Newspapers often carry lurid headlines about the extent to which house prices are either rising or falling. During the financial crisis, there were regular reports headed ‘House Prices Fall 50 Per Cent’ and similar. 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.