From the early 2000's to about 2007, house prices increased at a faster rate than the historical norm. The primary reason for this was the huge increase in buyers that was made possible by extremely loose lending standards/products that were initiated during that time. This created a demand in many areas that outpaced the supply. The problem with this increase in house prices is that it was artificially created by allowing certain people to purchase a house that could not afford it in the long run. The correlation of wages to house prices became out of whack. With a large percentage of the buyer pool now gone because of changes in lending standards/products and the resetting of mortgage rates for many people, the demand for house purchases is now far less than the supply in many areas.
The current housing debacle will not be resolved unless and until demand and supply are roughly equal or until there is slightly more demand than supply. It will take time to get there. Wages and house prices must come into line for this to happen. Unemployment levels will have to come down to pre 2007 levels. The reality exists that house prices will come down much faster than wages will increase.
For those people who think "normal" house prices were what they were back in 2007 they are wrong as these were artificial prices. In the end, the last time we had true normal prices was in the early 2000's or late 1990's. This is reality. Any attempt by the government to short circuit a required correction will only have temporary political benefits that will delay a complete and true correction.