Friday, March 19, 2010

Markets for the Unusual...or Not

Yesterday's issue of The Wall Street Journal had a somewhat amusing story (free content at this writing) about mortgages and "unusual housing." Specifically it talked about how bankers are balking at lending for houses built of unusual materials or using unusual construction methods. Since there is little to compare against to get a measure of value; and since bankers were burned with mortgages at some time in the not too distant past; the result is no mortgage.

One of the ideas that the article triggered in my head was the debate about value - does it arise from supplier's cost or from demander's intended use? Or does it come from an understanding of the market? And how big does the market have to be to provide sufficient information to avoid significant asymmetries?

I look forward to your comments.

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