Why are people bailing on their homes
 

just because their house is worth less than when they bought? Did their earning power decrease and thus can't make the house payment?

3 categories that I've read about and/or saw in financial news:
1) Person bought too big and/or too expensive of a home for their income but were able to do so with a teaser-rate ARM. When the ARM reset they planned to refinance but because they now have negative equity they cannot re-fi and their mortgage payments with the reset ARM are too high for their income.
2) Person used "stated income" to get loan and the stated income was either exaggerated or based on real estate transactions (sales commissions, flipping, spec homes, etc). Income hurt by housing sales slow-down and price depreciation, now can't make payments.
3) Person needs to move for typical career reasons, transfer, new job offer, etc. Refused to sell home for a small loss, now looking at a large loss.