IMHO the root problem that caused the financial crisis wasn’t that house prices dropped, but that they rose too high. There were many of us during the run-up who looked around when the “value” of our houses doubled in a short period and said to ourselves “that can’t be right,” rather than “I’m RICH!” And of course rising prices combined with “easy” loans combined to create a 'buy now or be priced out forever," fever. We would probably be in a better place now if the Fed had turned off the money spigot in '03 when prices became divorced from interest rates and were fueled by more and more crazy, non-amortizing teaser-rate suicide loans…
