Really nifty piece in Bloomberg, “Origins of the Indebted American Homeowner.” The title makes it sound like it’s a criticism of debt, but it’s not at all. It’s just a great, short historical overview of the housing market in America.
A couple of snippets:
The rules and institutions for financing homeownership weren’t always as conducive to buying as they are today. In the 19th century, most Americans bought or built a home outright, or saved substantial nest eggs to make large down payments, because financial institutions either didn’t lend to average homebuyers or did so on relatively stringent terms.
National banks were actually prohibited from lending on real estate and state banks typically limited mortgages to 50 percent of the underlying value of a property. Such loans also matured in a relatively short period, usually three to five years. These terms meant that buying a home often required years of saving and typically wasn’t an option for young families.
In the late 19th century, many states sought to promote homeownership by passing legislation that enabled the formation of building-and-loan associations, which offered small amortized loans secured on homes. Building-and-loans were structured to accept lower down payments and make longer-maturity loans. Policy makers promoted them partly as conduits for ordinary Americans to gain greater economic security by accumulating property.
Definitely worth a read, especially if, like me, you’re historically-challenged when it comes to the whole mortgage-market thing.