Then they would not be able to leave because they wouldn't be allowed to sell. If they foreclosed, they would be losing not only the money they paid in but also

Then they would not be able to leave because they wouldn't be allowed to sell. If they foreclosed, they would be losing not only the money they paid in but also their down payment and on top of that, they would have a dark mark on their credit preventing them from buying again. The best case is increasing at inflation for a long period of time, encouraging living in your house but discouraging it as a form of wealth accumulation. As long as wage growth matches inflation, you're golden. Now, I think that to correct, you'd need to have a decade or two where price growth is below inflation or flat, but the equilibrium is ideal.