Sort of. These things all have limits. People with negative equity cannot easily sell up. People close to negative equity will have a bit of a hard time. Say

Sort of. These things all have limits. People with negative equity cannot easily sell up. People close to negative equity will have a bit of a hard time. Say I owe $400K on a $1M home, and I want a $1.5M home. I sell my home to make a 600K downpayment and have to borrow 900K in order to buy that new place. Let's say all property decreases by half. My home is now 500K, the one I want is now 750K. I sell up and have a 100K (13%) downpayment and have to borrow 650K to cover the rest. My LTV has risen considerably, and if the market continues to fall, I might be stuck with negative equity, but I still owe less than I would at the higher prices. Lenders might be less likely to lend in that scenario, but there will be a sweet spot somewhere where the price drop corresponds to something sufficiently below the majority of movers' LTVs to be beneficial for homebuyers in general.