I like doom and gloom just as much as the next guy. But rather than look at the year-over-year decline in home prices as a harbinger of bubble-bursting inflation and economic decay, couldn't we just as easily see it as a correction that we should have been expecting for the past two (perhaps even 5) years now? It seems like ever since Rich Dad, Poor Dad spent five years on the NY Times best seller list and sold over 11 million copies, everyone and their mother has become an "investor" in real estate, leveraging themselves to the hilt to buy that second, third house to "flip." Granted it worked for a lot of people, even to the extent that the lenders, with the help of extra low interest rates, became more and more lenient in who they were giving mortgages out to; "bad credit? no problem!"
So, now it seems time for prices to come back to the (moving) average and correct its parabolic expansion. But with a mere 1.4% decline who's concerned? We should applaud the Federal Reserve for their masterful response with interest rate controls and sound fiscal tightening to prevent the housing bubble from splattering all over their faces.
Cool runnin' from now on, right? I mean so what if foreign lenders are funding our endless $600 billion annual trade deficits. So what that China has $1.2 trillion in foreign exchange reserves. So what that we consume 4% more than we produce? We can just sell off some of our assets to cover it, right (Dubai Ports, Unocal...Blackstone)?
It will all be OK....just keep buying, keep consuming, and keep taking your SOMA, it will all be OK.