As the Financial Crisis developed, newspapers often carried lurid headlines about the extent to which house prices were falling, for example, ‘House Prices Fall 50 Per Cent’. Economists might view these headlines from a more critical perspective.

a. What does ‘House Prices Fall 50 Per Cent’ actually mean? (This might sound a strange question but think about it from a homeowner’s perspective.)

b. Is the price of a house and its value the same thing? Explain.

c. Is the value of a house only relevant to those who are actually buying and selling a property? Explain.

d. A homeowner bought a house in 2003 for €320,000 and in 2006 it was valued at €550,000. They had to sell the property at the height of the Financial Crisis due to a job relocation. The price they received was €380,000. How much did the homeowner lose (if anything)? Explain your answer.