This is called Capitalism.

Forbes had a great story from January that I just found, and I thought it was worth sharing: Where US Home Sales are Rising. The key quote comes right at the beginning.

Something funny’s happening in Las Vegas. Home sale prices from last year are down 28%, but home sales are up 15%.

The reason? Motivated sellers–those in distress or foreclosure–or banks with too many homes on the books are slashing asking prices in order to unload their properties. Motivated sellers in Las Vegas accounted for 64% of sales in October, the highest rate in the country according to Radar Logic, a New York-based derivatives firm that provided the data for this story.

That means buyers are getting deals and hastening Las Vegas’ recovery. In fact, buyers are eating up inventory fast enough that the discounts offered by motivated sellers are tightening as supply contracts. The difference between what motivated sellers have to offer and what non-motivated sellers can command has held steady for three months at a 17% discount, versus the 33% national average. So while it’s still a buyers’ market, prices have dropped to a level that’s stimulated demand.

This is called capitalism! When a market is overpriced or oversupplied, prices correct. Why are we surprised by this? Creative destruction is the nature of the free market, one person’s failure makes way for another person’s success.

There was a related feature in which Forbes counted Houston as one of the nation’s 25 strongest housing markets, noting that this was in large part because we didn’t participate as much in the boom. They forecast about a 1% drop in home prices before things bottom out locally. Worthy reading, you should check it out.