In which the EE explains some fundamental misconceptions...

From the Naples News: Fort Myers home resales up in October, prices keep falling.

Home resales in the Fort Myers area rose for the 10th month in a row in October.

Meanwhile, values continued to fall in a market that’s plagued by foreclosures.

The median price fell to $119,000 last month _ 22.6 percent lower than it was in 2003. The median price is the price at which half the homes sell for more and half for less.

Denny Grimes, president of Denny Grimes & Co., a real estate based in Fort Myers, said continue to fall too because there are still so many homes on the market. He doesn’t see an end to the trend any time soon.

“Are we close to the bottom now? We are not close to the bottom with the level of inventory we see,” Grimes said.

But it’s got to stop somewhere.

“It can’t go down to free,” Grimes said.

Actually, Denny, it can. There is no "law of nature" that things can't be free. It all comes back to demand and supply, those old bugaboos.

If nobody wants something, its price may not only be free but negative (as in you have to pay to get rid of it.) There is absolutely nothing stopping this.

The point is that in this boom, homes were built in absurd places that nobody wanted to live in. With population growth, they will get filled in, say ten years, but what happens between now and then?

The idea that housing is immune to the rock-solid laws of demand and supply is absurd. There are literally thousands upon thousands of houses in Detroit and Cleveland being offered for $1. Yep, $1. More than you pay for your daily coffee. More than it costs me for my subway ride. And there are absolutely no takers.

So not only can they go to zero, given the situation, they will be going to zero.