Reply #208: yep, I said something similar above but not everyone gets this. [View All]

[spooky3]

And if you want to sell and stay in your neighborhood, the costs of the new place are also higher.

For example:

You bought at $100000.
The bubble pushed your house value to $200000.
It also pushed the values of other houses in your neighborhood up:
-- A $150000 house was pushed to $300000.
-- A $50000 house was pushed to $100000.

If the bubble had not pushed prices up, you could stay in your own home, or you could have moved up for just $50000 more (vs. $300K-200K = $100K more). Or you could have moved down to the $50K house and saved $50K (I'm ignoring transaction costs, upgrades, etc., just to simplify).

But now the move-up house may be out of reach, and the cheaper house will cost you what you paid for your current house.

The only people that the high costs benefit are those who plan to sell and move to a cheaper community. So as the prices come down, this will help most people. The prices' coming down hurts people who bought at the peak. But almost everyone else benefits.