Multiple Choice
Suppose all home values fall by $50,000, such that when a person moves, they have to take a $50,000 loss as they had borrowed up to the full value of the house. However, assume movers still have the credit to buy a new home. How will this event affect the mobility of homeowners as compared to losing $50,000 in the stock market?
A) Mobility will the same as either loss is a sunk costs.
B) The loss in home value will reduce the mobility of owners more because by not moving, they can avoid facing the loss in their home's value.
C) The loss in home value will increase mobility because homes elsewhere are now $50,000 cheaper.
D) The loss in home value will increase mobility only if homes are expected to appreciate more than stocks.
Correct Answer:
Verified
Correct Answer:
Verified
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