Cultural assumptions and house prices

Ramit Sethi (author of  the personal finance book “I Will Teach You To Be Rich”) makes the argument that falling house prices are not necessarily a bad thing. Here’s an excerpt:

Isn’t it funny how “home prices falling” is assumed to be a bad thing?

You never know how American your assumptions are until you go to another country. That’s because in the United States, we have been systematically taught that housing is a good investment and that prices must go up. Ask your parents why they bought their house. One of the top 3 reasons will almost certainly be, “It was a good investment.” Yet I’ve shown very clearly that for many people in many situations, it is not. In fact, housing is often a terrible investment.

Yet the illusion persists, whether it’s my friend wanting to buy a million-dollar house with no research, or people saying things like, “I wish I’d bought more real estate” after incurring a paltry 1.2% return rate over several decades.

As a result, you get media reports that implicitly echo the cultural assumption that housing is a good investment. The way they describe the housing market — oops, “housing recovery” — influences and reflects our cultural assumption. Let’s take a look at a headline from a major national news publication:

Interesting…it’s a “housing recovery” when prices are getting expensive. Would you say that with toothpaste?

You can check out the rest of the post here.