House prices fall... good!

The ABS has today released its house price index figures, showing a fall of 0.8 per cent in the national index for the December quarter, and 3.3 per cent for the year to December. In Sydney, house prices fell 0.3 per cent for the quarter, and 4.1 per cent for the year.

Well, that's some good news, isn't it? I know, it's not that much, but it's a start.

And yet... everywhere this is being reported like it's a bad thing, with much wailing and gnashing of teeth. In the Daily Telegraph you can read about the cities that have been 'worst hit' by the declines in prices. House price falls are 'gloomy news' at the Sydney Morning Herald. At the ABC, an economist laments 'unfortunately... households are in for a pretty tough time in 2009.'

(Bambi's mother. Media reports suggest she was killed by falling house prices.)

Households might be in for a tough time, but not because houses are less expensive.

Let's get back to basics.

Less expensive housing means more people can buy more of it.

It means persons who would like to buy a house for their own shelter are better able to do so.

It means persons who would like to buy a house and let it to someone else, and enjoy the income so produced, are better able to do so.

Less expensive housing = good thing.

But what about those persons who have already paid for their housing, and paid too much?

Well, if you bought it in order to live in it, you shouldn't feel too bad. The shelter it provides you is still just as good as it always was. If you sell it you might not get as much as you had hoped, but then again your next house isn't going to cost as much, so it evens out. Borrowed too much in order to buy it? That's unfortunate, but it is a bit rough to expect that someone else will come along and cover your interest payments by paying even more than you did.

And if you bought it not to live in it, nor to derive an income from it, but instead just to sell it again for a higher price, well, too bad. That's speculation for you. Borrowed too much in order to buy it? Again, too bad. Frankly, the housing market is better off without you.