Analyst: Declining home prices have silver lining

Declining home prices have a negative impact on home improvement spending, and they trigger painful foreclosures, but in the words of one analyst, "the market needs to clear."

Responding to a question from the audience during last week's Home Improvement Research Institute's Spring Conference in Washington, D.C., Morgan Stanley's Greg Melich, managing director responsible for retail, discussed the positive side of declining home values.

"To the extent that home prices fall and it allows more people to get into the housing, I think it's ultimately healthy for the market," Melich said. "The market needs to clear. And we do see parts of the country where that's happening."

He also offered an interesting way to look at the definition of "homeownership" in an era of easy bank loans. "While we don't like it and nobody likes to see anyone foreclosed on, the reality is that if you bought a house on a three-year 2% teaser loan in 2006 with 3% down, you weren't buying a house. You were renting a house with a call option on the price still going up."