The problem is that you have to take into account that those values are biased because mortgages exist. The value of a home is exactly what a person is willing and able to pay for it.
If mortgages never existed then people would value housing much less because it's no longer $x monthly, it's the whole thing up front.
You're right that a portion comes from material cost but the cost inflates to fit the budget of the expected buyer. Without mortgages the typical suburban house would be built so that a middle-class person could afford it.
From this you can argue that mortgages are a good thing because they allow a person with less wealth to get more/better houses by leveraging future income, but the trade-off is that buyer takes on more risk, there are no low cost homes in good neighborhoods which could be reasonably bought outright, and people are more dependent on their credit rating.
Exactly. That is why the UK has had to keep "emergency" low interest rates for the last 7 years or so. If they were to rise, people wouldn't be able to afford their houses and the prices would drop. The banks assets would loose value and we would have another crisis.
If mortgages never existed then people would value housing much less because it's no longer $x monthly, it's the whole thing up front.
You're right that a portion comes from material cost but the cost inflates to fit the budget of the expected buyer. Without mortgages the typical suburban house would be built so that a middle-class person could afford it.
From this you can argue that mortgages are a good thing because they allow a person with less wealth to get more/better houses by leveraging future income, but the trade-off is that buyer takes on more risk, there are no low cost homes in good neighborhoods which could be reasonably bought outright, and people are more dependent on their credit rating.