New construction

I have a bunch of capital ready for just such an event. I don’t think its all that likely in large scale like the foreclosure crisis. The reality is that inventory is extremely thin and mortgage rates remain historically low which continues to drive real estate prices up. Property owners have a lot more equity than they did back during the crisis and won’t have to resort to a “fire sale”.

One thing I have heard is the sales above appraisals bring a lot of cash to the table. People are less likely to walk away from something that they have equity in. This is not a structural problem with lending, but I am not sure why it is going on.

butler - Real estate appraisals for mortgages are based on what the property is worth to a typical buyer in case the property ever goes into foreclosure, but sometimes a property is worth more to a specific buyer for a number of different reasons so that buyer would be willing to pay more for it than its appraised value.

For example, in New York City there is a large supply of studio apartments which limits their value, while there is a very small supply of three bedroom apartments which makes them very valuable. So if a person owns a two bedroom apartment and a studio apartment next to it comes on the market, he has a very unique opportunity to buy it and combine it with his current apartment to create a valuable three bedroom apartment. So that specific buyer would be willing to pay a lot more for that studio apartment than the typical buyer would.