The real problem is not allowing the market to function naturally.
When the market is glutted, the values should come down in order to make the sales.
The problem is that the loan companies prefer to either hold the paper or not only take a complete loss, but pay somebody more cash to tear them down.
Meanwhile people who are looking to buy, can make offers, but in most cases their offers are beat by the homeowners attempting to refinance and the offer becomes their new market value.
What is nutty is tearing down the housing when now you have jobless and homeless people.
Usually when homes get bulldozed they are uninhabitable. The cost of bring them up to code doesn't make economic sense.