Population and Housing

[ijmorlan]

I wonder what house prices would be like if there was no such thing as a mortgage?

I’m not advocating for this, but I’d love to know as a matter of curiosity.

I assume what you are asking is, what would house prices be like if you could not borrow money to buy a house.

The short answer is that the prices would surely be lower. But home ownership rates would be lower, and the construction business would not exist the same way it does today. You can see the artifacts of inability to borrow for a house in most developing countries: partially-built houses , or houses where the first floor was built (and is inhabited) but the second floor has just some walls or rebar. Basically, you build as you have money, you don't just go out and buy a house.

Yes, that’s what I’m wondering about. Clearly, prices would be lower, because the buying power of most people would be less.

My suspicion is that all the housing would end up owned by those wealthy enough to buy for cash, meaning that almost everybody would rent.

Then I was thinking a bit and realized that it’s not just a thought experiment: it actually would be possible to implement this policy. If the law said that any debt secured by real property was not collectable and that foreclosure/power of sale were abolished, then it would be impossible to get a mortgage. Well, maybe from the mob, which has its own ways of collecting on debts.

I suspect that we want an intermediate level of mortgage availability that gives ordinary people enough buying power but not so much that prices go to the stratosphere.