i don’t know; it seems like a system that gives feedback in both direction.
if you asked me for a loan, I might be inclined to lend you money, based on how risky I thought the loan was. I find you less risky if you have lots of assets.
with lower valued assets, i find you a riskier bet.
If your house is depreciating, you have less assets.
You need to pay more interest.
if your house is going up up up, I’d know you’re not going to default on the loan, because there’s no reason to, you can sell the asset, and so i’d charge you tiny interest.
I mean, the banks are going to be tighter with credit when housing prices drop, right? How do we know whether interest prices are causing home values to change or whether the change in home values is affecting the interest rates banks want on home loans?
