According to a recent study published in the American Real Estate Economics journal, the wave of foreclosures of single family homes in the U.S. did not reduce the living circumstances of those affected.
First of all, many foreclosures took place at the speed of a glacier. Fully half of the foreclosures were still in process two years after starting, meaning the families continued to live in the homes.
Second, when the families moved to a new location, few moved "down" into apartments or more modest accommodations. Most found a new, similar residence, at a lower price than their previous one.
Finally, the major damage of foreclosures was personal, not financial. The study mentioned divorces as a significant by-product of the stress on families making tough decisions.
http://www.areuea.org/publications/ree/
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