It’s not high housing prices that are good, it’s RISING prices. Or, more precisely, non-declining prices. Declining prices hurt financial institutions, homebuilders, and, most importantly, people trying to sell their houses. Declining prices undermine the entire American homeownership culture. 68% of U.S. households own their houses and the remaining 32% are mostly students, retirees, white trash, etc. – the kind of people who can’t or shouldn’t own houses. “Bitter renters” making 100k+ are maybe 2% of the population.
In the traditional American world view, buying a house is very different from, say, buying stocks. You move to a new place, you rent for a few months at most and then you buy a house. As long as you can afford monthly payments, you’re OK. A house is not supposed to be a financial black hole that can eat your down payment, and buying it is not supposed to be a risky financial move that can cost you $10,000 a month. You need a roof over your head, therefore you buy. Houses never go down and a year or two of inflation-driven appreciation is enough to pay closing costs should you need to move again. In this scheme, it does not matter much whether houses are cheap or expensive. All that matters is 1) can new homebuyers by and large come up with enough money for a downpayment, which may be 10% or even 5% of the nominal price? 2) can everyone afford to pay their mortgages?
A period of sustained price declines turns this whole scheme on its head. Sellers are forced to take unexpected huge losses on their supposedly safe investments. Some people would like to sell but can’t. Foreclosures shoot up. Homebuilders suffer because there’s not enough demand for new houses. Pent-up demand builds up because people choose to rent while they are waiting for prices to come down.