Posted by: Michael Mandel on July 29
I’m on ‘vacation’ right now…actually, I’m on the Jersey shore finishing up my textbook. But I had to comment on today’s home price drop. The previous increase in home prices was effectively a wealth transfer from home buyers to home sellers. That is to say, you were a big winner if you were 65 and sold your big home to go live in Florida. You were a big loser if you were 30 and buying a home for the first time. And you were a small loser if you owned a small home and were trading up to a larger home as your family expanded.
The drop in home prices basically reverses all this. The worst hit are those people who were about to cash out of the housing market, or downsize. The big beneficiaries are the young. And for middle-aged homeowners who have been in the same house for ten years, what’s disappearing is wealth they never had, anyhow.
If I was 25 or 30 years old today (!), I would be applauding this news.
Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.