Everyone was under the idea that buying and reselling homes were the road to riches. It was easier to make more money than one would earn at a real, productive, job. This is where the problems come from.
When a bank loans someone 100% or even 95% CTLV, the bank is now at a high risk. If the asset price goes down, why would anyone want to hold onto it? If you buy a house for $300K, and your neighbor moves in at $220K for the same house, yet it's going to take you 6 years just to pay down to what they just bought at... why bother? Sure there is a moral dilemma, but employers wouldn't blink about outsourcing or offshoring people's jobs. I see it as the people adopting the corporate ethics of the country.
A tactic is to buy the house next door then let yours go to foreclosure, but as I understand it only works in some states and depending on the loan types.
In my area housing is still grossly overpriced, and it makes far more sense to rent. The sheer amount of fraud on behalf of mortgage lenders, banks, brokers, appraisers, realtors, and Fannie Mae / Freddie Mac is staggering. Many many people should be going to jail but instead the gov't is trying to "rescue" home prices... that is, keep them artificially inflated at a level that will keep people enslaved to huge debt loads forever.
