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Originally Posted by host
Housing valuations were much lower when mortgages were hard to come by and amounted to no more than 50 percent of total valuation of a property with repayment terms of five years. As terms loosened and lending ratios to total valuation dropped,and mortgage interest paid became deductible, more potential buyers could afford to bid on housing properties.
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I am having trouble getting my head around the bigger picture here. But what you seem to be noting here is that the value of houses was lower when the number of people who qualified for mortgages was lower.
In other words, there was less demand for purchasing houses. Is this not a classic example of supply and demand? As more people are able to buy their own homes, the demand for houses goes up and if the supply is not there, the price will rise.
I suppose an argument can be made that the price of houses could be kept lower by making mortgages harder to get but I can also see that there is another way to look at this.
Making mortgages easier to get gives more people the ability to own their own home. When one rents they are just paying for someone else's mortgage (typically). In paying that "rent" into a mortgage, a homeowner builds equity. It is an investment into their future.
To me the issue here, as always, is finding the right balance. Currently, the system has proven out of balance.