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> The houses sit empty because the owner would rather maintain a (fictious at this point) valuation than realise the loss. This happens for a while, and volume
by nilsbunger 4y ago
> The houses sit empty because the owner would rather maintain a (fictious at this point) valuation than realise the loss.
This happens for a while, and volume collapses except distressed sales. Then there’s a gradual recalibration where sellers adjust to a new normal and properties come back on the market.
Take a look at post-2008 crash behavior and you’ll see this dynamic: volume collapses, then a gradual normalization of volume, all while still far below the previous peak.
One example scenario: if you own a home but want to upgrade, the new home you want got a lot cheaper too. So you might take a loss on your current place to get into the new one.
- bushbaba 4y agoThat only works if rates go down. Most people won’t sell a house worth N financed at 2.5% to buy a new house worth N at 6%. California’s prop 13 was found to have this effect. So too will the prior low mortgage interest rates.
- nilsbunger 4y agoThat doesn't seem quite right. If you're moving up, your decision to buy will primarily be based on affordability, even if the old house had a better interest rate. And in a high-interest environment, house prices become lower and partially offset the extra interest expense, so affordability hasn't changed all that much. Prop 13 has a big effect but more so in downsizing (eg empty nest / retirement) than in upsizing.