[quote=urbanrealtor][quote=Jazzman]The one element that is consistently absent in these articles is price declines. It is completely incompatible with the current delusional mindset that home prices must always go up, or be forced up. I know there is plenty of evidence that suggests interest rates and home prices do not necessarily move in opposite directions, but it does no harm to give it a mention. If rates do go up, then homes become more affordable if prices go down. What is the problem with that? Many homes are over-priced anyway? If more inventory becomes available, whether from owners no longer being under water or foreclosures being pushed through more quickly, that could also put further pressure on prices. Now that WOULD be news worth celebrating! Perhaps then homes will be affordable in the normal sense of the word. We should be welcoming that, hoping for that, and trying to engineer that, not fearing it.[/quote]
While I do not disagree, I think your point misses a much bigger point in housing.
Specifically, housing in the US is a finance market more than a property market.
The effective demand is best understood in terms of payments rather than in prices.
That is why dropping prices in 92105 by 55% was not enough to get things selling in 2009.
Even at the dramatically lower prices, the lack of loans made those places not affordable.[/quote]
I resisted this concept. I now embrace it grudingly. Price is meaningless. What you pay each month is all that matters.
