Treating your primary residence as an investment has been bad financial philosophy for all of time.
And people who suddenly find themselves underwater on their mortgage. Assuming they face no economic shocks they might be able to ride it out, but that sounds like a very stressful situation to be in.
If they can't then they fall back on some social safety net that prevents bad decisions from being ruinous. Our lack of these mechanisms is why we have to keep propping housing up. The problem is we can't keep doing that.
Well, also people who were planning on retiring to a lower cost of living area (i.e., NY to Florida) and using the difference difference in housing costs as part of their retirement income.