On a personal note, I bought a home last year and I am probably under water on it already, although Zillow says I am up $100K. (don't know how they figure that)
People will probaby come after me here with pitchforks, but I put only 3.5% down. Yes I pay mort ins.
But I like the house very much and plan to stay there for a long time, 20-30 years.
So I am not concerned with the value going down and that will actually help with real estate taxes.
My mortgage payment is comparable to renting a similar house, although single family home rentals are hard to find.
I have another house that is under water that I rent out.
I have a slight gain in rental income there and the principle is being paid down every month.
Again, currently not concerned with being under water, I will come out ahead in the end.
Anecdotal evidence aside, it is not good for 30% of the entire country to have negative equity and be tied to their homes. Americans like to be mobile. And credit is getting really banged up.
I think people have adjusted and learned to deal with it.
But it still has an effect on consumer confidence.