alt Hacker NewsFalse, rents are based on what the market will bear. The value of the property is stickier than rents.
Plus one can be "losing money" on cashflow but earning money in equity, so one can rent for less than the mortgage while the value of the asset is rising even faster than the monthly loss. Of course this only happens based on speculation and having free cash to "lose" monthly.
> rents are based on what the market will bear
And that is the value of the property. I.e. the value of property is what income it will generate.
When those two values diverge, then "arbitrage" steps in which converges them again.