Arguably, it's good for both. Buyers have more quality inventory to choose from and can purchase a home with lower risk of getting trapped in it permanently. Sellers get faster sales with a higher floor on prices.
Liquidity is NOT good in a dire-necessity supply-constrained market like housing, because it invites capital which could've been spent elsewhere to lock up unnecessary housing units (houses are empty while being flipped), further constraining supply of a critical resource.
Imagine if drinking water was treated as a speculative asset, with large percentages of a countries water supply being stored in tanks and sold back-and-forth on paper between capital-rich investors instead of actually being pumped to where it was needed through pipes.
> Imagine if drinking water was treated as a speculative asset, with large percentages of a countries water supply being stored in tanks
then you'd see people not waste any water at all, and fix any pipe leakage, and conserve water, and use water efficient agriculture methods etc.
The price of a commodity determines how much and how easily it is available. The fact that water is so liquid (both in terms of the price, as well as being an actual liquid) is because of the high amount of investments made into obtaining it over the past centuries. Liquidity of any asset (or commodity) is a good feature to have imho.
