patrick.net

I think it's a wonderful idea!

The current mortgage-debt system is the main whip that our owners use to make us into obedient workers.

And this is precisely what is going to happen, except, prices will fall way below construction costs. Prices are already below construction costs in places like Detroit, and this is going to happen in all US cities, with no exception. Remember, price is a function of supply/demand. Cost has nothing to do with it.

Communism in theory is good too.

Actually I think this is what WILL HAPPEN. After a complete fiscal collapse - the feds will stop subsidising housing in order to pay military and all federal employee salaries and pensions + food stamp, welfare, social security...medicare then there is no $ left for 'loan modification subsisdies'. lol

When you really look deep at the budget - all these housing subsidies will probably be the FIRST thing to get cut.

It doesnt seem that way because we have never seen serious government cuts.

I would go to 15 year mortgage, at the longest. That along with 20% down required. Banks would not be allowed to sell off these loans.

There were people willing to loan money against collateral (RE or other) since Roman empire, and there always will be. So, in a market economy, there WILL be mortgages. The issue is the term and interest rate.

Of, course, if the govt. ceased to subsidize and/or guarantee them, the term will shorten and the rate will go up and/or cease to be fixed. All things being equal, this would initially crimp RE prices. But much less will be build, and the prices would soon go up. In Russia, India, and many other countries where mortgages are hard to get, shorter term, high interest, and not tax-deductible, RE is not cheap even in dollar terms, leave alone relative to local incomes.
Nor has it really been in the US when those conditions prevailed here.

kunal says

That if you wanted to live in a place that you called your own, you would save up the money for it.

How are people supposed to save significant amounts of money if there are no mortgages? The only reason people can save up lots of money is that others borrow it.

MarkInSF says

kunal says

That if you wanted to live in a place that you called your own, you would save up the money for it.

How are people supposed to save significant amounts of money if there are no mortgages? The only reason people can save up lots of money is that others borrow it.

This is ridiculous, now.
There are numerous countries where there are or were no mortgages. People could still save lots of money. Heard of Vietnamese boat people coming with bags of gold coins? Do you think there were gold mortgages there :-)

kunal says

Here are my thoughts: Prices would have to be reduced to the levels of the construction cost + land value of where you intend to live (or even build a house). At that point no one can fool around with the monetary system in place before and after a home is purchased. i.e. no mortgage, no derivative financial instruments.

If a home represents 2 man-years of labor (miners, foresters, designers, etc.), at $50K per man, then that's a $100K floor on the price of a home.

Even after Quantitative Easing, there is only about $6K of money for each person in the US. How are lots of people supposed to stuff $100K in a piggy bank to save for a house?

BTW, mortgages don't even have to involve lending money If I'm selling my home, I can just let them pay that $100K over 10 years or whatever, through seller financing. Even if banks and all of Wall Street disappeared, mortgages wouldn't.

Fisk says

There are numerous countries where there are or were no mortgages. People could still save lots of money. Heard of Vietnamese boat people coming with bags of gold coins?

Sure SOME people could save lots of money, and SOME vietnamese had bags of gold coins. But was not possible for lots of people do to so, since there were only so many gold coins in existence. Limit savings to a commodity, and total savings will be very limited.

APOCALYPSEFUCK says

If you can’t pay cash, fuck it.
And fuck bankers running anything larger than a village credit union.
Just chop them into bite-sized pieces for the domesticated animals.
Snack time, Fluffy!

Genius!

I'd become a mortagage bank

APOCALYPSEFUCK says

DIE BANKER DIE!

Have you considered a career in DC?

Michinaga says

@MarkinSF - Why can’t people save $100k in today’s currency system? Hasn’t the FDIC limit on savings accounts been raised to $250k recently? If your bank fails, the Fed just prints up the cash!

Of course in today's currency system you can. But our currency system requires somebody to be in debt a dollar for every dollar somebody has. The poster was asking what would happen if there was no debt, and people just paid for homes up front.

Extend the posters question: What if governments had to run balanced budgets and never have any debt?

What if people had to save money to buy everything in cash, and never use a credit card or car loan?

What if nobody was ever in debt?

My point is it would be impossible for almost everybody to save to buy a home if they had to pay up front, and debt based savings (lending to debtors) was not available.