Actually the problem is that under the structure we have set up real estate values are determined by the amount of credit available to fund real estate. The unwinding of leverage is what is producing the collapse in real estate values which is causing further unwinding of leveraged debt and so on.
It started with a bunch of ivy leaguers on wall street and in the Fed thinking they were a lot smarter than everyone else and knew things that the rest of us didn't. As Ronaldus Magnus pointed out about liberals, they know a lot of things that just aren't so.
Real Estate has always been a solid, long term investment not the get rich quick business it became a few years ago. I agree that credit available determines value somewhat. Lenders, appraisers, brokers, and sellers all wanted to maximize the flow of money. Speculators licked their chops and dove into the market with gusto. We saw a 32% spike in home prices here in Florida..what would have taken ten years, in a little over a year. The result is short sales, foreclosures and bankruptcy for those who have to move or whose financial situation has changed by sickness, loss of job or jobs etc. A structure that allows one to buy a house with only a small fraction of the cost invested (all leverage) is certainly going to collapse.