About Time They Figured That Out
One thing interesting I did find was that two "bullish" commentators, John Tamny and Alan Reynolds, finally figured out that there is a downside to rising prices and an upside of falling prices: namely that rising prices makes would-be home buyers poorer and falling prices makes them richer, all other things being equal.
How convenient that they just so happened to figure it out when prices seems to be declining.
"But", some of my readers may think, aren't bearish commentators like me making the opposite mistake of now highlighting the downside to falling prices now that prices are falling.
No, there is a difference actually. It is not the case that if prices first rise sharply and then fall back that it's the same as if prices had stayed flat all the time. The reason for this is that during the period of rising prices debt is created as home buyers need to borrow more to buy a home and as existing home owners borrow more using the "home equity" created by rising prices. When prices then fall back, the "home equity" disappears, but not the loans they spawned.