Exactly. At some point a lot of people are going to discover that they are the bag-holders. It's unfortunate, and at an individual level you can't blame people

Exactly. At some point a lot of people are going to discover that they are the bag-holders. It's unfortunate, and at an individual level you can't blame people that felt compelled to purchase a home (only one!). However, if people are honest with themselves, they would admit that the only reason they were willing to pay such a high price is because they expected the price to increase. In other words they were speculating. After a certain point, nobody was buying for the actual ROI (i.e. income potential or substituted rental value). Not only was this mistake made, but it was made using massive leverage in most cases. TLDR; Nobody was willing to admit that they were making a risky investment. A risk that it may turn out that they couldn't afford to make.