It is a mistake to think that foreclosure or short sale or simply walking away from a house ruins your credit. It may or may not. I hear plenty of stories of people religiously paying their credit card bills but not making mortgage payments. Then keeping the bank from evicting them for months or years. Their credit may or may not be impacted or ruined. They make credit card payments because (as wacky as it seems) messing up on your credit cards hurts your credit score a lot more than walking away from a house or a foreclosure. Every case is different of course.
They can still buy a house and get a mortgage in many cases
I heard one story where a family bought a huge house they could not afford. The house went underwater. They walked away from it and in the same time frame bought and moved into another house that was far more affordable at today's prices. I don't have details on that one
“It is a mistake to think that foreclosure or short sale or simply walking away from a house ruins your credit. It may or may not.”
Right now that is true. In a couple of years it won’t be. The environment after Freddie and Fannie have their long overdue date with demise will be vastly different. Once banks are putting their own money on the line, good luck on geting a mortgage if you have anything but impeccable credit and a big downpayment.