Anyone today would be insane to buy a house knowing it could fall at any time. Home prices have fallen, but they could fall much, much further. In the early 1990s, a typical 2,000 sq ft. house cost in my area was $89,000 vs. $220,000 today. The price to erect a house, minus permits, restricted number of contractor licenses and special laws, is very cheap, especially with the prohibited labor used. A 2,000 sq ft site-built house could be built in a free market for $50-$60K today. I know someone who just built one for $40k using prohibited labor. If the U.S. gov’t doesn’t back today’s home loans for buyers of resale houses, 95 percent of all houses on the market could fall into default, since these properties could not be sold for what was paid + home equity loan due. If that happened, the U.S. economy may collapse as an entire new class of homeless would arise. Should a U.S. gov’t guarantee be place in place for home resale loans?
If we cut the legs out from homeowners, it will probably work out in the long run. In the small run but, all the baby boomers will wind up on gov’t welfare as they will have to use their retirement to pay for their over-inflated mortgages. No retirement money left for retirement. X & Y gens will have to foot the bill for this (or have to warehouse your parents). As Keynes said: In the long run, we are all dead.