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2/8 For the 50 years following WWII (box), home price gains kept pace with inflation ("real" prices), making housing affordable. Starting in the late 90s, housing went into wild boom-bust cycles. This is when housing started to be viewed as a piggy bank to fund retirement. https://t.co/JYRSLfoIKR 3/8 400 years of real (inflation-adjusted) home prices in Amsterdam show that housing has remained affordable for centuries. This view began to break down in the late 1990s, as housing became the piggy bank for retirement. https://t.co/jrjllTUb6m 4/8 For a while in the early 2000s, we tried to achieve both goals (fund retirement and still be affordable) simultaneously by using innovative mortgage finance. * Negative amortization mortgages * Alt-A * Adjustable-Rate Mortgages * 120% loan-to-value mortgages 5/8 And for a while it seemed to work. Housing was both affordable and helped fund retirement. But starting in 2006, it all went badly, leading to the Global Financial Crisis. 6/8 The homebuilding market was crushed and never really recovered. Here is a version of @ezraklein's chart. It's color-coded to show that home construction never recovered nearly 20 years after the financial crisis. https://t.co/Nbh1znqfuk 7/8 At the same time, household formation has outpaced new home construction by 2 million units (more if you consider that the current housing stock is aging and some units are becoming unhabitable). https://t.co/LJhqBmLzRd 8/8 45M renters want affordable housing (lower prices). 86M homeowners wish to retire comfortably (higher prices). Homeowners will SAY they "feel renters' pain," but not do anything about it out of fear it might lower home values. --- The 50-year mortgage idea is an acknowledgement that home prices are unaffordable. Instead of lowering home prices through more supply (new construction) and hurting homeowners’ ability to retire, we’re floating the idea of returning to innovative mortgage finance to try to make it work. If this is the road we are going down, how will this not end badly like the last time?