Things are looking rosy. No recession here, move along, nothing to see. LOL.

How have you been down there in Florida?

Re C, I didn’t think I was suggesting anywhere that the government should do something to stop home values from going up or down, assuming they actually had that power.

It is probably true that govermental policy either intentionally or unintentionally precipitated the unnatural increase in home values.

Generally, my position would be that governments have been involved in markets since the dawn of both, that goverment involvement in markets can be both good or bad (depending on who the regulations favor), that generally the level and type of government involvement in markets is controlled by the people that pay for the goverments or their campaigns.

Arguments for having the government have no control of markets are equally bad as arguments for goverments having complete control of markets.

The optimal happiness seems to lie somewhere between the two extremes.

b’s points are reasonable.

If I had the power, (and thankfully, I do not), I would try to achieve moderation and gradual change, wherever possible. Sadly, we do not always get to choose our revolutions.

I’m with you from A –> B , but you’re making an awful big leap to C. The housing market isn’t a zero-sum game where one group’s gain is another’s loss.

Let’s assume the government could simply stop RE price decreases. I suppose it could mandate that you aren’t legally allowed to sell your house for less than you bought it. Wouldn’t that create all kinds of unintended side-effects that hurt both homeowners, renters, and lenders alike?

Think about it this way, when is the price of a consumer good (which is what homes are) going up beyond inflation ever good for the majority of consumers? It never is. Its good for speculators, or people who are disposing of that good, but for everyone else it is bad.

The same assumptions apply to prices rapidly increasing (as they have) and then staying without declining. The only people that helps is the same class, investors or people changing to cheaper rentals. For everyone else its either a wash or bad. It would only be “ok” again once wage inflation has eaten away that plateau, which is just an effective decline in prices anyway.

I agree with your assumptions.

I was not defending rapidly increasing future home prices.

Who exactly is going to continue to buy homes if the market goes on increasing faster than wages? Like a stock, a home is only worth what you can sell it to someone for. If homes continue to rise in price, the number of eligible buyers will continue to dwindle as more people are “priced out forever”. This occurred in most markets around 2004-2005, prices got so high that standard mortgages meant you could not afford a house. This is when banks began peddling ARMS, Option ARMS, etc, to keep the party going. With those products you could now afford to pay more overall for the same house so the party continued. Finally in 2007 we reached the point when not even those products can prop up housing, and the bubble burst.

Fast rising home prices only help investors or other people who are selling a property and banking the money (e.g. not buying another house with it). This class of people is very small compared to the rest of the market. For everyone else it is bad.

- New buyers: priced out or need to stretch into a piece of crap
- Own home and no plans to sell: Higher taxes
- Own home and want to upgrade: A wash or worse, your house is worth more but so is the place you want to upgrade to
- Own home and want to downgrade: Same as upgrade
- Investors/Flippers: Make money
- Own home and selling to move into rental: Make money

So that we know what we are arguing for (or against), lets start with the original statement, and parse it a little, so I know what I am defending.

1. It seems house prices will go up or down according to the market demand, influenced by innumerable external conditions.

True or false? Is this statement in question?

Probably not, because there is adequate measurable proof that the prices go up and down, and clearly there are many (if not innumerable) external conditions.

2. If they go down a lot, the majority of people will be unhappy (mostly homeowners), and a minority (non-homeowners) will happily gain from the majority’s loss.

True or false?

Tough to say because there are 3 assumptions:

a) the majority of people are home owners, and the minority are not.

True or False?

Depends on how you count ownership and people I suppose (are my dependent children home-owners or renters?, or neither?). I lazily counted on the oft repeated stat that home ownership is (or was recently) at an all time high, and the figure I heard today was 70%, but I have also heard numbers around 65%. I could be off by millions from the lower number, and that would still constitute a majority, except for possibly in Electoral College or Democratic Party math.

b) If (home values) go down a lot, (the majority of) home owners will be unhappy.

True or False?

Hard to say, I’ve never seen a poll on this question, so admittedly, that is also sloppy thinking. Can’t imagine anyone paying for a poll on the subject, to back up the assertion. Being a home owner, the answer seemed obvious, but perhaps it is not. Does anyone have any data to suggest that homeowners would be happier if their home values went down a lot?

Of course, the term “a lot” is incredibly vague. Again speaking ONLY for myself, I do not think I would be overly upset if my home were to decline in value by 0-10% in the next year, because I neither plan to sell or refinance in the next year. In fact, I probably would be pleased if my taxes were to go down. However, if I were to either sell or refinance, I would probably be dissappointed, and most likely financially impacted. In that case, I do not think it would increase my happiness.

c) and a minority (non-homeowners) will happily gain from the majority’s loss.

Well, this one IS a stretch. Will in fact the minority (non-homeowners) benefit from the majority’s loss? I think that is the most interesting question.

Possibly, the ones to benefit most will be well capitalized individuals and corporations, buying up properties at discount prices, and either renting them, or just sitting on them, until prices eventually improve.

Personally, if a large drop in prices occur, I hope that the ones to benefit ARE the current folks who wish to be homeowners. The negative effect of empty homes in a neighborhood can be devastating for home owners and renters alike.

Finally:

Doesn’t seem productive, really, to advocate for the majority of people to be unhappy.

That’s merely an opinion. Of course, people are welcome to advocate for whatever change they would like to see happen, benefitting whatever group they would like to benefit, whether that group be in the majority, or the minority.

There are certainly times, in the interest of justice and public good, where the majority may be justly inconvenienced and made less happy, to help a minority. I am glad to have lived thru such a time to see that happen. Whatever inconveniences that may have befallen me from the improvements to the conditions of racial minorities in this county in the past 50 years, I am glad to have endured.

Unfortunately, this kind of occurrence (minorities benefitting from the majority’s loss) happens with depressing regularity in the capitalist system. As in the rich (the minority), get richer, and the not rich (being the majority), comparably suffer. I think that is fairly well documented in the past 6 years or so.

Embarrassingly, though I have tried to get richer, I have not succeeded so well in the past 6 years or so. Just trying to hang on, as I suspect are many home-owners in the middle class.

The other arguments made by laxtocnoco I generally agree with.