That is an awful analogy. Aside from those in the oil industry or envirmentalists who want to discourage use, everyone likes low gasoline prices because energy prices are only a cost. The money you spend on gas it lost forever.
The money you spend on a home is money you will some day get back. Whether it grows or not, most people expect its nominal value to at least stay constant. More likely the real dollar value will be constant and the nominal value will rise.
When home prices fall precipatously it is a drag on the economy. Suddenly anyone under water on their mortgage or at a loss on their home can no longer sell, and are effectively locked into their home. This is inefficient because the best labor can not fluently move the most appropriate jobs. The money tied up in a falling home can not be reinvested. An over extended house can not be reversed mortgaged to fund a small business.
It is nothing like gas prices. Low home prices are only good for those (like me) first entering market. But the number of those first entering the market will by definition be much smaller than the number already entrenched in it. Aside from a small percentage of speculative investors the popping of the bubble simply hammers anyone who bought a home in the last 5 years out of necessity and will continue to be a huge problem for our economy for years to come.
High energy prices are good for whoever owns energy. Mostly it's countries with natural reserves. But there is nothing stopping anyone from investing in a way that ties his fate with theirs.
A house deteriorates too. You invest in upkeep. The difference between the two are: (A) you buy housing all at once and (usually) pay over time. (B) housing is a manufactured good while oil is a resource.
Sure it would be a difficult "adjustment" for those that saw their house as an investment if prices went into reverse in the long term. It would be a serious hit for those who are invested in multiple houses. But it would be a net win for society.
If you own a house that is going up in value, you win nothing unless you sell. Even if you sell, you are most likely to lose since most people upgrade rather then downgrade or move to renting. If house prices went off a cliff new buyers would win, upgraders would win and "investors" would lose. The long term nature of the product would mena that it would take time for the benefits to affect the averages, but over time people would need to spend less on houses. This would make them weathier.
The problem you describe is not inherent in houses. It is inherent in expectations. People made decisions based on expectation that houses are the best investment. That is the root of the problem. If the expectation had never existed, houses would be seen as goods and noone would be that worried about their house value going down. It would just be like buying an item at price X, one week before it goes on sale. That's not such an economic hit.
This isn't an over time thing. This is an all at once thing.
You obviously don't know people going through this so let me paint you a vivid picture.
My grandfather died in March 2008. His home wasn't an investment, it was the house had had lived in for 40 years. He paid $340,000 for it. We have been trying to sell the house for over a year, we finally sold it this month for $150,000.
That is the housing market right now in a nutshell. It doesn't really matter to us because the estate is a gift to us, not our own money really.
But now flip the coin to the people who "normal" home buyers. Say I moved into that house 10 years ago and now my job is gone. I want to sell that house and move somewhere else. What am I going to do if I bought the home for 340k and have to sell it for 150k. I owe the bank almost 200k. I'm not an "investor", I have a wife and two kids and all we want to do is get out of our house. We didn't buy it as an investment and we played by the rules, but now we are completely and utterly screwed.
It has nothing to with investing. It has to do with putting a roof over your kids, and the expectation that if society won't burn to the ground around you. For people underwater in their homes - society has basically crashed and burned around them. They are basically trapped in their current situation whether they want to be there or not with only one way out - default.
People love to blame sub-prime borrowers who shouldn't be in homes, or speculators who shouldn't have bought homes. Sure those guys lifted the prices that everyone had to pay, but the VAST MAJORITY of homes bought during the bubble were still primary residences for people, and all of those regular families are now the victim in this situation.
Ignoring those problems is to be either incredibly out of touch, incredibly stupid, or incredibly callous.
Sorry. I didn't mean to seem harsh. Quick jumps can be very hard on some people. 340k to 150k is very big. But I do think these are more end cases then it seems. The point to note is this:
I" want to sell that house and move somewhere else."
In the majority of cases, people want to buy at a higher price. Even if they want to buy a cheaper house, you lose the difference between the house prices at the time you buy, the price at the time you sell (buy again), times the rate at which house prices fell. Say you go from a 300k house to a 200k house after a 25% fall (big numbers), you "lose" $25k. If you move to a more expensive house, you "win."
If your house is under water, you are in no worse a situation really then if prices hadn't crashed. You still have the same mortgage.
When you buy a house you lock in your housing costs.
Oh, I agree that some people are going to suffer because they overpaid for their houses, but you make it sound like every homeowner is in this same situation, which is definitely not the case.
I do agree this is going to be a drag on the economy, lots of people are going to lose real money. We built houses that people cannot afford, we built houses in the wrong areas etc... we had a massive case of malinvestment so of course there is going to be pain when it's corrected that is only natural.
Also a lot of people think houses are good investments, when most of the time they are not, in fact most people would be able to have a nicer place and save more money if they rented. Just because people believe something does mean it's true.
Edit: Also a lot of people may feel like they're losing money, because the artificially high price that they thought there house was worse is no longer there -- whether or not purchased a house in the last few years.
We don't talk about the recovery of gasoline prices. The concept that a bubbles peak price is somehow correct is by definition flawed.