Is this just because newspaper articles are biased towards the perspective of real estate agents and homeowners? Or are high house prices good because houses are investments? Would cheap 3-d printed houses (hypothetically) make the country better off or worse off economically?
It's the same thing for most goods - the price mechanism is inherently value-neutral, and then whether it's better if prices go up or down depends upon how many people are potentially on each side of the transaction. Falling wages are seen as a bad thing, because most Americans identify with labor and not capital. The social security crisis is seen as a bad thing, because senior citizens (who get the payouts) vote in much larger numbers than young adults (who pay the taxes). Falling stock prices are seen as a bad thing because most Americans own stocks, even if indirectly. Falling CDO prices are seen as a good thing because most Americans do not own CDOs.
Why? Those homeowners shouldn't care what the price of their house is. While they're living in it, it doesn't matter, and when they sell, presumably their next house will be cheaper too.
The only time home prices should matter is in comparison to the overall market. If your house got cheaper while other homes got more expensive, that's a problem for you. Otherwise, the price of your home is mostly irrelevant.
Let's say you bought a house for $400k with 100k down and have so far paid 50k towards the remaining 300k (plus interest, since it's a loan). The housing market has gone down, and your house is now worth $200k. (These sort of drops happen). Okay, so your house is worth $200k. You need to get out of there, but you've only paid 150k towards your 400k loan. You sold the house for 200k, so now you still owe 50k to the bank for a house you just sold for less. This does not help you out of your current situation, which was to sell an asset to pay for things, or to survive easier.
Edit: Note. This is a VERY simple and slightly inaccurate review of how paying for a house works. The intent of it was to explain why lowering prices are bad for people that already own homes.
This is part of the problem with the American labor market at the moment.
If I sell the house, I walk away with $40,000 in cash, which I can keep tax-free (a special privilege accorded the capital gains on your primary residence).
Now let's say I want to buy a home the same size--it's $120,000 too. But I only need a down payment of 20% to secure the mortgage--that's $24,000. So now I'm back in a house the same size as I had, but I have $16,000 tax-free in my pocket.
* Most bought and expect it to appreciate. Very important. That is the most important retirement asset they have. If their house loses half the money it could mean eating ramen for 20 years after retirement or eating steak.
* Property taxes. Some would actually not like it to appreciate too fast if they are not selling yet because they have to shell our many thousands of dollars a year. Ideally they would like the price to stay low then right before they sell, to spike through the roof.
But we are avoiding that too, borrowing a trillion plus bucks a year. We will ultimately face the music and it will be when all the wiggle room is gone, because they wiggle as much as possible without regard to long term consequences.