A law against selling any house cheaper than it was bought for, what consequences would that have?

That would be really, really bad.

Any house that loses value will be unsellable, and thus virtually worthless.

Most people living in such a house would be prevented from moving. They cannot sell it, since no one wants to buy an overpriced house, and they cannot afford buying another house with their capital already tied up in the current house.

A black market would appear, with people giving money back under the table. "Buy my house for 4M SEK and I'll refund 1M SEK under the table."

I can tell you one thing it won't do. It won't stop prices from ever falling.

Mandating a house be sold at last price sold does not mean that people value it at that sticker price. I could mandate that water bottles only be bought for $1,000,000. This does not mean anyone would buy. I'd just be stuck with a bottle that I don't value.

Similarly, setting price floors on the housing market would mean many owners will be stuck with homes.

It's also important to note that the market devaluation of a home only matters to owners that are planning on selling. If I bought a house for $200k and the market crashes the day after, I still VALUE the house at some amount > $200k. It does not matter to me that the market price is lower because I still have the exact same home. If anything, permanent home owners should really like the idea of homes being devalued because it means lower property tax liability.

Sure, bubble bursts tend to have adverse effects on many other markets. But these are separate issues altogether.

A previous answer has already covered the emerging black market. This also happens in NYC with low-income housing regulations.

If the housing bubble would burst in Scandinavia as it has done in many other places the recent decade, certainly all banks will immediately be wiped out and millions of Scandinavians will become completely destitute for the rest of their lives with unpayable debts and no property to match it as a deep depression sets in.

Firstly, it's not that bad, provided you have functioning central banks to bridge the banks' credit position.

But consider what normally happens when people are unable to make loan payments: the bank eventually repossesses the house and sells it on. Often for a discount because they're in a hurry to convert it back into capital. Now suppose they're unable to sell it due to price regulation laws, but the market has collapsed. What happens? The bank is stuck. They need capital to make loans, but they have houses instead. They still need bailing out.

(Note: if you jack up inflation to double-digit percentage, suddenly the house resale price law becomes less of a problem.)

In the end, you may end up having to demolish the houses. Don't forget that houses, unoccupied, are a wasting asset: they require maintenance. The extreme case of this is probably Detroit.

So one extremely likely outcome of your minimum resale price law is that habitable houses get demolished because they cannot be sold at their minimum price.

There will be a rapid rise in artificial schemes to get round the letter of the law. For example, an agent may charge you 90% of the minimum legal sale price to officially register your house as uninhabitable and obtain a compulsory demolition order for it. A new house built on the same site would not have any previous price history, so it could be sold for say 10% of its true market value, plus a large one-time charge (non-negotiable, of course!) for a "new-building insurance policy" or some such terminology.

Exploiting such loopholes in the law won't necessarily benefit the bulk of the population, but they would benefit the minority with the expertise to create the work-rounds - there will always be some property owners for whom taking a financial loss is a better option than not being able to sell at all, who can be exploited.

And everyone is safe, the crash prevented and everyone will keep making millions simply by borrowing more for risk free "investing" in simply owning ones own house, right?

It is true, your investment cannot drop in nominal value (not counting inflation,) but it can become totally illiquid, which is worse in many ways. You see, if a stock drops in value by 5%, I can sell and take the 5% loss, freeing and preserving 95% of my capital. If a house in your scenario drops in value by even .05%, then I cannot cut my losses.

From a short-term perspective, any loss at all becomes a total loss. From a long-term perspective, any loss is still magnified, since you can't free your capital for better investments - the opportunity cost is high even if you manage to sell later. Either way, the risk of real estate investing would rise dramatically. This will increase the cost of home ownership.

Of course, that's speaking abstractly. In reality, houses make up a huge portion of most people's net worth and that's the real danger of illiquidity in the housing market. Imagine not being able to move, not being able to refinance, only being able to free yourself of your investment by means of a total loss. That's not going to work for many people. These people will have to rent instead of owning, which will increase demand (and price) for renting.

Once this all settles out, people will no longer consider real estate to be a 'safe' investment, although con artists and deceivers may succeed in swindling people for a while.

Tl;Dr

• The inability to sell a depreciated asset increases the risk of that asset. Increasing risk increases cost, so you'd see home ownership increase in cost as well. That's bad.
• Renting would become more attractive by comparison to home ownership, so you'd see demand (and price) rise for renting. That would be very bad for low income families.
• Ironically, this law and its fallout might disabuse people of the notion that real estate is a 'safe' or 'guaranteed' investment. That would be good.

Finally, the only people that I think will truly benefit are the large companies which would be able to handle the risk of home ownership in this scenario, because they will have less competition.

Price is the thing that balances supply and demand, if you fix prices artificially low then you create supply shortages. If you fix them artificially high you create demand shortages.

So people who want/need to sell their houses in an area where demand has dipped would be unable to do so. Even in areas where natural demand had not dipped buying a house would become a much ricker proposition further depressing demand.

I suspect that the net result of all of this is that houses throughout the country would quickly become unsellable.

There would likely be an explosion in the rental market as unsellable houses get rented out instead.

Banks would have to develop new departments to handle renting out the unsellable properties they reposessed

The government would have to figure out what the heck to do about valuing unsellable houses for inheritance tax purposes and what to do when the remaining assets of the owner were not enough to cover the inheritance tax.

One of the worst ideas I have ever heard. All negative consequences, almost no positive ones. ANY attempt by government to restrict prices (whether by floor or ceiling or anything else) ALWAYS has perverse bad effects; it always causes worse problems than the problem it is trying to solve. A free market works best when all members of the market are FREE to decide what price they are willing to pay, or receive, for a particular good. Government sticking its nose into that transaction always makes at least one participant in the transaction worse off, usually both, and the economy as a whole always suffers.

It's like a politician on campaign promising "I will reduce taxes, increase government spending, and reduce government debt!" That never works, EVER.

This would be a catastrophically bad idea. The next time the economy turns down, what happens?

Workers who own houses for which they cannot find a buyer at the same price they paid for the house, will be unable to move house. They will therefore be unable to take up employment elsewhere. So you have compounded an economic downturn with an artificial restriction on the local availability of the staff that a company might wish to hire! I can't imagine any other move that might make it harder to recruit staff as a recession bites and unemployment rises.

Surely, anything which restricts labour mobility within a nation's borders can only be a bad thing. It should therefore be as easy as possible for someone to sell a house in one location and buy a house in another, as the government can make it. Here in the UK, we have a silly tax on house purchases called stamp duty. One consequence is that it typically costs one 3% of the purchase cost of one's house, to re-locate. Therefore, it is an incentive to stay put, rather than respond to an offer of a better-paid or more desirable job elsewhere. Or, if an employer is desperate to recruit, it will have to somehow compensate its new recruit for that person's tax burden when he moves.

Back to this crazy idea: if one cannot sell one's house because nobody will pay the previous price, and it's illegal to cut the asking price, then the only legal option will be to rent it out instead. So you will create a nation of amateur landlords, mostly handling matters badly because they don't want to be landlords at all. I also imagine that insurance on houses will become several times more expensive, if not completely unobtainable, because there's one obvious way to get one's money out as cash. Insure the house for its previous purchase price / legally mandated minimum "worth", and then arrange for it to burn down.

Bursting bubbles don't destroy actual wealth. Instead, they stop destructive processes which convert actual wealth into imaginary wealth.

Suppose it would cost $120,000 to build a house that's would be worth $100,000 in non-bubble conditions,but market conditions in a bubble would cause such a house to sell for $150,000. Building a house under such conditions would convert $120,000 of actual wealth into $100,000 of actual value plus $50,000 of imaginary wealth. If the builder manages to sell the house for $150,000 that will mean the buyer traded $150,000 of real wealth for $100,000 of real value and $50,000 of imaginary wealth.

As long as the bubble lasts, people can keep passing the imaginary wealth around and pretend it's real wealth, but there's no way to turn such imaginary wealth into real wealth. The act of building the house will have destroyed $30,000 of real wealth, and no matter how much higher prices might go in the bubble, total net profit among all buyers and sellers (assuming for simplicity nobody does anything with the house except buy and resell it) will be -$30,000. Any profit anyone might make buying and selling the house will be offset dollar for dollar by a loss by someone else down the line.

While it may look like bursting bubbles cause people to lose money, the reality is that it's the formation and inflation of bubbles--where it looks like people are making money--that actually destroy wealth. As the bubble gets bigger, both the amount of imaginary wealth created and the amount of actual wealth destroyed are prone to increase exponentially. Although the bubble going may protect some market participants from losses, it can only do so at the by causing other market participants to lose even more.

A point that doesn't yet seem to have been made is that banks and other mortgage lenders would have to stop lending as soon as such a law was proposed, never mind enacted, and that would in itself cause the housing market to collapse. A bank will lend you €320,000 to buy a €400,000 house because they know that if you default on your payments and they have to repossess the house, they can recover the loan value by selling the house, even if they can't get as much as you paid for it. That's why you (usually) have to put down a deposit for a certain percentage of the purchase price, and the bank won't lend you the full amount. If they're not allowed to sell it for less than €400,000, even though they only need to recover €320,000, then they may well be unable to sell it at all and be stuck with both an unpaid loan and an unsellable house. (Yes, I know that Sweden doesn't use the euro, but it's more concise and more widely applicable to use euro as the currency in my example.)