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Comment by bishnu | Hacker News Reader

I think people will be shocked by how little housing prices decrease if the startup economy experiences a downturn.

Absolutely. Housing prices are like wages: very "sticky." Nobody wants to ever sell a house at a loss or drop their rent, so housing will sit idle on the market rather than take a write-down.

The only way housing could conceivably fall (without intense depression-level pain) is if the entire rest of the economy inflated such that housing was reasonable. Everyone would be making six figures, a gallon of gas would be $6, a loaf of bread over $10, but housing would be reasonable again.

> Absolutely. Housing prices are like wages: very "sticky." Nobody wants to ever sell a house at a loss or drop their rent, so housing will sit idle on the market rather than take a write-down.

Depends on how financially solvent you are to manage the upkeep (Principle, interest, prop tax, insurance) if your wages drop or you lose your job.

Yes, right. Housing can never fall. I've heard that one before.

Demand has greatly outstripped supply in the bay area. Even with a moderate reduction in demand prices may still rise.

http://blog.altosresearch.com/how-sustainable-are-the-exorbi...

Housing fell a little bit off the 2005 highs and the result was very nearly a total collapse of the financial system. The Fed and the government did everything they could to backstop housing (at the expense of housing affordability and banking system reform) and it's now permanently unaffordable.

More accurately we could say that housing will never be allowed to fall. The entire economy will be sacrificed at the altar of home values. Homeowners vote more than non-homeowners, and so much investment capital is tied up in housing that a major fall in home values would destroy the financial system.

This chart for housing prices in San Jose fell off more than "a little bit."

http://www.zillow.com/san-jose-ca/home-values/

There was a dip, sure, but that's not what I meant. There was no lasting correction.

Problem is, all those housing bullets have already been shot dealing with the last housing mess. Good luck next time.

Now if China continues to slow down and can manage capital controls better, then you're going to see housing fall back to Earth a bit.

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