Ever since the current depression began, the Fed and most Washington politicians have assured us that quantitative easing, low interest rates and stimulus spending would all combine to set the state for real estate to “lead us out of the recession.” As far as I can tell, this theory is based on the idea that if real estate values can be re-inflated, then people will buy more houses, more furniture and more stuff. Then, they’ll take out home equity lines of credit and spend even more money on consumer goods, thus “leading us out of the recession” and ensuring that happy times will be here again. I deny that this is a good idea, and unlike Janet Yellen, I’m pretty sure that printing money is not the only way to produce economic growth. People should stop buying real estate and save money and devote it to things other than consumer goods or appetizer’s at P.F. Chang’s. However, since stimulating real estate lending, while that is one of the goals of the Keynesians, let’s look at their success. 
all of this in the face of historically low interest rates which have not managed to return homebuying activity to pre-depression rates. home buying activity also promptly dropped following the end of the tax credit. According to Case-shiller, home prices are still down 31 percent from peak levels. For the past 12 months, real estate lending, every month, has been down by at least 100 billion dollars compared to the same month a year earlier. The other justification is that banks would not be enthusiastic to lend without massive quantitive easing - well, are the banks lending out to? Not accoridng ot this - during January and February, excess reserves increased at the fastest pace in more than a year, with reserves increasing q to q by more than 14 percent in both jan and feb. The line has basically gone vertical. 
Now of course, during the course of this period, lenders should have been lending on rental housing, but that was neglacted for years in favor of homeownership. Thus now markets have been skewed by Fed policy.
