[skew-aberration]

Maybe OP is saying when you buy from a landlord, they still get their profit (you pay them the NPV of the expected future rents - it's neutral from their perspective).

In cases like your example, what forces landlords to lower the rent? Usually only a) cost of credit, as you said b) opportunity cost, and c) government intervention [land tax, property tax].

a) not all landowners have mortgages! many own outright. they make pure profit b) the game theory of this case is frequently misunderstood, landowners are a monopoly and are strongly incentivized to act as a cartel. same principle as walmart destroying old stock.

Landownership is one of the most lucrative and profitable enterprises in (American) history, so you might want to question the logic which has convinced you that market dynamics is so effective in taking its profits.

[lesuorac]

> a) not all landowners have mortgages! many own outright. they make pure profit

I mean they don't. They have expenses like taxes and maintenance regardless of the properties vacancy. Nominally this is more profit than somebody with additional expenses (mortgage) but not always more than somebody who has additional income from say stock returns (the whole buy-vs-rent argument).

While your entire post has been directly about homeowners, (a) is also a crucial point about investment rentals. Other commenters have pointed that many commercial loans allow you to tack onto the end of the loan periods of vacancy. So during a bull market you can refinance and draw out your initial investment so that only the bank's money is backing the mortgage and then during a bear market when you have vacancies you just tack onto the end of the loan.

> b) the game theory of this case is frequently misunderstood

It's not misunderstood. It's exactly market dynamics. You don't list your property for rent at 3.5k when you have a 4k mortgage; you live in it yourself!

The reason people get 4k/month mortgages to rent out a property for 5k/month is exactly because the current market demand is 5k/month. They didn't buy a house first and then decide to price it at 5k/month because it's higher than their mortgage; they saw the market demand first and then bought the house.

> Landownership is one of the most lucrative and profitable enterprises in (American) history, so you might want to question the logic which has convinced you that market dynamics is so effective in taking its profits.

If you have an item of limited supply and demand increases since you obtained that item then you're going to have an (on paper) profit according to market dynamics.

[skew-aberration]

I'm not really sure what you're trying to add, so here's a few questions and examples of my points. Have you read much economics?

a) Firstly, I said landowners, not home buyers. Are you claiming that nobody owns land without a mortgage? Most land value is in residential real estate these days, but not all of it. Much of that value is owned outright - either by homeowners or investors. This varies regionally but could be about 25-50% of the land. What do you think happens when a mortgage is paid off? What about a mortgage on an investment property? What about all the boomers who paid of their loans 20 years ago? While I did list taxes in my original comment, landowners do not necessarily need to pay significant maintenance, for example in the case of undeveloped land, or the case where the value of the house is very low relative to the value of the land.

b) Yes, market dynamics are frequently misunderstood. Do you deny that it is misunderstood, or are you implying it is misunderstood by me? As a case in point, your own example is actually simplified to the point of being wrong - investors frequently buy land with a loan such that the mortgage payment is greater than the (rental, business, etc) return. They do this on the expectation that future yields will make up for the losses. In most jurisdictions this strategy is actually incentivized by the tax system - money lost on the interest payments can be offset against taxable income from your other assets. Are you claiming this doesn't happen? Likewise, in my city, many commercial properties are unleased, but the asking rent is not reduced to the point that they get tenants. This is a 'feature, not a bug' of market dynamics - a fact which is frequently misunderstood by laypeople.

c) Again, what are you adding here? You are saying that the profits are not realised? This is simply untrue - property investors do realise their profits, typically via rent. Are you saying landownership is not profitable or it is not more profitable than other enterprises?