> There is simply no way to argue that lowered property values won't result in a net destruction of wealth for people holding mortgages or paid off homes. For

> There is simply no way to argue that lowered property values won't result in a net destruction of wealth for people holding mortgages or paid off homes. For people with existing home equity, sure. But how much does that actually benefit them? You can only actually make use of that money in a meaningful way if you either get a mortgage again, or if you leave and go somewhere cheaper (if it's more expensive than your current area, the current situation makes you even more screwed compared to the hypothetical). Anyway, I was talking about the eventual steady state of the system: as a general principle, low home values would not destroy wealth, any more than reverting back to sane car prices will "destroy the wealth" of car ownership. > We're clearly off trend at present and there's no reason to believe it won't revert It might revert, yes, but unlike the insane housing bubble before, the current situation doesn't appear to be caused by financial shenanigans. There's just a lot of demand chasing not many houses. And if it does revert, it'll almost certainly be because of long-term changes in demand or supply. For demand, that would mean a long period of stagnation or recession. > You're still thinking about extreme markets. And what we're seeing is that increasingly, even markets that we didn't think of as "hot" are getting expensive. Random places look increasingly like the bay area I grew up in in the 90's, when it was already quite expensive, but not insanely so like now.