One family's sorrow (the one moving out of this house) is another family's joy (the one moving in):
University of Rochester Steven E. Landsburg presents the "case for foreclosure" in his new Slate.com Everyday Economics column:
If you're facing foreclosure, Treasury Secretary Henry Paulson wants to help. "If someone is willing to make a call to reach out," says Paulson, "there's a chance we can save their homes." But Paulson can't save these homes because the homes are not endangered in the first place. They stand to change hands, not to vanish. There cannot be more homeowners than there are homes, and if one home becomes vacant, then there can be one new homeowner. Call it the Law of Conservation of Homes.
None of these foreclosed houses is going to disappear. After a foreclosure, one family moves out, and another moves in. We see the sad faces of the people moving out, but we don't as often see the happy faces of the new homeowners moving in. Nevertheless, those happy faces are out there, and we should not discount them.
That's important, and it's important in a larger context. Often when it comes to economic policy, some effects—in this case, the genuinely moving stories of good people who can't afford to live where they've been living—are highly visible, while others—the genuinely moving stories of good people who can now achieve their dreams of home ownership—are less well-publicized. That doesn't make them any less real.
Landsburg's analysis on foreclosures reminds me of Bastiat's essay "What Is Seen and What Is Not Seen":
There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.
This difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Whence it follows that the bad economist pursues a small present good that will be followed by a great evil to come, while the good economist pursues a great good to come, at the risk of a small present evil.
I think Landsburg falls into the "good economist" category.