Current Events > why do mortgages exist? Can someone explain them to me

(+) Yeah! (+)

Property value is determined by what people are willing to pay for that property

if mortgages didn't exist, no one would be able to buy property at the value it is today and in turn, all properties would plummet in value, correct?

wouldnt the problem fix itself? because prices would adjust to what people could afford

when and why were mortgages implemented in the first place?

yikes

In that case I wish people stopped financing or buying new cars
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Great idea.

Everybody stop selling their houses right now!
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I suppose that's technically possible, but if you somehow got everyone to stop taking on mortgages, people who just design far cheaper and suckier homes and have much worse neighborhoods.
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Milkman5 posted...

Property value is determined by what people are willing to pay for that property

It's actually determined by an appraiser.

Rest of your post falls apart.
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In other news, the average size of new single family houses would decrease by 4/5th due to needing to cut as many corners as possible to make building homes still profitable.
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Broseph_Stalin posted...

yikes

well I was just thinking how banks drive the prices of property up and in turn drive the need for their service. And it almost seems like the service is not beneficial to society in the first place.

I tried to find the history behind it and apparently, they were pretty much scammers from the very beginning

the moment mortages became mainstream in the united states, the ratio of debt to actual property owned shot up lmao

This topic is really, really stupid. Even by CE standards.
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ChromaticAngel posted...

Milkman5 posted...

Property value is determined by what people are willing to pay for that property

It's actually determined by an appraiser.

Rest of your post falls apart.

in real estate, the value is set by what a house sold for in your neighborhood recently

how do you think the appraiser determines value? what do you think gives things value?

Milkman5 posted...

well I was just thinking how banks drive the prices of property up

They do not.

Milkman5 posted...

the moment mortages became mainstream in the united states, the ratio of debt to actual property owned shot up lmao

so did the rate of home ownership lmao

Milkman5 posted...

how do you think the appraiser determines value? what do you think gives things value?

You can't be serious...
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Milkman5 posted...

ChromaticAngel posted...

Milkman5 posted...

Property value is determined by what people are willing to pay for that property

It's actually determined by an appraiser.

Rest of your post falls apart.

in real estate, the value is set by what a house sold for in your neighborhood recently

how do you think the appraiser determines value? what do you think gives things value?

Come back and have this conversation again after you buy a house.
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Because people are willing to pay for property at the current price, but prefer to do so over a long time period because it's more convenient than having to save until they're 50 to pay in one lump sum
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this has to be a joke topic
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Milkman5 posted...

Property value is determined by what people are willing to pay for that property

Yeah it costs nothing for them to build the house itself. Labor, materials, and land? All a few grand or whatever people can afford out of pocket.
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chill02 posted...

this has to be a joke topic

I'm trying to believe it is, but I don't think it is.
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Broseph_Stalin posted...

Milkman5 posted...

well I was just thinking how banks drive the prices of property up

They do not.

Milkman5 posted...

the moment mortages became mainstream in the united states, the ratio of debt to actual property owned shot up lmao

so did the rate of home ownership lmao

is that accurate? I looked and home ownership only started to go up after ww2, but mortgages existed before then

if not for mortgages, why have property values been skyrocketing since the implementation of mortgages?

Lmfao
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Gamer99z posted...

chill02 posted...

this has to be a joke topic

I'm trying to believe it is, but I don't think it is.

SK8T3R215 posted...

Lmfao

how is this being productive at all?

does anyone actually know or are you guys just going to troll? was there really a problem where no one could buy houses before mortgages existed? Many civilizations bought land without mortgages...

The middle class would live in slums and the standard of living would be lower.
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If you want an actual good answer, look online. Not many people on CE care to explain stuff, even the ones that actually know what they're laughing at you about. Much better to just feel superior by calling you an idiot. I don't have enough knowledge on the subject to really explain it any more adequately than I did initially, just know that it should be apparent that costs do actually exist so, no, you can't say it's all dictated by banks, that's crazy. In order for houses to be cheap enough for most people to buy outright, they would need to be incredibly cheap and it bad neighbors as both material, labor, and location are factors in determining prices among other things. As expectations have gone up throughout the years, so have the quality of homes, I'm sure it's not a 1 to 1 ratio since it's a business and people want profit, but it's not just artificially increased prices.
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cerealbox760 posted...

The middle class would live in slums and the standard of living would be lower.

ok, so thats true? like is there a stat that shows that?

because the whole reason why I find them odd is because instead of exchaning two equal values between two parties of the same class, you are instead paying extra money to a rich middle man, lmao

these bankers are extremely rich, this money has to be coming from someone to make them billionaires.

is it really true that the same practice making these people billionaires is also helping the middle class?

maybe I should stop looking at money like its a zero-sum idk

Xelltrix posted...

If you want an actual good answer, look online. Not many people on CE care to explain stuff, even the ones that actually know what they're laughing at you about. Much better to just feel superior by calling you an idiot. I don't have enough knowledge on the subject to really explain it any more adequately than I did initially, just know that it should be apparent that costs do actually exist so, no, you can't say it's all dictated by banks, that's crazy. In order for houses to be cheap enough for most people to buy outright, they would need to be incredibly cheap and it bad neighbors as both material, labor, and location are factors in determining prices among other things. As expectations have gone up throughout the years, so have the quality of homes, I'm sure it's not a 1 to 1 ratio since it's a business and people want profit, but it's not just artificially increased prices.

But Land has arbitray value, you realize. Forget the materials and labor for a second because the actual land itself is the most expensive part of a property.

What deteremines the value of a piece of land is what people are willing to pay for it. Without mortgages, wouldnt people be willing to pay less overall?

although I suppose I could apply that to credit as well

TC literally doesn't understand that land, material, and labor aren't free.

Milkman5 posted...

Gamer99z posted...

chill02 posted...

this has to be a joke topic

I'm trying to believe it is, but I don't think it is.

SK8T3R215 posted...

Lmfao

how is this being productive at all?

does anyone actually know or are you guys just going to troll? was there really a problem where no one could buy houses before mortgages existed? Many civilizations bought land without mortgages...

Do you know how much land, utilities, supplies, labor, etc. cost? Homes have a tangible value that the majority of people don't just have out of pocket. Shit, they average American can't even handle an I expected expense of $500, but even the more well off doesn't usually just have that chunk of change lying around to put up on a home...

Like this is legitimately one of the dumbest topics I've ever seen on CE.
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JustMyOpinion posted...

ChromaticAngel posted...

Milkman5 posted...

ChromaticAngel posted...

Milkman5 posted...

Property value is determined by what people are willing to pay for that property

It's actually determined by an appraiser.

Rest of your post falls apart.

in real estate, the value is set by what a house sold for in your neighborhood recently

how do you think the appraiser determines value? what do you think gives things value?

Come back and have this conversation again after you buy a house.

That's exactly what the appraiser did when I bought a house. He compared mine to recent sales nearby and added or subtracted to the value based on things my house did or did not have relative to the comps.

I mean...
I never bought a house myself yet, but I know people in real estate and Ive watched those Real estate shows and I looked at property values before and the way they have all determined the value was by comparing it to a recently sold house in the area or a house of comparable value and then what it was bought at sets the price of the house your selling.

Thats how I was told and how I have seen it being sold, I have literally never seen anything claim otherwise.

I even googled it right now just in case and google says thats how they appraise house value so I have literally no idea what he is reffering to

Gamer99z posted...

Milkman5 posted...

Gamer99z posted...

chill02 posted...

this has to be a joke topic

I'm trying to believe it is, but I don't think it is.

SK8T3R215 posted...

Lmfao

how is this being productive at all?

does anyone actually know or are you guys just going to troll? was there really a problem where no one could buy houses before mortgages existed? Many civilizations bought land without mortgages...

Do you know how much land, utilities, supplies, labor, etc. cost? Homes have a tangible value that the majority of people don't just have out of pocket. Shit, they average American can't even handle an I expected expense of $500, but even the more well off doesn't usually just have that chunk of change lying around to put up on a home...

Like this is legitimately one of the dumbest topics I've ever seen on CE.

what sets the cost of land. Think for just two seconds

So if loans didn't exist, you'd be able to go buy a brand new Ford Mustang for $3,000 because that's what people can afford! SWEET!

I see no downsides or conflicts with basic economics with OP's contention.
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Broseph_Stalin posted...

TC literally doesn't understand that land, material, and labor aren't free.

The value of almost anything is set by what people are willing to pay for it. Save for things that have set prices by the government and ofcourse everythings value is influenced in some way by legislation

TC thinks he can build a house for $10,000
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If mortgages weren't a thing everyone would just be renting homes from rich people.
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Milkman5 posted...

The value of almost anything is set by what people are willing to pay for it.

And also the cost of production.

Milkman5 posted...

Broseph_Stalin posted...

TC literally doesn't understand that land, material, and labor aren't free.

The value of almost anything is set by what people are willing to pay for it. Save for things that have set prices by the government and ofcourse everythings value is influenced in some way by legislation

Yes but what you fail to understand is that if people aren't willing to pay at least what it costs to produce something, NOBODY WILL PRODUCE IT.
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Milkman5 posted...

But Land has arbitray value, you realize. Forget the materials and labor for a second because the actual land itself is the most expensive part of a property.

The land is most definitely not the most expensive part of building a house but even if that were true, land value is determined by location, scarcity, and competition (I'm sure there are more factors as well but that's what comes to mind to me first). Generally more than one person wants the same place if the price gets low enough. The best offer gets it, and then that sets up the base price and obviously the person who paid all that money for it isn't going to want to lose money on the deal when they start building homes. And, again, the actual building is the most expensive part what with paying for all the contracts, licenses, material, etc... There is just so much to building a home. I suggest just Googling a link on the costs of building an average home and you can already see why these prices are so high.

I think your biggest issue with grasping mortgage is you just plain don't understand the sheer amount of money and resources that goes into building even one house.
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Milkman5 posted...

The value of almost anything is set by what people are willing to pay for it. Save for things that have set prices by the government and ofcourse everythings value is influenced in some way by legislation

What job do you do? Is your job solely dictated by what people are willing to pay for your work and nothing else?
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Broseph_Stalin posted...

Milkman5 posted...

The value of almost anything is set by what people are willing to pay for it.

And also the cost of production.

Land isnt produced. When you buy a property, most of your money goes towards the cost of the actual land and not the house on it.

is this not true?

Milkman5 posted...

Gamer99z posted...

Milkman5 posted...

Gamer99z posted...

chill02 posted...

this has to be a joke topic

I'm trying to believe it is, but I don't think it is.

SK8T3R215 posted...

Lmfao

how is this being productive at all?

does anyone actually know or are you guys just going to troll? was there really a problem where no one could buy houses before mortgages existed? Many civilizations bought land without mortgages...

Do you know how much land, utilities, supplies, labor, etc. cost? Homes have a tangible value that the majority of people don't just have out of pocket. Shit, they average American can't even handle an I expected expense of $500, but even the more well off doesn't usually just have that chunk of change lying around to put up on a home...

Like this is legitimately one of the dumbest topics I've ever seen on CE.

what sets the cost of land. Think for just two seconds

Do you think without mortgages there wouldn't be what would be considered prime real estate at an elevated cost?
Like you're free to go out in bumfuck Texas where I'm from and pick up land for dirt cheap because nobody wants it, you're not getting that same plot of land for the same price in a place where land is actually valuable and in relatively short supply to the number of people. And do you think land is what takes up the biggest cost of a home? Because it's not...

Again, you're telling me to think for 2 seconds but you really need to take your own advice...

You're free to buy land in bumfuck nowhere, and build yourself a shack with no utilities to it like most people had before mortgages. Mortgages are what's allowed people to get better living conditions and live in homes as we know them today...
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look guys if we all just agree to stop buying yachts for a minute we'll all eventually get $1 yachts, the plan is foolproof

Broseph_Stalin posted...

Milkman5 posted...

The value of almost anything is set by what people are willing to pay for it.

And also the cost of production.

No, that's the labor theory of value and that's bunk. If your factory can produce a widget for $10 and my factory takes $12 per unit to make the exact same widget, is my identical widget worth more than yours? No.

The cost of production takes a part in setting the ASKING PRICE, but not the value.
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Lets say you want to live in Manhattan. How realistic is a Manhattan where you could purchase an apartment with a weeks pay? Hell how about a years pay?

What do you think would happen in this scenario? Hell how would this scenario even happen?
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