Reducing downpayments and relaxing lending standards is a time-tested way of deaing with a glut of overpriced housing that has never led to problems in the past. ft.com/content/644d8d… 
One benefit of the likely crash in the luxury housing market (besides schadenfreude) is it will be a good test of the "filtering" theory that construction at the high end leads to lower rents for all. High-end sale prices are falling; will rents down the scale eventually follow?
A lot of the dysfunctions and instability of asset markets, it seems to me, come when expectations of future prices are based on extrapolating from recent changes. Another exhibit in the endless parade for why rational expectations are not a desirable feature of economic models.
