The Obama administration has tried gallantly to combat the financial crisis. Using virtually every conceivable tool at its disposal to keep people in their homes and prevent an outright collapse in home values.

Where the administration has fallen short is in improving the way Americans feel about owning a home. Granted, previous administrations might have overshot the need and right to own a home. However, more recently homeowners and potential homebuyers have been inundated with messages on the financial risks and responsibilities of mortgage borrowing. What is lost in these messages is the social value and personal satisfaction of owning your own home. Let’s face it, if housing were on a daytime talk show – we’d being giving it a makeover.

These are ambiguous times, and ambiguity breeds anxiety. Nowhere is this more apparent than in the housing market. This is important because perspective is often times reality. Buying a home is an emotional decision making process as well as a personal economic evaluation.

We can’t underestimate the power of a vibrant labor market in improving the psyche of prospective homebuyers.  Consider that the unemployment rate in 2005 (height of housing market) was roughly 5 percent, and the economy was adding 175,000 jobs a month.  That is a huge psychological positive when it comes to buying a home – “my employment prospects are plentiful and diverse, I can afford to buy a home right now”.

Interestingly enough, in 2005 mortgage rates were nearly 100bps higher than current par quotes. Yet 5 million+ more homes were sold in 2005 than in 2010. Making it obvious that low rates don’t carry the same emotional currency as a robust labor market. Qualified potential homebuyers need practical psychological incentives and economic fundamentals to be in line before they sign a sales contract.

Despite the administration’s efforts, the U.S. economy is still dealing with the chicken and the egg enigma  – the job market will rebound when the housing market recovers, and the housing market will rebound when the jobs market recovers…and around we go.

Over the next 24 to 36 months more than 5 million foreclosures are anticipated to hit the REO market. To clear that inventory we need to focus squarely on creating a vibrant labor market and improve the way Americans think about owning and buying a home.

And at the end of the day – neither regulators, politicians, nor appraisers will set the floor of real estate values. Homebuyers will set the floor.