Last week, NPR reminded us that falling home prices and rents aren't always a bad thing for communities. Of course, they're rarely an immediate boon for existing homeowners and landlords, but sometimes even they can gain in the longer term.
When Falling Home Prices and Rents Are Bad
There are two main drivers of falling housing prices. The one we're most familiar with is a local economy in decline.
And perhaps the most famous example was Detroit, MI, between 2006 and 2013. The city saw the median sales price for its homes tumble by 82.2% between 2006 and 2008.
Worse, it became nearly impossible for aspiring first-time buyers to become homeowners, at least by getting a mortgage. Lenders and appraisers began by battling a meltdown, but soon all but withdrew from the city.
"Between 2009-2013, the market bottomed out," said Good Deeds, a 2021 study by the University of Michigan. "The median selling price remained below $10,000 and fewer than 375 mortgages were issued each year."
Today, the median sales price in Detroit is $99,940, according to Redfin, up 4% year over year (May 2026). That's a recovery, but don't forget the many homeowners and landlords whose housing debts exceeded their assets for decades, many of whom faced financial ruin.
Smaller Communities Can Turn Into Ghost Towns
Detroit's housing market crash was largely caused by a falling population, triggered by automation and the offshoring of jobs by the motor industry. But cities of its size have some level of resilience, and it's hard to kill one outright.
The same can't be said for the abandoned smaller cities, towns, and villages that litter the United States. They often became economically unviable owing to the collapse of a local industry, soil, and water contamination or extreme weather events — occasionally, a combination of all three.
There's nothing good about these. Communities evaporate, leaving homeowners and landlords with near-total losses.
When Falling Home Prices and Rents Can Be Good
NPR focused on Denver, CO, as a city where falling home prices and rents might prove good for the community. Of course, it won't feel that way right now for homeowners and landlords, but they can hope their pain will be short-lived.
Denver had the opposite problem from Detroit. Its economy was thriving, which attracted new people looking for well-paid jobs. The extra demand pushed housing costs higher.
However, expensive housing put off many highly qualified potential recruits, and employers began to complain that their growth potential was being constrained.
"The economists Chang-Tai Hsieh and Enrico Moretti published research in 2019, which estimated that 'stringent housing restrictions' to build new housing in places like the San Francisco Bay Area prevented workers from moving to where they could be more productive," said NPR. "By their estimate, constraints on building new housing lowered U.S. economic growth by a staggering 36% between 1964 and 2009."
Now, NPR acknowledges that subsequent research suggests that 36% estimate was an overstatement. But the theory remains strong and credible.
Supply and Demand, and Denver's Solution
Denver took all this on board and began to encourage developments that provided more affordable housing, including starter homes. Developers jumped at the chance, creating an oversupply that has caused rents and home prices to fall in many parts of the city.
Naturally, development slowed as the rewards for building decreased. And in May, Denver extended the life of existing permits to build.
"Denver’s Community Planning and Development Department initiated — and on May 4, the City Council approved — the revival of more than 150 planned housing projects amid a multifamily development slowdown plaguing the city," according to Brownstein, a Denver law firm.
In other words, the market has been correcting itself. Supply and demand are balancing themselves, which gives hope of a resumption of appreciating home prices and rents for the city's homeowners and landlords.
Benefits of Affordable Housing
Besides highlighting the economic benefits of attracting highly qualified workers to a city, NPR identified other advantages of affordable housing:
- When a city's residents aren't struggling to afford their rent or mortgage, they have more money to spend and invest, boosting their community's wealth.
- Couples are more likely to have a first child or more children. They can easily afford the extra space they'll need. And kids help a city thrive over decades.
- Homeownership tends to foster civic engagement and promote investment within communities, according to multiple studies.
For homeowners and landlords, falling home prices and rents are rarely welcome. But, before panicking, ask why they're falling. It may be just a period of positive adjustment.
