There isn't a simple solution. If prices continue to rise, people cannot afford to buy homes. If prices fall, those people that have mortgages may owe more money than their property is valued at.
Stopping the banks doing whatever they like would be a good start. Discouraging people from owning multiple homes would help reduce demand for housing. Encouraging people to live out of the major cities would also put less pressure on house prices in cities.
If only we could take fear out of the equation - it is essentially fear that drives both the insanity of the banks and the indulgence of the buyers, I think!