It's still not the bank's fault that people will voluntarily enter unsustainable agreements because they think they need to live in overpriced areas. The banks in this scenario are merely an accessory to financial suicide.
So I think my point still stands: how do we break up this obsession with living in overpriced areas? Improved remote work opportunities? Better cultural opportunities outside major metropolitan areas?
>Better cultural opportunities outside major metropolitan areas?
There is so much historical inertia behind the cultural opportunities in many places that this one will be hard to do and take an inordinate amount of time I think.
Difficulty: houses are more expensive near good schools, because demand is higher, so you can't get away with cheaper housing without harming your children's future prospects.
And no, it's not mostly a funding thing, so just distributing funds more evenly won't fix it. It has a lot more to do with selection bias, of which housing prices are a major part.
An expensive home is a place to live and sleep, but it's also: 1) a ticket of admission into a good school district 2) a ticket of admission to a local economy with well-paying jobs 3) a retirement investing account
I do think changing the way schools are funded will help the first point, and the rise of remote-work will help with the second point, but as to the third point - who knows. There are too many government incentives to buying a home that I don't think it'll change any time soon.
The areas aren’t overpriced, they’re correctly priced given the reduction in value of many types of labor due to automation and outsourcing.
This is a structural change where many Americans now have to compete with people in poorer countries who are up and coming, and at the same time facing redundancies due to technology sufficiently automating their tasks that far fewer people can output more labor.
The obsession is not with living in overpriced areas, the obsession is trying to be in the top quintile/decile and having a network of people in the top quintile/decile because you see the value of labor of the rest of the population going down.
This the solution has to involve either making more people’s labor more valuable, or reducing people’s need for income from their labor.
The first might be accomplished by better educating people so their labor is more valuable and funding research and development, and/or reducing the amount of labor available.
The second can be accomplished with a universal basic income.
Whether this would continue to let a country be economically competitive against other countries in the world, I don’t know, but probably not.
I'd blame local zoning boards for that, they won't let new houses be built, so the prices keep going up, screwing folks who don't own homes already.
Let's say the rules right now permit 30 year mortgages. Someone suggests allowing 100 year mortgages. I don't presently own property, but I have $300k saved up in the bank, which is enough to get a low-end apartment that would be a step down from where I'm renting now, or enough for a mortgage downpayment on a house. I don't want to live in debt so I have no plans to get a mortgage.
Should I believe that these rules changes won't affect me, because I don't have any plans to get a mortgage?
Or should I be worried that the cheaper availability of credit will quickly put those entry-level apartments out of my price range?
Basically, my point is that changes in details regarding contracts that I'm not a party to can still significantly affect me!
In Sweden, you'd be competing against people getting 110 year mortgages.
If I want to buy a house without a mortgage (or with a limited, affordable mortgage), I still need to be able to outbid other buyers who might have no qualms about taking on an unaffordable debt. So even if I'm just making an individual decision for myself not to go into debt, I'm severely influenced by the behaviour of other members in society, and how much banks are willing to lend to them.