If the economy suddenly switched from a 3% steady inflation to 3% deflation, than yeah, that would be very bad for debtors. Conversely, a sudden switch from 3% deflation to 3% inflation would be very bad for creditors and holders of dollars. But I'm talking about what would be good in steady-state. In steady state, borrowers take expected inflation/deflation into consideration. So the net result would be the ratio of home prices and mortgages to income would fall (which would be a good thing, IMO, because I think Americans have too much debt).