Good News! Home Prices are still dropping.

Home prices down 1.7% in first quarter, U.S. agency says - MarketWatch
If you were planning to cash out your home in the near future, or hoping to get your lender to drop your PMI, then I guess dropping home prices aren't such a good thing. For the rest of us this is either good news or relatively unimportant.

First time home buyers will certainly appreciate being able to buy homes at a more affordable rate. The drop in housing prices will save them untold thousands in principle and interest over the life or their mortgages. Many who may previously have been priced out of the housing market may now finally have an opportunity to own their own homes without dangerous adjustable rate mortgages.

Those moving up to bigger homes will also benefit from this drop in prices. Most of us begin with a small "starter" home and move up as our income increases. If your home was worth $150,000 a year ago, and you were planning to upgrade to a $200,000 home, then the drop in prices will be a blessing for you. Although your current home won't bring $150,000 now, that home you wanted to move into will now cost less also. To make the math simple, let's assume they've both dropped 10% in value. Now you are only going to be able to get $135,000 for your current home, but you are only going to have to pay $180,000 for your new home. That means the upgrade is now costing you only $45,000 instead of $50,000. While that sounds like a savings of $5,000, it's much more over the life of your mortgage.

If you were planning to stay in your home for a few years then the current trend in housing really has very little impact on you. The real estate market has up and down fluctuations, just like the stock market. But like the stock market, the real estate market has historically always performed well over the long term. While no one can guarantee the future value of your individual home, there is almost a statistical certainty that the average price of a home in the United States will be more in 10 years than it is now, or even more than it was a year ago before prices began to fall.

The next time you hear the media screaming about falling housing prices just smile and think about all the good deals that are available to you, your friends and neighbors.