The banks only care that housing prices remain astronomical--the mechanics are not important--so that mortgages must be taken out.
And, as recent history shows, the mortgage casino is "too big to fail" because of the globally-systemic role of mortgage-backed securities.
An individual is fucked if something happens to crater the price of their house. Nobody hedges, really. It’s a toxic system.
Not a good reason for people to buy your insurance, but some people might believe in the boom times
they just don't want to live next to anything (which I get), they don't like change (sure, I get that too, buy that's how you get historical landromats) then they realize they can't get that (as you would have to buy the land to keep it from being used), so the next best thing is to make it as similar to theirs as possible... (which ironically makes their house worth a bit less, because of increased low-quality supply leads to slightly lower price locally)
increasing density leads to having higher-quality services around, which would increase value
If they've already paid off the house and they want to sell it without buying another house, sure.
If they have a mortgage on the house, someone gets screwed, and that someone is the bank that issued the mortgage. The mortgage is secured by the house. You can just let them take it.
If you have 25% equity in the house, and something happens that knocks down the value by 30%... the person getting screwed is you.
Then the price declines and you have a $750,000 mortgage on a $700,000 house, plus $175,000 in meaningless equity.
You can sell the house and pay the bank $50,000, screwing the bank, or you can deliver the house to the bank and pay them $0, screwing the bank much harder.
Meanwhile, you've lost... the opportunity to take out a second mortgage against the equity you had in your house? What was the equity doing for you?
That equity was only useful to you if you had the option to sell your house. If it was your only house, the equity concept wasn't all that meaningful, as applied to you, to begin with.
Try changing the numbers. You have 100% equity in your house and the price falls by 120%. (What happened?) Are you getting screwed? How?
You have 70% equity in your house and the price falls by 100%. Are you getting screwed?
Prepayment doesn't really screw the bank.
> or you can deliver the house to the bank and pay them $0, screwing the bank much harder.
And wreck your credit in the process-- and perhaps even owe the money, depending on whether your mortgage is non-recourse.
> Meanwhile, you've lost... the opportunity to take out a second mortgage against the equity you had in your house? What was the equity doing for you?
Meanwhile you've lost your entire down payment and your ability to purchase another house now. You either have to take a credit hit walking away and forfeit the down payment, or just stay stuck where you are now overpaying for a house vs. current values.
If you own it and you're using it as much as you want, you living quality is not at all affected by fluctuations in its hypothetical price.
Your ability to borrow against it is a downside, but maybe we also shouldn't be supporting that.
It’s TBTF because it’s the source of the vast majority of household wealth. We turned housing into a retirement program, stealing from future generations.
In any case, far from noise, the cause of steadily increasing prices is restricted supply.
https://progressandpoverty.substack.com/p/no-silver-bullets-...