Home prices fell: All bad news?
Of course, lower values hurt borrowers who seem to want to leverage as much of their value as they can. Instead of paying off a mortgage like was done in earlier generations, today's home buyers seem more prone to borrow and refinance as often as possible. They're pulling equity out of their houses faster than ever, and rely heavily on the "market value" of their homes to keep playing this game. And the banks have suffered too, as a handful of their customers with not-so-good credit and a sketchy ability to repay loans were counting on easy refinancing and defaulted when they couldn't get it.
But who says home "owners" with little to no equity are a good thing? I don't necessarily think that the artificially high home values were benefiting consumers a whole lot. Sure, they allowed some people to turn a nice profit and lots of others to refinance into infinity. But the flip side is that home buyers found themselves not being able to get as much house for their money as they might have a few years earlier.
The drop in home prices is not all gloom and doom. Lower home prices present a great opportunity for buyers. Is it a bad thing that they are now able to get more house for their money? Why so much sadness for the home sellers, but no happiness for the buyers who are benefitting? I realize that our economy relies, in part, on real estate values to keep humming along. I'm just saying that it's not all bad that home prices have pulled back.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.