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I dont think you understand the economics of debt related to mortgages. If there were no morts, you would have to amass wealth for a long time to be able to pu

I dont think you understand the economics of debt related to mortgages. If there were no morts, you would have to amass wealth for a long time to be able to purchase a home, which means ur capital becomes tied and you cant invest. Mortgages increase the amount of circulating money enormously. Everything is exponential in finance, both debts and house values. Also income and investment returns. The exponential nature of debt is not an argument against anything. Rental also has an exponential opportunity cost.

macawfish 9y ago
Just because I understand it differently from you doesn't mean I don't understand it. And I should be clear that I'm really lamenting about something bigger, which is the tendency for "always defect" strategies to get normalized as "smart" in our collective economy's various prisoners' dilemmas. We suffer collectively because of it. More concretely: right now because of how cheap, bad quality mortgages artificially inflated housing prices around 2008, and again today, and because of the stagnancy of wages, most people I know cannot afford to buy or rent without compromising their well-being significantly. If "cheap" mortgages weren't so rampant, how would property values even have been able to inflate like they did? They wouldn't... it'd be a totally different market. I think home values would be much closer to their physical value, reflecting the state that they're in rather than some abstract, speculative potential value. There would be less incentive for speculators to hold on to them for the sake of "investing" and more reason for people to hold on to them for the sake of living in them. Just where does that money circulate back to? Right now it circulates back to the most wealthy, those who this article is talking about, those who are usurping their feudal lordships right now. Where I live, there is a housing trust that bars people from buying its houses to rent them, and protects houses from bubbles. When people want to sell the houses, they have to sell them through the trust, where the amount they could lose or gain from market fluctuations alone is capped at 25%. If they made improvements on the house, they are able to sell it at a higher value. The houses are significantly less than market value. And are much higher quality than rental properties.
- conanbatt 9y ago
  > right now because of how cheap, bad quality mortgages artificially inflated housing prices around 2008, and again today, and because of the stagnancy of wages, most people I know cannot afford to buy or rent without compromising their well-being significantly. If "cheap" mortgages weren't so rampant, how would property values even have been able to inflate like they did? They wouldn't... it'd be a totally different market. I think home values would be much closer to their physical value, reflecting the state that they're in rather than some abstract speculative. There would be less incentive for speculators to hold on to them for the sake of "investing" and more reason for people to hold on to them for the sake of living in them. There are several explanations to housing values being high today besides (and probably along) cheap credit. 1) 2008 crisis was devastating to construction and development rates in the U.S. and it hasn't caught up to demographic growth. That alone could cause a mid-long term increase in housing prices that can only subside if development outstrips demo-growth 2) There is a global effect of people moving to cities for jobs. Even if construction kept up, if people moved to the cities where its harder and more expensive to build, you would see wages lagging behind property prices, since the competition for both gets more fiercely concentrated. 3) There is a global effect of chinese money. Cities like vancouver and London are very aware that the influx of asian funds have fueled their local RE markets. Also, the era of cheap credit is ending, and the fed is slowing increasing the rates. They might be risking a crisis if they just jumped the credit a few points up, so this process can also take quite a while. > Where I live, there is a housing trust that bars people from buying its houses to rent them, and protects houses from bubbles. When people want to sell the houses, they have to sell them through the trust, where the amount they could lose or gain from market fluctuations alone is capped at 25%. If they made improvements on the house, they able to sell it at a higher value. The houses are significantly less than market value. And are much higher quality than rental properties. Any restriction of use of a commodity will reduce its value. Naturally, if you only allowed a housing unit to be rented out, it will also be of less value that one that doesn't have that restriction. In terms of housing, that is an equivalent to a price control, so those measures will tend to lower investment and availability, to, finally, in the end, cause higher prices than they would otherwise. Rent control is one classic case of this effect. Moreover, its not a scalable solution, and I'm fairly confident that it will show all the problems of trying to avoid market behavior: it might be hard to get in to the fund, it might end up causing a run in the case of a big down-turn where many people need to sell but the fund has overpromised, etc etc.
TheOtherHobbes 9y ago
Mortgages don't solve that problem. In the UK is that housing has become unaffordable for most of the population - precisely because mortgages made it possible to buy property as an investment. At the same time the market has been deliberately starved of affordable housing as a matter of national policy. So your point makes no sense. What are you going to do with capital while you're saving it for a property purchase? Keep it under a mattress? In reality, without mortgages, there would be far more investment cash available, because the money would be out there doing something useful, not trapped and congealed inside a fixed asset.
- conanbatt 9y ago
  Man, I always say Argentina is anachronistic: we've had 15 years of no mortgages and we are starting to have them now, while there is an anti-mortgage sentiment in the world. > In the UK is that housing has become unaffordable for most of the population - precisely because mortgages made it possible to buy property as an investment. Without going too deep, there is a problem with saying unaffordable. Are we talking about indigents? Or that the middle class 25-35 doesn't have the access to houses the previous generation had? They are very different propositions. I would take for granted that mortgages raise the price of housing, simply because it helps foster demand more than supply. But it also means more houses are sold, which also means more houses are built. The goal is not to have cheap housing, is for the biggest amount of people getting housing, and banning mortgages will reduce both prices and people getting housing. > At the same time the market has been deliberately starved of affordable housing as a matter of national policy. I can't comment or debate about this for UK because I don't know what this is about. Any government that puts a policy to control what is built is likely going to have bad effects. It is true that luxury housing is providing higher returns than affordable in the U.S. In argentina its a bit different, due to historically no credit: basically the only buyers of new property in Argentina are investors, because those are the only ones that had the capital to purchase in advance. Hence for a decade, the market was flooded with cheap-construction rental homes. I expect the introduction of mortgages to create a market for long-term quality housing. > So your point makes no sense. What are you going to do with capital while you're saving it for a property purchase? Keep it under a mattress? Probably low-yield money funds if you are sophisticated. Home-owners are ill-advised to mortgages their home to invest in the stock market: using your capital to buy a home to invest in stocks is basically the same. > In reality, without mortgages, there would be far more investment cash available, because the money would be out there doing something useful, not trapped and congealed inside a fixed asset. If a man buys a house at 100k, his capital is now owned by the former seller, so the amount of capital in circulation is the same. The point is what happens when someone wants to buy a house: they have decades of saving money in low yields. This can be seen in Argentina again, as there is a mortgage boom, 30 year olds are making cash-down payment, even though market participation is almost non-existent. People were saving the cash in their mattresses.
deleted 9y ago
[deleted]

macawfish 9y ago

Just because I understand it differently from you doesn't mean I don't understand it. And I should be clear that I'm really lamenting about something bigger, which is the tendency for "always defect" strategies to get normalized as "smart" in our collective economy's various prisoners' dilemmas. We suffer collectively because of it. More concretely: right now because of how cheap, bad quality mortgages artificially inflated housing prices around 2008, and again today, and because of the stagnancy of wages, most people I know cannot afford to buy or rent without compromising their well-being significantly. If "cheap" mortgages weren't so rampant, how would property values even have been able to inflate like they did? They wouldn't... it'd be a totally different market. I think home values would be much closer to their physical value, reflecting the state that they're in rather than some abstract, speculative potential value. There would be less incentive for speculators to hold on to them for the sake of "investing" and more reason for people to hold on to them for the sake of living in them. Just where does that money circulate back to? Right now it circulates back to the most wealthy, those who this article is talking about, those who are usurping their feudal lordships right now. Where I live, there is a housing trust that bars people from buying its houses to rent them, and protects houses from bubbles. When people want to sell the houses, they have to sell them through the trust, where the amount they could lose or gain from market fluctuations alone is capped at 25%. If they made improvements on the house, they are able to sell it at a higher value. The houses are significantly less than market value. And are much higher quality than rental properties.

conanbatt 9y ago
> right now because of how cheap, bad quality mortgages artificially inflated housing prices around 2008, and again today, and because of the stagnancy of wages, most people I know cannot afford to buy or rent without compromising their well-being significantly. If "cheap" mortgages weren't so rampant, how would property values even have been able to inflate like they did? They wouldn't... it'd be a totally different market. I think home values would be much closer to their physical value, reflecting the state that they're in rather than some abstract speculative. There would be less incentive for speculators to hold on to them for the sake of "investing" and more reason for people to hold on to them for the sake of living in them. There are several explanations to housing values being high today besides (and probably along) cheap credit. 1) 2008 crisis was devastating to construction and development rates in the U.S. and it hasn't caught up to demographic growth. That alone could cause a mid-long term increase in housing prices that can only subside if development outstrips demo-growth 2) There is a global effect of people moving to cities for jobs. Even if construction kept up, if people moved to the cities where its harder and more expensive to build, you would see wages lagging behind property prices, since the competition for both gets more fiercely concentrated. 3) There is a global effect of chinese money. Cities like vancouver and London are very aware that the influx of asian funds have fueled their local RE markets. Also, the era of cheap credit is ending, and the fed is slowing increasing the rates. They might be risking a crisis if they just jumped the credit a few points up, so this process can also take quite a while. > Where I live, there is a housing trust that bars people from buying its houses to rent them, and protects houses from bubbles. When people want to sell the houses, they have to sell them through the trust, where the amount they could lose or gain from market fluctuations alone is capped at 25%. If they made improvements on the house, they able to sell it at a higher value. The houses are significantly less than market value. And are much higher quality than rental properties. Any restriction of use of a commodity will reduce its value. Naturally, if you only allowed a housing unit to be rented out, it will also be of less value that one that doesn't have that restriction. In terms of housing, that is an equivalent to a price control, so those measures will tend to lower investment and availability, to, finally, in the end, cause higher prices than they would otherwise. Rent control is one classic case of this effect. Moreover, its not a scalable solution, and I'm fairly confident that it will show all the problems of trying to avoid market behavior: it might be hard to get in to the fund, it might end up causing a run in the case of a big down-turn where many people need to sell but the fund has overpromised, etc etc.

TheOtherHobbes 9y ago

Mortgages don't solve that problem. In the UK is that housing has become unaffordable for most of the population - precisely because mortgages made it possible to buy property as an investment. At the same time the market has been deliberately starved of affordable housing as a matter of national policy. So your point makes no sense. What are you going to do with capital while you're saving it for a property purchase? Keep it under a mattress? In reality, without mortgages, there would be far more investment cash available, because the money would be out there doing something useful, not trapped and congealed inside a fixed asset.

conanbatt 9y ago
Man, I always say Argentina is anachronistic: we've had 15 years of no mortgages and we are starting to have them now, while there is an anti-mortgage sentiment in the world. > In the UK is that housing has become unaffordable for most of the population - precisely because mortgages made it possible to buy property as an investment. Without going too deep, there is a problem with saying unaffordable. Are we talking about indigents? Or that the middle class 25-35 doesn't have the access to houses the previous generation had? They are very different propositions. I would take for granted that mortgages raise the price of housing, simply because it helps foster demand more than supply. But it also means more houses are sold, which also means more houses are built. The goal is not to have cheap housing, is for the biggest amount of people getting housing, and banning mortgages will reduce both prices and people getting housing. > At the same time the market has been deliberately starved of affordable housing as a matter of national policy. I can't comment or debate about this for UK because I don't know what this is about. Any government that puts a policy to control what is built is likely going to have bad effects. It is true that luxury housing is providing higher returns than affordable in the U.S. In argentina its a bit different, due to historically no credit: basically the only buyers of new property in Argentina are investors, because those are the only ones that had the capital to purchase in advance. Hence for a decade, the market was flooded with cheap-construction rental homes. I expect the introduction of mortgages to create a market for long-term quality housing. > So your point makes no sense. What are you going to do with capital while you're saving it for a property purchase? Keep it under a mattress? Probably low-yield money funds if you are sophisticated. Home-owners are ill-advised to mortgages their home to invest in the stock market: using your capital to buy a home to invest in stocks is basically the same. > In reality, without mortgages, there would be far more investment cash available, because the money would be out there doing something useful, not trapped and congealed inside a fixed asset. If a man buys a house at 100k, his capital is now owned by the former seller, so the amount of capital in circulation is the same. The point is what happens when someone wants to buy a house: they have decades of saving money in low yields. This can be seen in Argentina again, as there is a mortgage boom, 30 year olds are making cash-down payment, even though market participation is almost non-existent. People were saving the cash in their mattresses.

deleted 9y ago

[deleted]