In a normal time, I don't think economic policy makes a large difference one way or another. But in times of crisis it makes all the difference in the world.

The Obama administration deserves credit for quickly ending the housing free fall. In particular, Obama empowered the Federal Housing Administration to ensure that households could find mortgages at low interest rates even during the worst phase of the financial panic.

It has become fashionable to rail against government intervention in the economy, and the FHA is a favorite example by those trying to show the government's overreach. In reality, the FHA shows how government action during the Great Recession forestalled a much worse economic fate.

The key to house prices is the share of foreclosure or short sales in the total housing market. When that share rises, house prices will fall, because distressed properties sell for significantly less - currently around 25 percent below non-distressed houses.

In a normal time, I don't think economic policy makes a large difference one way or another. But in times of crisis it makes all the difference in the world.

Distressed properties are often vacant and in disrepair, and thus sold at significant discounts. As the share of distressed sales grows, home prices fall.

There are different flavors of recession. You can get into some pretty dark scenarios pretty quickly.