Barack Obama says we need to keep housing markets from deteriorating further, and suddenly everyone starts writing that no way, no how should we be propping up home prices. And they’re right! But deterioration needn’t just mean falling home prices. It could also mean the very real lack of buyer interest in housing markets at the moment. This is not a healthy thing.

Now normally, we’d look at a market with all sellers and no buyers and conclude that prices were simply too high, and in many parts of the country that is still the case. But it’s also true that many people are simply terrified of housing at the moment and are staying away, low prices or no. In cities where prices are approaching a fair level, this is preventing markets from clearing, and it’s generating economic pain, defaults, and foreclosures that are unnecessary. It’s also putting undue strain on financial markets by ensuring that the national housing crisis remains a national, rather than a regional, affair.

If we want an orderly adjustment in home prices, then we want a raft of buyers out there visiting homes and making offers — even if those offers sometimes come in 10% or 20% below list price. Instead we have folks trying to sell homes of necessity (and increasingly this will be due to job loss, rather than foolish borrowing) and finding that even prices corresponding to mortgage payments below prevailing rents are failing to draw interesting. This is not a desirable place to be, and it’s worth government attention.