If you pay $500k for a house and can only sell it for $300k how is that not a bad thing? Further, if you pay $500k for a house in 1993, which should be worth $1M in today's money adjusted for inflation, how is that not economically damaging?
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Housing prices need to go down because they've outpaced wages significantly due to a lack of supply and new buyers are unable to buy into the market. However, housing prices crashing in a normal economic environment is terrible for residents of the area without exception.
Most people are ultimately going to sell houses throughout their life. Imagine you have three kids and buy a 3000 sq ft house. Your three kids go to college and get their own houses.
Even if you don't have a mortgage, why would you want to continue paying property taxes and the cost of maintaining such a big property? You'd probably want to move into a smaller home, and losing out on a significant chunk of the money you paid for that house that you could've spent to, say...
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