TEXT OF COMMENTARY

Scott Jagow: In Congress today, there’s a House hearing on the housing aspect of the economic downturn. More specifically, how to help people with bad loans. Commentator Will Wilkinson says for all the grief over this, there is another way to look at it.

Will Wilkinson: Market downturns are rarely pretty. People get hurt. From February of last year to February of this year, the median price of existing American homes plunged almost 9%, the biggest dip in recent memory. Some people, especially those who signed up for adjustable rate mortgages, are struggling to make payments and will have to sell at a loss or face foreclosure.

But for all the gloom, there is a bright side. For one thing, the current slide will have no adverse effect on most homeowners. They’re in it for the long haul. It’s not like the downstairs half-bath disappears when house values slip. And most folks who bought houses only a couple years back are still sitting pretty, since the run-up in values prior to the current malaise was so long and so sharp.

So far, the housing slump has taken the largest toll on speculators who hoped to turn a quick profit. It has also hit banks and mortgage companies that wrote loans to con men. They gambled and lost. But the large majority of Americans who took on sub-prime mortgages weren’t gambling — even though some would have you believe that subprime is a dirty word. New flexibility in credit standards really did help many thousands of families into homes. And most are now doing just fine with their payments. For them, too, all this will pass, like a bout of indigestion.

While we so fretfully tote up losses, it’s easy to forget that there are winners in a down market: homebuyers.

Housing is becoming more affordable again. For everyone who sells a house at big loss, there is a buyer who gains from the lower price. In the grand accounting, these gains count just as much as the losses. We ought to keep that in mind as Congress considers mortgage assistance legislation. What may seem like public-spirited benevolence to people struggling to keep their houses can seem like a tax to people struggling to buy one.

Scott Jagow:Will Wilkinson is a research fellow at the Cato Institute. You can find a link to his blog at our Website: Marketplace.org.