Why is financing a home using its projectrd sale value a problem?

Financing a home based on its projected sale value can be problematic because it often relies on optimistic assumptions that may not materialize, leading to overvaluation. This can result in borrowers taking on larger loans than they can afford if the market does not support the anticipated sale price. Additionally, fluctuations in market conditions can lead to significant financial risk for both lenders and buyers, potentially leading to defaults and foreclosures. Overall, basing financing on uncertain future values undermines the stability of the housing market.