Where the heck do you live that you can buy even a studio apartment for $10k? And even if you can, you'll spend $20k/year in gas getting to your job (not to mention the time you waste in the car). Okay, maybe if you get mad cash working an oil field in the boonies, but for most of us who have to live in a city to be reasonably close to work...
I agree with you that people should consume less, not demand huge, new houses, drive their cars until they can't possibly be fixed, and I do all that. My car is a 1998 I live 45 minutes from work because houses cost twice as much near my office. And I have a family, so I can't just rent a room (which is how I lived cheaply when I was single). But for the $800 of our mortgage payment that goes to interest, taxes and insurance, we can only rent a small apartment or condo, so borrowing and buying truly makes more sense.
What I'm really complaining about is the tax code and the fed's monetary policy. If you're paying 3.5% (i.e. earning -3.5%) on a mortgage and the stock market earns, on average, 8%, every extra dollar put in your 401k instead of paying down your mortgage is earning you 4.5%/year. But now that money is at risk for those years (and we have one once or twice a decade) where the stock market actually drops.
Tax and monetary policy should encourage people to save, not gamble. It /should/ be smart to pay off your mortgages and thereby distribute wealth rather than consolidate it at the top. Tax the capital gains the same as income. End the mortgage interest deduction but let us withdrawal from retirement accounts without penalty or taxes to pay off the mortgage on a single, primary residence (with some reasonable cap, say $500k). When Americans start actually owning their homes instead of the mortgage company owning it, we'll have less need for social security and medicare and be less resistant to cuts in those programs. And we'll save cash too, now that we've paid off our mortgages early, making us dependent on ourselves, not handouts from the Uncle Sam.
And the feds should NEVER bail out the markets. If we'd all owned our homes instead of having so much of our asses in the markets, we could have just let the big firms fail -- only a small percentage of very wealthy Americans would have been hurt much by that, and all of them could have afforded it.
And the fed should target a 0%, not 2% inflation rate. Would this hurt stock market growth? Of course, but that's fine. This free ride of a market averaging 8%/year just makes the rich (who have a larger % of their assets in the market) richer. Let it fail. Let it decline. But let the middle class get out first.