Monday, May 9, 2011

Housing is a zero sum game.

I am always surprised how rarely articles actually mention that falling home prices are good for a great many Americans. For most of us housing is a zero sum game. Every penny home prices fall is another penny saved by young Americans like me. Therefore I always get happy seeing that rare article which points out that yes, in fact the popping of the housing bubble is a huge inter-generational shift in wealth from the old to the young.

In time this saving of money by young people will prop up the economy. When young people pay less for homes, we don't just save the money. It gets spent on goods and services. Just as dramatic is the situation in the commercial market, if rents fall for businesses than more will be able to keep their doors open. A business idea which would have been prohibitively expensive when land prices are high, might very well be practical once those prices fall.

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