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For home prices to deflate people would have to sell at lower prices - in some cases below their home equity. In these cases sellers would have to basically pay the bank the difference. Given how affordable 3% rates are, I think people would not sell.



> In these cases sellers would have to basically pay the bank the difference

Or they can default. Mortgages in the US are typically limited recourse, not full recourse. Of course that makes you a pariah to lenders for the next several years...


What you’re referring to is called a “short sale” and they are not uncommon during recessionary periods.




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