Marketplace yesterday featured yet another story about the supposed housing market slump. This time the take was - yes, the housing market is in trouble, but actually prices haven't fallen enough and really should fall further.
We all know the reasons for the slump - because they keep repeating them in the news - the wide availability of subprime mortgages allowed more people to buy more houses that were more expensive than they could afford. This made lots of people raise the prices on their houses and made lots of builders continue to build one McMansion after another. Now mortgage companies are realizing that subprime loans aren't so great and are not giving them out as much, plus people are defaulting on the ones they already have, with the result of too many houses on the market. Blah blah blah...
Okay, fair enough. But why is this such a hot topic of discussion on so many different news shows? The only people who will really be affected on a large scale are investors who own stock in housing-related companies, builders and/or mortgage people, and crazy people who have bought into the trend and decided to flip houses for a living. (About I week ago I heard a typical profile of an older woman who took advantage of adjustable-rate mortgages to buy several homes that she re-did but now can't sell, and in the meantime she had to refinance her mortgage on her main home to pay for the other homes and now it's shot up and she may lose her house.) For the rest of us, though, it's interesting because we own a house, but surely it shouldn't impact whether we buy or sell our house today!
I think instead what these stories do is just contribute to the craziness. They encourage people to go through "seller's delusion" and think their house is worth much more than it actually is. They encourage them to make poor decisions like trying to become a flipper. Instead of educating us, they just try to up the hype and hysteria. I guess in that way they're not much different from all other news items.