Government intervention in the market has screwed up the housing market beyond belief. While this sucks for a lot of people the truth is their houses are still wayyyyy over priced relative to their real, aka market driven values. Housing is a utility, not an investment. You can derive the same basic function from 1,200 sq feet as you do for 3,000.
Property taxes are killing the housing market. The mortgage, no matter what the rate, can eventually be paid off, property taxes however become a never ending liability.
In the state of Texas by the time you pay off a 30 year mortgage you have actually paid the entire value of the home in property taxes and yet the bill keeps coming. This never ending tax liability will be the death of the American dream and home ownership. There is simply no point in buying property that you can NEVER actually own. You are in fact renting your property from the state.