PR, I like your reasoning and would like to engage you on two points.

1:
The problem with what you are saying PR is that it assumes that you can both effectively discount risk out of a successful purchase and still successfully compete as a buyer.

In my experience, achieving perfection in risk management (especially by discounting) is desirable but not practical.

If one is to drop a price in order to avoid being upside down, then in most purchases there will be another buyer who is marginally more risk tolerant.

2:
The other issue is that if, as history would suggest, home price dynamics reflect household income, then it may be rather safe to assume that values will increase in the long term. I very much agree that the boom was unsustainable but the historical trend tends to oscillate around income oriented coefficients. Those coefficients are relatively constant and those income numbers tend to increase over time. Ergo, housing tends to increase over time. This is not bullishness but an observation of visible data. Most of it has been pointed out by Rich.