> Overpaying for a house is not a problem in an appreciating housing market. If you overpaid for a house, just wait for its actual market value to catch up and voila, no loss.

The price you pay when entering the housing market is substantial. It corresponds inversely to the capital you'll have later to do other things. If you pay $900k for the same house your neighbor paid $600k for, your neighbor has an extra $300k to work with over 30 years, which is significant.

But inflation being as high as it is today...that $300k will be worth much less over time, and you aren't saving it all at once if the down payments are the same.

That isn't even to mention selling at a loss or close to it if you have a pressing need, which will hurt your chances of getting into the next house.

Nitpick but the reason you fire-sale that house at loss is because you don't believe the market will catch up in your beneficial timeline. The housing market historically has a pretty slow appreciation rate, but one that is fairly predictable. Maybe Z sees the incoming rate hikes as a high volatility event?

Holding onto inventory is death. In auto and housing sales if you’re a dealership you’re leveraged in order to hold that inventory (paying interest on it, less friendly interest than you get as a government backed mortgage borrower) and you’re paying insurance and maintenance on that inventory. Vacant houses depreciate very quickly.

Yes, you validated my observation with that assessment. But my point was more towards the private consumer. I think we see a lot of speculation in the housing market now and historically it has been a long term hold investment.

> The reason you fire-sale that house at loss, is because you believe market value is unlikely to catch up.

it's a bit tautological - because the expectation of value not catching up is the definition of overpaying!