Housing prices are not just about bricks and land. They are about credit. When banks lend, they create purchasing power. This increases bidding capacity, which raises prices, which justifies even bigger loans. The loop feeds on itself.
The Debt Engine
Most buyers do not pay for housing with saved cash. They pay with debt. Banks profit from interest and fees, so they have an incentive to issue large loans. As credit expands, prices rise. The market becomes a reflection of debt capacity rather than construction cost.
This is financialization: housing behaves like a financial product. The value of a home is decoupled from its use and tied to its price trajectory.
The Risks for You
Debt makes housing a forced gamble. You might need to sell at the wrong time. You might face rising rates or falling local prices. You cannot diversify. Your primary asset is a single, illiquid property with decades of obligations.
Even if you win on paper, you often buy into another inflated market. The gains are illusory unless you exit the market entirely.
Decommodification and Credit Discipline
A decommodified system aligns credit with real value. Loans support construction and maintenance, not speculative bidding. Credit rules prevent price escalation beyond wages. Lending becomes a tool for housing people, not for inflating asset values.
This reduces the pressure to borrow at extreme levels. It also protects against the boom and bust cycles that destabilize the economy.
The Broader Benefit
When the debt engine slows, housing becomes less volatile. People are not forced into leveraged positions. Banks become service providers rather than market drivers. The housing system becomes more resilient, and the economy less exposed to speculative shocks.