Another surface-level examination that doesn't answer the question in the headline.
Houses are mortgages, which are financial products. Nowhere in the article does the author examine the mechanics of origination and servicing. To understand the prices of real estate, there must be a deep examination of how the paper is made, sold, and resold (typically as mortgage-backed securities). The builders and the entire ecosystem around houses exist to support that process. While more mixed-use and better zoning would be somewhat helpful, the influences of NIMBY are near-zero with regards to pricing compared to the financial models used by mortgage originators.
I dunno, it seems pretty dubious to me that that’s the way causation’s arrow points. I don’t think any purely financial market could have that much impact on the price of a very, very expensive item consumed by almost literally everyone (i.e., there’s a deep and liquid market of transactions involving actual real assets that are useful and in demand - unlike, say, crypto).
I also don’t understand how the pricing models used on the securitizations translate to the actual prices agreed by buyers and sellers in individual real estate transactions. Obviously that’s going to have some effect on the terms that originators offer, but there’s still a real underlying transaction between two usually rational counterparties.
My naive guess would be that the government backing of mortgage loans makes the securitization market possible, rather than securitization making the real estate sector viable.
> I also don’t understand how the pricing models used on the securitizations translate to the actual prices agreed by buyers and sellers
Who is the buyer? Most paper is created with expected returns months before the potential homeowner has the loan underwritten. If there is no one willing to buy the security, then the originator/servicer can not create the mortgage and the homeowner can not purchase the home.
Because the underwriters have to limit access to the paper based on available buyers of the security, when times are plenty, credit and income requirements lower. The lending rates just slow or speed up the market slightly. When there is more liquidity in the system, more people can purchase homes.
> My naive guess would be that the government backing of mortgage loans makes the securitization market possible, rather than securitization making the real estate sector viable.
If Fannie and Freddy had 2x the amount available in the US then home ownership would not exactly explode because there would be fewer buyers of the underlying security as prices and returns lower. However it's not the government backing in all cases. The same would be true if the Building Societies in the UK would also had more capital available. An over-abundance of securities would lower their demand.
Houses are mortgages, which are financial products. Nowhere in the article does the author examine the mechanics of origination and servicing. To understand the prices of real estate, there must be a deep examination of how the paper is made, sold, and resold (typically as mortgage-backed securities). The builders and the entire ecosystem around houses exist to support that process. While more mixed-use and better zoning would be somewhat helpful, the influences of NIMBY are near-zero with regards to pricing compared to the financial models used by mortgage originators.