Loss Aversion and Real Estate
At first glance, now would seem like an excellent time to buy a home. In most urban areas, home prices are down at least 20 percent from their peak in 2007. Shouldn't lower prices lead to increased demand? After all, interest rates are still low by historical standards.
The problem, of course, is that people are afraid that the real estate market will only get worse. No one wants to pay interest on an investment that continues to decrease in ...
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