I think one of the biggest obstacles is the expectation from home owners not only that the housing market won't crash, but that the value of their house will continue to appreciate rapidly. Housing costs are at a level that people who might previously have been able to pay a decent amount into a pension or have savings now have to put all their spare cash into paying their mortgage - and all their plans for the future - retirement, paying for their kids to go to university, moving to a larger house in a nicer area, etc etc - are built on not only the value of their house increasing, but it increasing over the rate of inflation.
Whilst they may think this, some of it is nonsense.
Moving to a larger house is restricted, not enabled, by housing price growth. Paying for kids to go to university isn't directly enabled by property prices because it's complex to release the value; the retirement scenario isn't simple either. I'm not even all that convinced by the headlines in it: the mortgage affordability vs. pension argument, or that people really think that their own future is enabled by housing price growth.
I certainly do think that people fear a housing price crash, but I think it's well worth looking at the actual consequences, although they may be obvious to some.
If you bought a house with a comfortable deposit, and its value fell a little, your loan-to-value ratio (LTV) declines and your mortgage rate at the point of remortgage is worse. You pay slightly more each month. We live in low-interest times. Generally not ideal - however If you want to 'upgrade', this is potentially enabling, as house prices fall proportionally and you need less capital to make a jump.
If you bought a house with a smaller deposit, or its value fell further, your LTV declines such that your LTV may now fall outside the available mortgage products. If it goes far enough, you're in negative equity, where your mortgage debt is worth more than the current value of the house. In the short term this restricts your ability to move. In the longer term, at remortgage time, you can't remortgage to a preferable deal without summoning up more capital. So you fall back to the punitive standard variable rate of the product you're stuck on, and your monthly costs do go up significantly. But if you can afford the increase, you keep your home. You're just paying over the odds for something you could have freshly bought for much less - except that's complex because you would have been losing money in rent etc.
Such an affordability crisis could potentially be mitigated by the state assuming the risk of default and offering better rates for people so affected.
