Home Prices

Here is a chart of median and average home prices in the United States.

I was prompted to look this up because of an article about median home prices dropping to a 3 month low.

Right now, median = 204,400 and average = 243,900

I am more curious about the total loss rather than just the 3 month span, so I went back up the chart. The highest prices are:

March 2007, median = 262,600 and average = 329,400

Doing quick math, that suggest a drop in 22% of the median and a 26% drop in average price -- over 4.5 years.

Don't get me wrong - this is a significant drop. No one wants to lose 20 plus percent in one of their biggest investments. However, should losing 25% of the value of something really be catastrophic? This would drive someone living on the edge over the edge, certainly. But in a healthy financial situation, people ought to be able to recover. Just as an alternative example - cars routinely lose most of their value over time - and you lose at least 25% of the value the moment you drive it off the lot. It's not even totally clear to me why we view housing as an investment as opposed to something we use (like a car). What is really worrisome about the economic crisis is how many people were living on the edge, not the loss in housing prices.