of hugely affordable, which is where the market has been trying to push them for the past three years. Savers who don't have the means or the desire to navigate the Wall Street casino are given no choice, because the Fed's casino barkers get to levy negative interest on their savings if they refuse to play.
It gets worse: student loans turn the aspiring middle class into lifelong debt-slaves, the huge alphabet soup of tax-deferred accounts acts as a giant sluice gate to Wall Street for Other People's Money. The hidden threads in this tapestry of tax, fiscal and monetary policy are the twin designs of keeping the money flow headed upstream and the barriers to socio-economic mobility fixed. Americans, as this commenter notes, are thrown into competition with the global poor for wages and with the global rich for housing.
Every action provokes reaction, and the US banana republic faces existential threat from an angry, desperate middle class. This threat has been considered and an appropriate policy response implemented: the American middle class is to be replaced with a compliant Third World peasantry.