Emilio Vilar Brun | 17/11/2020

Financial markets course

Financialization of housing

We live in a world in constant change, constant growth and also constant improvement. In

the housing market this change and improvement started with the promotion of mortgages

after the great depression to allow American citizens to pay a house with a small down

payment and then the commercialization of mortgage backed securities which started in

1968. The housing market changed from a market were people searched for a comfortable

place to live, grow and raise a family. To a speculative market where you could store,

manage and increase value.

This spread all over the world with other countries taking the same approach as the

United States, this has led to a series of good and bad consequences and also to another

front for the classic battle between Deontology and Utilitarianism. Were in one end we

have the people who defend the inherent human right for decent housing and decent

treatment, accusing (with all the right) this free market and dehumanized system of leaving

people without proper housing, without opportunities to grow as a person and generally

being exploited by this capitalist system. On the other end we have the free market part of

the story, were the best possible outcome will always be the best option only taking in

count the increase in profits, value and in simpler terms: Making more money at all costs.
 Both sides have improvement areas, some will argue we have to think about human

rights first, that we have to live in an equal world, etc. Others will argue we live in a free

market were the most intelligent and skilled will make more money and thus live a better

and fulfilled life. I think we cannot live in extremes; history has shown us extremes take us

to a negative path always (even though it seems we do not learn).

To reach the best possible outcome we need to face reality. Free markets will

continue to become more popular worldwide (as it is happening) and we cannot stop the

financialization of housing as commodities, assets, securities or just as a value storage.

What we need to do is learn from our past mistakes, analyze them thoroughly and, as it is

said in the course, create regulations, clear rules and a constant improvement of the whole

real state system. From bottom to top. From mortgage loans not being lended to

irresponsible people and creating easy but secure procedures, to the prevention of housing

monopolies or the surveillance for shady MBS’s and housing market derivatives. It’s surely

a big challenge for our society and specially to us as financier’s.

Bibliography:

Guzman, C. G. (2016, February 5th). L03 Deontology vs Utilitarianism, The eternal

battle… | PSY 833: Ethics and Leadership (Buban). Retrieved November 17, 2020,
from https://sites.psu.edu/psy533buban/2016/02/05/l03-deontology-vs-
utilitarianism-the-eternal-battle/

McConnell, J. J., & Buser, S. A. (2011, agosto). The Origins and Evolution of the Market
for Mortgage-Backed Securities (173). Annual Reviews.
https://doi.org/10.1146/annurev-financial-102710-144901