The Finance Industry Is Gorging Itself on Your Future—The Trend Lines Will Blow You Away

[Xithras]

28. There's a strong argument that your house is only worth $200k because of the banks.

You can't afford to spend $200k on a house. Virtually nobody can. So why do we do so? Because the predatory banks have offered us "loans" that allow us to break those amounts into convenient monthly installments that we CAN afford. The banks themselves have created a situation where you cannot afford to buy a house without them.

If the banks did not offer mortgages, houses would not sell for $200,000.

When Levittown was built in 1947, you could buy a new house for $7900. Adjusted for inflation, that's less than $80,000 in modern dollars. Instead, the average price of a home sold there today is over $360,000. A major portion of the difference is directly attributable to easy credit and the price inflation that it allows. "What can I afford to save?" became "What can I afford to finance?"

It's a variation on the same theme that led to the recent real estate bubble. Credit lowers the bar for ownership and drives up prices. While some would argue that it's a good thing, the net result has been a massive transfer of wealth to the banker classes. How much interest will the bank make on that $200k loan over 30 years? Those numbers were far smaller in 1950.