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Debt. A person might not be able to lower prices because they owe more than the house will sell for. I can't imagine that is broadly the case in this market, u
by gorjusborg 3y ago
Debt.
A person might not be able to lower prices because they owe more than the house will sell for. I can't imagine that is broadly the case in this market, unless the house was just bought.
A corporation is even less likely to lower prices if they own lots of properties. If they lower the price of one, their loss may be multiplied by the number of comparable holdings.
I imagine that it might affect borrowing for highly leveraged real estate investors. If you are securing loans on asset values and they drop in perceived value, lenders might get nervous and call loans in.
- candiodari 3y agoIn other words the solution is some serious level of sustained inflation.
- gorjusborg 3y agoTheoretically, that'll make the debt easier to pay, given enough time. However, there are levels of debt-to-income that prevent the borrower from getting that time (insolvency exists). I am hoping policy-makers have a more sophisticated approach than 'money printers go brrr'. Economies like price stability. Deflation and inflation can be destructive in the extreme.