I’ve recently seen two articles suggesting that negative equity could be driving prices up.
At first, this seems absurd, but there’s actually some perverse logic in this paradoxical concept.
Think about the Boise real estate market with its shortage of listings, multiple offers, and homes selling above asking prices.
Markets and prices are driven by supply and demand.
In the Boise real estate market, demand is currently outstripping supply.
That’s driving prices up.
One reason we don’t have more listings is that roughly 20-30% of potential sellers are “under water”, owing more than their homes are worth.
Those potential sellers can’t sell without bringing money to closing, so they hang on and wait for higher prices.
That, in turn perpetuates our shortage of listings.
As prices rise, some of those potential sellers will realize they are no longer “under water” and list their homes.
That will help to balance supply and demand, and could result in our market leveling off.
Interesting concept, isn’t it?
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