Question: what is a “negative feedback loop”? According to Michael Corkery and James Hagerty in the Wall Street Journal, it is a vicious cycle gripping the US housing market.
It starts with the oversupply of homes, which is causing prices to plummet. Falling prices are leading to more foreclosures, as homeowners have difficulty refinancing their mortgages or selling their houses. Banks are reluctant to lend freely at a time when home values keep sinking and defaults keep rising. That is crimping housing demand further and leading to more price drops and defaults.
Got it? The bad news continues.