Because mortgages are one of the few leveraged investments Joe Consumer has access to. As such, it is often one of the only ways people can retire or afford property at all.

Also, because it is highly leveraged for many, especially in the Bay, to have it reduce in value can actually easily bankrupt you. But for many, they feel they need to take the risk to lock in home prices, and also to grab what they still cling to as "the american dream" of owning a small single family home. Can't say I blame people for being upset by that, especially after this tax reform theft.

It’s all relative. You own a cheaper house now so if prices went down your absolute loss in selling would be less than someone who sells a house that’s worth let’s say 10x more than yours, maybe the next house you want to buy. Also, not everyone is in the market for a new house in the 10 years, so sure you want houses to be cheap because you’re going to be buying, but it would be the opposite if you were looking to downsize. Home prices going up means personal net worths going up - most people like that.

Because many people can't budget or plan on a multi-year, multi-step horizon like you are expressing above.

For those people, if their house goes up in value, it represents an important source of financial security (if they haven't gutted it via refinancing and HELOCs for renovations returning $0.60 on the dollar, new cars or vacations)

Even for people with decent financial planning skills, the home is such a large investment and typically bought with 5-33x leverage, that a small price drop is dangerous to their position.

I get this concept but I dont think thats how it works. The correlation on the prices of a 1000 sq ft to a 3000 sq ft is not 1: if the first one increases 100% the second one might increase 50%.

In cities, it is often that bigger appts are cheaper per sq/ft because the market for them is much smaller than 1br/2br.