The Case Against 30-Year Mortgages

By all means I can imagine the 30-year fixed loan could be driving up prices of the land itself (the lots). There is of course a non-trivial cost for materials and labor, below which you would never expect see the price of a new home fall.

I suspect though, for better or worse, if we had to pay cash for a home, builders would simply be putting up inexpensive mobile-home style houses on tiny lots. Suburbia would look very different from what it looks like today.

It also seems likely that if the 30-Year Fixed went away, only the truly wealthy would be able to buy homes … to rent to the rest of us of course.

American Suburbia should actually look more like the pre-automobile streetcar neighborhoods. That development style is far more sustainable, pleasant/walkable, reduces car dependency (biggest drag on individual wealth), etc.

I find that Americans want affordable homes but they also have a crazy list of demands that turns all “modest starter homes” into luxury homes by global standards.

The “must-have” checklist gets crazy. I’m not going to share a bathroom, I’m not going to share walls, I need a big yard, and I need a big garage to park my cars because I need to be far away from everyone/everything, I need a separate room for storing all the stuff I bought from Target and don’t use anymore, I won’t share walls, I won’t share outdoor space, the list goes on.

> It also seems likely that if the 30-Year Fixed went away, only the truly wealthy would be able to buy homes … to rent to the rest of us of course.

It’s kind of already been happening. Rising LTVs. A rising percentage of renters. All this means the wealthy own a larger share of housing. Rent and mortgage payments are two ways for those with substantial assets to parasitize cashflows from those without. The article wants to blame the pass through effect of subsidies (the way that each subsidized dollar partially cancels itself out by boosting price some amount between $0.01 and $1.00) but it ignores the elephant in the room of wealth inequality - the structural cause of housing scarcity.

The thing that sucks about the expectations is that it’s also what the market builds. I’ve been looking with what I think is a reasonable list; 1.5 bath, 3 bedrooms, ideally a living room and dining room but if they are combined or I have to eat in the kitchen I’ll survive, partly finished basement and enough yard space for a 10’x10’ garden. I’d be fine with it being a duplex. But they don’t exist! At least not in my state. Everything is either gigantic, well by my standards, or a condo.

To be sure. I just don't see a simple solution to that.

Yeah, builders don't build starter homes any more.

>I suspect though, for better or worse, if we had to pay cash for a home, builders would simply be putting up inexpensive mobile-home style houses on tiny lots. Suburbia would look very different from what it looks like today.

There are other kinds of loans and different terms too.

>It also seems likely that if the 30-Year Fixed went away, only the truly wealthy would be able to buy homes … to rent to the rest of us of course.

The cheap credit drives up home prices. It's not actually an obvious aid to poor people. It discourages saving up for a house. Higher interest rates would drive prices down and make down payments easier to save up.