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Why is that? You might be right, but your argument isn't intuitive to me. Landlords are afraid of rent going down, and renters are afraid of rent going up, so
by arbitrage314 11y ago
Why is that? You might be right, but your argument isn't intuitive to me.
Landlords are afraid of rent going down, and renters are afraid of rent going up, so a long-term contract would be nice because it could simultaneously reduce stress for both of them.
These are the trades that create value--trades that reduce risk for everyone!
- oh_sigh 11y agoEach party has different acceptable levels of risk, and different outlooks on the market. Imagine a hot market. What landlord would sign a long term contract? Imagine if a landlord in silicon valley rented a house out on a 20 year lease 15 years ago. Big mistake.
- arbitrage314 11y agoThis happens in other futures markets all of the time. The price/month of a long-term lease ends up being a bit more than the price/month of a short-term lease. The same thing happens in interest rate markets: if you want to borrow money short-term, the interest rate is pretty low; long-term borrowing is scarier for the lender, though, so the rate charged is much higher (https://en.wikipedia.org/wiki/Yield_curve https://en.wikipedia.org/wiki/Yield_curve).