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"I'm going to add a huge "it depends" to all of your points."

Yeah, but from the tone of your reply, sounds like you would follow my points for your personal finances? I'd also guess that these points are valid for easily 80% of mortgage applicants.

We are sort of insulated here in Akron. The housing market is flat, but since our homes aren't that expensive, they can't drop much. It's hard to drop the price of a home below the cost of building the same structure in place. :)

I would do all those things, in the scenarios I mention.

I would buy a $50K house zero-down, since I could pay the entire thing off in 5 years if I really wanted to. I'd do a 3 or 5 year ARM if I had enough equity and would sell it by then.

But I might not even stay in Akron, so who knows.

"It's hard to drop the price of a home below the cost of building the same structure in place."

Thanks for injecting some sanity into this thread. Anyone who has priced concrete, lumber, or copper (to name just a few housing materials) in recent months knows that the cost of new construction has risen substantially, as has the cost of buying and developing buildable lots. These costs are what drives the prices of existing homes in the long run in most areas. In the short run, of course, house flippers and people who have to sell quickly because of divorce, unexpected job change, etc. may lose money. The former is the occasional consequence of purposeful risk-taking; the latter can be a personal financial tragedy for those involved but is hardly cause for the mass hysteria fomented by some.