patrick.net

Actually it is good for Realtors as well. More buy and sell @ low prices means more commission then selling less @ high prices.

bubblesitter says

Actually it is good for Realtors as well.

Local government too. With significantly lower rents and mortgates, they can add more property tax to fund services instead of having that capital locked up in "vaults" doing nothing.

I like to use the analog of gas prices.
We hope to see $5.00 a gallon by 2015 and are seeing strong per gallon increases across the country.
A real gas recovery

John Bailo says

Local government too.

More sales at lower prices would be good for local governments in California too, under Prop 13. More sales means more frequent reassessments (and of course, more distortion under Prop 13 by having residential property become more and more of the tax base vs. commercial).

Overall heavy buying and selling means very good for economy then less buying and selling. Even bulls should agree with that.

bubblesitter says

Overall heavy buying and selling means very good for economy then less buying and selling. Even bulls should agree with that.

What matters for the economy is mostly new homes, because they represent so much new work being paid for. The volume: #units x price is what counts. So in that sense you are right that more houses for a lower price can work.

But then for existing homes what matters is the extra debt. If prices go down, it means less debt, meaning less money creation, which is deflationary. People have physically less money.

Also banks balance sheets are influenced be home prices: if assets prices are high (assets column), banks have more capital, and therefore can lend more. (which in turn push up home prices). And vice versa.

Heraclitusstudent says

But then for existing homes what matters is the extra debt. If prices go down, it means less debt, meaning less money creation, which is deflationary. People have physically less money.

The assumption here is that most seller will move up, creating extra debt.

Heraclitusstudent says

if assets prices are high (assets column), banks have more capital, and therefore can lend more.

If that is the case then there is no reason for new loans and refinances going down despite prices hiking up! Banks are simply not comfortable lending in those mid-high tier homes. All the buying selling has been going on in less than 500K(SFBA may be an exception), that is why a 1300 sq. ft shack sells at $400/sq. ft. and a decent 2600 sq. ft. home sells for less than $300/ sq. ft.