If housing prices drop, will Americans be happy? The CEO of Redfin has thoughts:

I think we’re at an inflection point. So mostly people who have had to sell their home have been able to do so quite easily over the past two or three years. So even in the post-pandemic correction, it was fairly straightforward.

But now home sellers are struggling, especially people who bought a house during the pandemic. We are talking to them about lowering their price and they can’t, because they’ll be short on their mortgage. Now, we’re not going to have anything like the great financial crisis in 2008, where there was a wave of foreclosures. But for a particular population of folks who did buy during the pandemic, it has suddenly gotten very hard to sell their home and pay off their mortgage. And so right now the market is just teetering in a very unhappy equilibrium. I think that prices will come down, and I’m one of the people who views that as good news.

When bread prices come down, when gas prices come down, most Americans view that as cause for celebration. But when home prices go down, about half of us are worried about it and the other half are throwing a party. And really, for the younger generation, we need prices to come down…

So about 75 percent of American homeowners have a mortgage below 5 percent. We’re unlikely to see a rate like that anytime in the foreseeable future, and so those folks create this rate-locked inventory. Many, many people in America—more than half of all Americans—really couldn’t afford to buy their own home at current interest rates. So it’s very common for us to go to a listing consultation with someone who has had another baby or is going through a divorce, had some kind of life event where they need to move, and when they realize what they’re going to be able to afford from the sale of their home, they decide to stay put instead.

If the goal is to have a majority of Americans happy about housing prices, that might be hard at this particular moment. As described above, different actors may want higher or lower prices. Those wanting to rent or buy want lower prices. Those who are looking to sell might want higher prices. And the 0homeownership rate in the United States is a little over 65%.

But one hint above is that more people – a majority – might win if prices come down. If prices are too high and interest rates stay roughly where they are, there is little movement in the housing market. So could Americans be convinced that a drop is good? This would help more people get into the market and others to sell. (I wonder if it also might create more demand that would then raise prices again.)

Perhaps this is not the right topic in the first place. Focusing on this particular issue and moment obscures the larger issue: what is the long-term trajectory for American housing and for the ability of buyers and sellers? Do people perceive they can purchase a residence? What policies further (or hinder) a longstanding American idea that homeownership is a critical element of the American Dream?