Feds Can't Rebuild Housing in a Day

But while the capital infusions will help restore the financial system and the broader economy, a massive housing bubble that took years to create will not correct itself as quickly as it burst.

"What [the government is] really trying to do is build confidence in terms of saying, 'We're here; we'll protect these loans; we'll protect the banks that make the loans," says Latha Ramchand, an associate professor of finance at the University of Houston's Bauer College of Business. "But the banks that are making the mortgages are still worried about risk. So whether it actually percolates down to more mortgages being made, that's going to depend on the grassroots confidence."

One positive takeaway will be a reversion to more prudent standards of the past: It's not a bad thing that buyers must document income, hold a job, provide a significant down payment and generally be able to afford the home they want to buy. But it holds a negative connotation, since the shift from no-doc and no-down-payment mortgages to full-doc and 20% down was so rapid and dramatic.

"If you look at today's lending standards and compare them to the 80s and 90s, or 70s and 60s, it's the same thing: Borrowers have to have good credit," says Gumbinger. "If you're on the risk-management side of the coin, the prudent-lending side of the coin, the side that tries to keep people from overextending themselves, is it a good thing? Yes. It's absolutely beneficial in the long-run."

One group that is primed to take advantage of the housing downturn is first-time buyers, who may also provide the ammunition for a recovery. First-time buyers don't have homes to sell, allowing transactions to occur more quickly, with fewer strings attached. They also tend to be young, which means more appetite for risk and less vulnerability to economic downturns than older peers -- who have kids to put through college, cars and vacations homes to manage, or retirement funds to worry about.