November 27, 2007

The seen and the unseen

Why are declining home prices bad news? Not only bad news, but a public "nightmare."

It is great news when the price of energy, food, transportation, health care and consumer electronics drops. But for some reason it is bad news when the price of shelter drops.

That has not always been the case.

A couple of years ago, reports like this one from the California Association of Realtors were considered bad news, because fast-rising home prices were making housing less affordable to the middle class. If I recall, those reports sometimes were the lead story in newspapers across the state under headlines screaming about the terrible consequences of high home prices. A nightmare for homebuyers, even.

So now that housing prices have stopped soaring and in some places are dropping, shouldn't that be good news? Shouldn't we be seeing stories filled with anecdotes about formerly priced-out middle-income families finally getting their chance at the American Dream?

I understand why foreclosures are bad news, and why the impact of losing a house when you can no longer afford to make the payments is a compelling story. But for every house sold because the buyer couldn't make the payments, there is a buyer on the other end of that transaction who got a good deal. And for every foreclosure, there are probably 10 buyers of nearby homes who benefitted from the general easing of house-price pressure.

I'd like to hear some of their stories.

Posted by dweintraub on November 27, 2007 6:38 AM