I don’t know what the answer is but having our prime real-estate in the USA lose value is not the answer or good for anyone.

Actually, the best thing for the U.S. would be for a spectacular, quick drop in the price of real estate.

Price real estate as an asset. Homes are currently renting out for a pathetically small fraction of their market price. The rate of return cannot be sustained for the long term and represents overinvestment in a non-performing asset. For example, we sold a condo earlier this year. We could have been $100/month above water at current rental rates ($400 if you count the payments toward principal) on about 200k$ in “equity” in the condo. Guess what– we make more money giving that money to the Feds. Plus, Uncle Sam doesn’t call us when the toilet won’t flush.

This situation is repeated throughout San Diego and California. Hardworking, responsible people are spending wage income paying toward mortgages on houses that have a rate of return that is lower than the rate of return on government bonds. This is not a good situation, especially when most Americans don’t save.

If the price of housing doesn’t drop, it is possible that these people will continue spending a disproportionately large amount of their income on an asset than doesn’t generate a reasonable rate of return. This would be catastrophic for those people and for the U.S.