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> Housing? Yep mortgages, people can rarely afford a house without a large mortgage What does this mean? Are you saying mortgages are recent? Prices are a func

> Housing? Yep mortgages, people can rarely afford a house without a large mortgage What does this mean? Are you saying mortgages are recent? Prices are a function of supply and demand, not of access to capital. > I really wish society would have stopped this in its tracks People didn't own houses before. They were serfs or renters. Mortgages meant people could access a lifetime of money now and afford a house.

torstenvl 2y ago
> Prices are a function of supply and demand Demand for living and having somewhere to live are inelastic. As a result, these markets are especially prone to distortionary effects caused by monopolies, price fixing, and price non-transparency.
- balderdash 2y ago
  What are the monopolies, price fixing, and price non transparency in housing?
  - programjames 2y ago
    In many areas, all landlords use one of two or three management companies, which use the same pricing software. I do think prices are usually pretty transparent though.
- robertlagrant 2y ago
  What's this got to do with mortgages?
CuriouslyC 2y ago
I think the main point to take from OP is that houses have gotten much more expensive because builders presuppose the existence of a pool of people who can afford them given mortgages. If mortgages weren't a thing a lot of building code wouldn't exist and houses would be built smaller and simpler because otherwise they wouldn't sell.
floor2 2y ago
> Prices are a function of supply and demand, not of access to capital. And easy access to debt massively shifts the equilibrium point on the supply/demand curves. Cars, houses, college, even cell phones or furniture can have far higher market prices when people switch from paying full-price in cash at time of purchase to making payments over months or years.
adolph 2y ago
> Prices are a function of supply and demand, not of access to capital. If a buyer cannot access capital (money), then no amount of demand will facilitate the exchange and the seller might supply a different buyer who has capital for a lower price.
- robertlagrant 2y ago
  So in context of mortgages being bad, you're saying that house prices would be lower if only people who have the money saved up or inherited to buy them are bidding on houses? Wouldn't that make supply much lower?
  - adolph 2y ago
    If the mortgage did not exist, and a significant portion of buyers (or the sellers) did not have access to same/similar amounts of capital, many people would probably restructure their financial lives in order to facilitate house buying without a mortgage. The same/similar number of people need housing and move, upsize or downsize, so the nature of the supply might change but probably not supply in general. If the mortgage were to suddenly disappear I would expect the housing market to have a similar contraction as in the recent recession when poorly understood risks from mortgage backed securities caused a decrease in mortgage availability.
    - robertlagrant 2y ago
      But how much would it contract when you can rent the properties out? Rental and purchase prices are linked - the price floor of a house is related to how much you can rent it out for if you sold it to a landlord (or kept it yourself to rent to people). People would stop buying houses and start renting. The demand for renting would go up, and for buying would go down.
have_faith 2y ago
> not of access to capital I think I get what you mean with this, but I'm not sure I follow it completely. Banks are able to extend large amounts of credit that are backed by a small percentage of the credit offered. People are generally bad with money and will take what the bank offers them if they think they can afford the monthly figure. The bank and it's lending practices therefore seem to have an (indirect?) influence on how much money someone has to pay for a house, and therefore what houses sell for in the market. Whether all this does is reveal a houses true value in the market, as opposed to artificially increasing it, I'm not sure.
- robertlagrant 2y ago
  I probably agree with most of this, and definitely with your thoughtful last sentence, but the context is that the existence of mortgages has driven up house prices. I think this is a silly claim, because while almost no one being able to buy a house would lower house prices, it would do so in a net negative one.
  - have_faith 2y ago
    It sounds like there's two separate dimensions to this, price, and positive / negative outcome. It seems like it's possible for a banks mortgage lending practices to both positively increase access to mortgages while at the same time making houses more expensive. At first I think this is counter intuitive, but I think there's a logic to it. Whether this is a good tradeoff, is separate to whether the loaning itself increases house prices.
sofixa 2y ago
> What does this mean? Are you saying mortgages are recent? Prices are a function of supply and demand, not of access to capital. Access to capital influences how much money can be spent to satisfy a demand.
- robertlagrant 2y ago
  How is this related to mortgages being bad?
  - sofixa 2y ago
    It is not, it's about "prices are about supply and demand" being put as something entirely independent of access to capital.
graemep 2y ago
> Prices are a function of supply and demand, not of access to capital. That is simply wrong. The demand curve is the relationship between quantity bought and price. It definitely shifts with how much money people have, so in the case of houses depends entirely on access to capital.

torstenvl 2y ago

> Prices are a function of supply and demand Demand for living and having somewhere to live are inelastic. As a result, these markets are especially prone to distortionary effects caused by monopolies, price fixing, and price non-transparency.

balderdash 2y ago
What are the monopolies, price fixing, and price non transparency in housing?
- programjames 2y ago
  In many areas, all landlords use one of two or three management companies, which use the same pricing software. I do think prices are usually pretty transparent though.
robertlagrant 2y ago
What's this got to do with mortgages?

CuriouslyC 2y ago

I think the main point to take from OP is that houses have gotten much more expensive because builders presuppose the existence of a pool of people who can afford them given mortgages. If mortgages weren't a thing a lot of building code wouldn't exist and houses would be built smaller and simpler because otherwise they wouldn't sell.

floor2 2y ago

> Prices are a function of supply and demand, not of access to capital. And easy access to debt massively shifts the equilibrium point on the supply/demand curves. Cars, houses, college, even cell phones or furniture can have far higher market prices when people switch from paying full-price in cash at time of purchase to making payments over months or years.

adolph 2y ago

> Prices are a function of supply and demand, not of access to capital. If a buyer cannot access capital (money), then no amount of demand will facilitate the exchange and the seller might supply a different buyer who has capital for a lower price.

robertlagrant 2y ago
So in context of mortgages being bad, you're saying that house prices would be lower if only people who have the money saved up or inherited to buy them are bidding on houses? Wouldn't that make supply much lower?
- adolph 2y ago
  If the mortgage did not exist, and a significant portion of buyers (or the sellers) did not have access to same/similar amounts of capital, many people would probably restructure their financial lives in order to facilitate house buying without a mortgage. The same/similar number of people need housing and move, upsize or downsize, so the nature of the supply might change but probably not supply in general. If the mortgage were to suddenly disappear I would expect the housing market to have a similar contraction as in the recent recession when poorly understood risks from mortgage backed securities caused a decrease in mortgage availability.
  - robertlagrant 2y ago
    But how much would it contract when you can rent the properties out? Rental and purchase prices are linked - the price floor of a house is related to how much you can rent it out for if you sold it to a landlord (or kept it yourself to rent to people). People would stop buying houses and start renting. The demand for renting would go up, and for buying would go down.

have_faith 2y ago

> not of access to capital I think I get what you mean with this, but I'm not sure I follow it completely. Banks are able to extend large amounts of credit that are backed by a small percentage of the credit offered. People are generally bad with money and will take what the bank offers them if they think they can afford the monthly figure. The bank and it's lending practices therefore seem to have an (indirect?) influence on how much money someone has to pay for a house, and therefore what houses sell for in the market. Whether all this does is reveal a houses true value in the market, as opposed to artificially increasing it, I'm not sure.

robertlagrant 2y ago
I probably agree with most of this, and definitely with your thoughtful last sentence, but the context is that the existence of mortgages has driven up house prices. I think this is a silly claim, because while almost no one being able to buy a house would lower house prices, it would do so in a net negative one.
- have_faith 2y ago
  It sounds like there's two separate dimensions to this, price, and positive / negative outcome. It seems like it's possible for a banks mortgage lending practices to both positively increase access to mortgages while at the same time making houses more expensive. At first I think this is counter intuitive, but I think there's a logic to it. Whether this is a good tradeoff, is separate to whether the loaning itself increases house prices.

sofixa 2y ago

> What does this mean? Are you saying mortgages are recent? Prices are a function of supply and demand, not of access to capital. Access to capital influences how much money can be spent to satisfy a demand.

robertlagrant 2y ago
How is this related to mortgages being bad?
- sofixa 2y ago
  It is not, it's about "prices are about supply and demand" being put as something entirely independent of access to capital.

graemep 2y ago

> Prices are a function of supply and demand, not of access to capital. That is simply wrong. The demand curve is the relationship between quantity bought and price. It definitely shifts with how much money people have, so in the case of houses depends entirely on access to capital.