It's a very unpopular, but there is far too little blame placed on the numerous people that got caught up in a get rich quick scheme of flipping houses (there w

It's a very unpopular, but there is far too little blame placed on the numerous people that got caught up in a get rich quick scheme of flipping houses (there were a slew of tv shows on the topic), the realtors that encouraged this and siphoned off their profits from increased transaction volume, and the retail mortgage people that faked documents, faked estimates, and took on rosy assumptions. I kept hearing people say "housing has never gone down". The reason people decided to start defaulting on their debts is similar to the reason people sell stocks at the bottom of the market. They wanted to get rich quick and saw the chance disappear, so they ditched the mortgage they could barely pay. They took out a huge loan they could barely afford in the hopes of selling in two years when they could do it capital gains free and seeing a big profit. The price to rent ratio was very high. These people were trying to ride a wave and got caught out by the tide. I mean, if you have a mortgage it doesn't matter at all if the price of the house you are living in falls. The only reason to cut and run is because you want to cut your losses on a failed investment and your dreams of getting rich quick. The fix has been pretty simple- lending standards have been greatly tightened, making it harder for people to buy houses they can't afford or for those with bad credit to get mortgages. It notably didn't take any major changes to derivatives marketing (because the sophisticated buyers of those products had already learned the lesson). The only change needed to normalize the market was to prevent the retail buyer from taking on too much debt. This seems indicative as to what was a fundamental cause of the problem. It runs counter to some of the incentive programs intended to increase home ownership.