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Why is being “upside down” on a mortgage so bad?
For most people "home ownership" is a long term lifestyle strategy (i.e. the intention is to own a home for several decades, regardless of how many times one particular house might be "swapped" for a different one.  In an economic environment with steady monetary inflation, taking out a long-term loan backed by a tangible non-depreciating "permanent" asset (e.g. real estate) is in practice a form of investing not borrowing, because over time the monetary value of the asset will increase in line with inflation, but the size of the loan remains constant in money terms.  That strategy was always at risk in the short term because of temporary falls in house prices, but long-term inflation running at say 5% per year would cancel out even a 20% fall in house prices in 4 years. Downturns in the economy were often correlated with rises in the inflation rate, which fixed the short-term problem even faster. Car and student loans are an essentially different financial proposition, because you know from the start that the asset will not retain its value (unless you are "investing in a vintage car" rather than "buying a means of personal transportation", a new car will lose most of its monetary value within say 5 years) or there is no tangible asset at all (e.g. taking out a student loan, paying for a vacation trip by credit card, etc).  The "scariness" over home loans was the widespread realization that the rules of the game had been changed permanently, by the combination of an economic downturn plus national (or even international) financial policies designed to enforce low inflation rates - with the consequence that "being underwater" had been changed from a short term problem to a long-term one.