A couple of points here.  First, during the Depression, people did just walk away; they had no choice.  My folks lost their house but the banks had so many, they just let people stay in them.  Farmers walked away from farms that had been in the family for generations.  So just because we don't like the result doesn't mean the result won't happen.  Second, yes, a house is people's largest investment, or at least largest asset.  But they rarely own it: the bank owns it.  As interest rates go up forcing the adjustment of ARMs, as the cost of driving to work, the cost of food, the cost of everything we buy goes up because of increased energy costs, people can get to a point they cannot afford the mortgage payments.  They have no choice but to walk.

Is your position that these apocalyptic views can't or won't happen because they seem too bad a result?  If that's the case, none of this peak oil stuff can happen because the result is too bad.  So let's just continue along with mainstream America and deny it and be happy because as long as we deny it, it can't happen.  I like to think the apocalyptic version won't happen either, but I can certainly envision a lot of scenarios in which that is the inevitable result.  If peak oil hits in the next few years, what will be the impact on our economy?  If we slide into recession or depression, from where do we get the massive capital necessary to implement all these necessary alternatives to overcome peak oil on the scale necessary?  From our bankrupt government?  Borrow it from the people who can barely (or can't) afford food for their kids and the higher costs of their mortgage?

There may be no point in Kustler obsessing on the collapse of Phoenix and the southwest.  At the same time, if you had your kids there and that collapse were a reasonable possibility, would you rather be made aware in time to protect your family?  Kunstler does provide a service because he is one of the few really giving a view over the edge.  If you think the edge doesn't exist (and this isn't to say going over is inevitable), you have far more faith in human nature than I.