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Why is negative equity bad? (lemmy.nz)

submitted 2 months ago* (last edited 2 months ago) by dragonfucker@lemmy.nz to c/nostupidquestions@lemmy.ca

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Sometimes drag buys a game on Steam at full price, and then a week later, the game goes on sale. Drag thinks "damn it, drag should have waited". But drag's never that upset, because drag wouldn't have bought the game if it weren't worth the price. Drag failed to save some money, but drag still values the game more than that money, so it's not a big issue.

The concept of negative equity was recently explained to drag, and it sounds like the housing equivalent of that. It happens when the price of housing crashes, but you already have an expensive mortgage out on the house. You still have to pay money worth more than the value of the house. Therefore, your equity, or equivalent share of ownership, is effectively less than zero.

The politician drag was talking to said negative equity is a big problem and it's why we can't just crash the housing market to solve all our cost of living problems. But drag doesn't understand. If you take out a mortgage, you should be able to afford it with your income, and the house should be worth more to you than its market value. Negative equity sounds like a huge bummer, but that politician was talking like it was something life ruining.

Why's negative equity so bad?

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[–] trustnoone 7 points 2 months ago* (last edited 2 months ago)

Nah bruh you are misunderstanding. Politicians and other rich and powerful use property as an investment. This means they buy up all the properties, rent it out, and as prices go up so does its value. They then sell it for double the price in 10 years.

It's life ruining because it affects the politicians, the rich and the powerful. There are also some very few who use it to get ahead, and they likely will be the "example" case so that people don't think about the 10 properties Mr politicians estate owns, or the 5 commercial real estate they have in some mixed fund. And the potential millions they can make by ensuring certain policies are kept.