I have to say I find Geithner rather sensible here when he says asset prices need not be higher than they are now.

Geithner is right, and I'm glad someone has finally said it, but even leaving the possibility that house prices return to '06 levels is utterly ridiculous.  I've asked this about a million times, and I've yet to get an answer from any of the bulls: What part of "Houses are too expensive to clear the market" do homeowners, banks, talking heads, and the idiots who rule us not get?  It costs far more to pay the mortgage than the house will fetch in rent.  The P/E ratio is out of whack (technical term).  The mortgage requires debt levels far above the historic norm without a change in real variables that would justify the the appreciation.

All together now: Houses are too expensive.

Be nice to America. Or we'll bring democracy to your country.