A false floor for housing prices?

Although the government efforts to support the housing market seemed to have created a potential bottom in the future for housing prices, could that be a false bottom that leads to a trap door if the overall economy doesn't improve or the government runs out of stimulus money? From a Wall Street Journal story:

In response to gigantic government efforts to support the mortgage market, house prices are showing signs that they mightn't have much further to fall.

But prices have to be built on more than cheap financing. Indeed, government leverage could set the stage for another downdraft if the wider economy doesn't recover fast...

Sharply lower house prices and ultracheap mortgages were bound to spark bargain hunting. Government intervention in credit markets has helped push down rates on standard, fixed-rate, 30-year mortgages to 4.85%. That is the lowest level since Freddie Mac's records began in 1971. After months of decline, house prices jumped 1.7% in January from December, according to the Federal Housing Finance Agency.

This was a small sign the vicious circle in housing can be broken. Policy makers fear the more prices fall, the more likely it is that underwater borrowers choose to default, increasing foreclosures and forcing prices down even further...

However, two countervailing forces could thwart a rally.

First, borrowers mightn't want to take on more mortgage debt while personal balance sheets are still stressed, something not reflected by the affordability index. At the end of last year, personal disposable income covered 75% of household liabilities. In 1991, it was 114%.

Second, rising unemployment could continue to take a heavy toll. It makes the employed more cautious about large purchases, but unemployment does most damage by driving foreclosures higher -- even among borrowers with sounder personal balance sheets...

Even Fannie Mae's 2005 mortgages, most of which should have been conservatively underwritten, are suffering unusually high default rates.

Given this backdrop, the government will be tempted to keep stepping up mortgage subsidies. The risk: Buyers are lured in by artificially cheap financing, only to find the house-price floor subsequently gives way.