Home prices need to go down further to re-establish equilibrium. That is going to happen whether anyone wants it to or not. Prices that are 4 to 5 times annual income are not sustainable.
It's a real estate transaction between a person and another party. That person has no obligation to their neighbors with regards to the value of their homes, and in reality, that foreclosure isn't what is causing the price destruction. Those forces are already acting on their own. The foreclosure simply forces a recognition of the price destruction that has already occurred because the asset was overvalued to begin with.
The 13 acre farm I bought in Kentucky (with a brand new “love nest” on it) was 80% of my annual income. I can go with that. Especially considering it is potentially revenue generating.