Oh dear! Read some recent headlines about housing prices, and you might find your heart rate rising. Check out this one from an Associated Press article, for example: "Home Prices Plunge by Most in 35 Years."

In it, Martin Crutsinger reported that "new home prices fell last month by the largest amount in 35 years and owners are being warned to brace for further declines, especially in formerly hot markets." The decline was 9.7% between last September and this past September, taking the median new-home price to $217,000 from $240,000. New homes are a relatively small part of the overall home market, so here -- have a little more perspective: Over the same period, prices for existing homes fell by 2.5%, "the largest decline in records going back nearly four decades."

What should we investors and homeowners make of this development? My first thought is, "Well, it probably had to happen sometime." After all, we've had many years now of very strong housing price appreciation in many parts of the country. The trend couldn't continue forever. And just as with the stock market, the housing market doesn't appreciate in a straight line; there will always be up years and down years.

Fools are talking
Over on our Buying or Selling a Home discussion board, many savvy Fools dissected this news, offering some valuable perspectives. (Read the whole discussion.) Here's a sampling of thoughts:

  • chkNYC noted, "Yes, but there is some good news. In a similar article from CNNMoney.com, Greenspan is reported as saying that he believes that '... most of the negatives in housing are probably behind us .' "
  • Then ziggy29 chimed in, saying, "Plus, a lot of this is shaking off regional froth. In some areas where there are solid job markets and reasonable housing prices, there's really no 'look out below' happening. It's mostly in the depressed economic areas and in the 'bubblicious' coastal cities where the hits are being taken." He added, "If I still owned my house in California (which I sold in 2003), I wouldn't care too much if it dropped in value from $600,000 to $500,000 when I paid $239,000 for it. Of course, those who bought into the froth in the last few months, particularly with adjustable-rate, nothing-down interest-only mortgages ..." (He's right on, referring to the dangers of "extreme" mortgages. I've warned of them before, myself.)
  • ibarz opined: "We are in a long slowdown. Yes, occasionally you would see some uptrends, then it's going back down again. You have to realize, we had one of the longest housing bull markets in history. It was unprecedented and it shouldn't surprise you that we might have one of the longest bear housing markets."
  • If that thought has you depressed, read rog56's words: "Lower house prices are great news, as they enable more people to afford to buy their own home . For whom are house price falls not good news? They are not good news for investors in residential real estate, as the capital value of their investments seems set for continuing declines in many areas."
  • linanil shifted the discussion toward builders, noting, "Builders are really the ones that will lead the price drops because they'll lower prices until someone buys. In order to compete, homeowners are also going to have to lower their prices." It's worth thinking about builders, because lower prices for new homes means their profits will be threatened. Some top builders include KB Home (NYSE:KBH), Hovnanian Enterprises (NYSE:HOV), Pulte Homes (NYSE:PHM), DR Horton (NYSE:DHI), Toll Brothers (NYSE:TOL), Lennar (NYSE:LEN), and Beazer Homes (NYSE:BZH).

More perspective
In The New Yorker recently, former Fool writer James Surowiecki touched on this topic, making some sensible points. For example, he noted that when we see data on average sale prices, we need to remember that they're for the homes that sold and they don't reflect the value of unsold homes. If it's mostly pricey homes selling, then the reported average sales price will be high. Also, he pointed out that today's typical home is considerably fancier than yesterday's homes. On average, it's much larger, and may have a home theater, central air conditioning, and a pool. These factors alone would boost a home's value.

The bottom line
So what should we conclude about the matter? Well, perhaps the main lesson is that it all depends on your perspective. The coming years may not be as good for homebuilders and residential real-estate investors as the past few have been. But lower home prices will allow more of us to buy homes, and even if we have to sell our home for a lower value, the home we buy with the proceeds will likely have fallen in value, as well.

Those who have invested in homes via extreme mortgages may not fare as well. They may want to look into refinancing into alternative mortgages.

Learn more in these articles on home prices and homebuilders:

And finally, if you're interested in homebuying and -selling issues, visit our Home Center, which features lots of money-saving tips and even some special mortgage rates.

You might also want to check out these articles:

Here's to a happier portfolio! (And hey -- consider forwarding this article to anyone whose financial future you care about. Just click on the "Email this Page" link near the top or bottom of the page.)

Longtime Fool contributor Selena Maranjian recently had a CAPS ranking of 666 (yikes!) out of 12,354,and shedoes not own shares of any companies mentioned in this article. For more about Selena, view her bio and her profile. You might also be interested in these books she has written or co-written:The Motley Fool Money GuideandThe Motley Fool Investment Guide for Teens. The Motley Fool is Fools writing for Fools.