Pundits discussing the turmoil in the financial markets keep coming back to the need for “housing to recover” before we get stability among financial institutions.  No one is discussing what the measure of “recovery” is.

In the California Bay Area, where I practice, the median price of housing has fallen on average 25%.  If recovery means a return to those peak values, I dispute that such would be “recovery”.  Mortgage lending, without standards and without the institutional restraint of having to live with the loan you made, created the artificial high in home values.  When everyone who could fog a mirror or wield a pen was a candidate for homeownership because some heedless institution would make a loan, the supply of homes was inadequate for the number of prospective buyers.  The relentless upward march of prices created a “buy now before it’s more expensive” atmosphere.

Those who bewail the drop in home prices don’t discuss how real that “lost” value ever was.

So, I don’t yearn for a return to that housing market.  I hope for a return to the availability of mortgage money to people who might actually be able to repay the loan on its terms, not tranactions dependent on a further refinancing or sale of appreciated property.