Does that sound right? In a world of tradeoffs you have to pick the things you want to optimize for. I think that ever-rising housing prices has resulted in some awful politics from the median American, so I'm willing to take a hit elsewhere to make it happen and would consider it worth the tradeoff

Even if I'm paying a bit more in interest on an loan, the important part is that the total purchase price is lower. That's the thing we need to optimize for. More houses, sold and rented as cheaply as is reasonable. As long as they get built, bought, and used.

To give a concrete example, my house (at least according to Zillow) costs twice as much now as it did ten years ago when I bought it, and I'm not even from a high cost of living area. Those kinds of price changes swamp marginal differences in interest rates.

Whatever the downstream effects for mortgage backed securities, I'm thinking the entities or agents with interest in those securities won't be able to stop other retail bank entities or agents from making their own money on new loans.

You may be pointing at something that I don't have the understanding to grasp, and if so I apologize. I guess I'm just trying to make the narrow point that even if we built so many homes that houses became a depreciating asset like vehicles clearly are, the loans would still be available.

I don't understand why the folks stuck with the consequences of declining home prices have any power to keep retail mortgage brokers from issuing new home loans.

Maybe the previous owner takes a haircut, or maybe the developer of a new lower cost home has to do more work to keep construction costs down so they can still make money, but if the market rate for housing goes down in the midst of housing abundance, banks are going to finance those sales.

Yeah, I would agree with you if a given house was worth more than the loan, and it is messy for a mortgaged homeowner if their house dips in value below the mortgage balance. But for either a new cheap home, or an old home purchased more cheaply in the midst of more supply, the price is just lower.

As long as mortgage brokers get their origination fee and the bank is making money on loan interest, they're absolutely going to continue issuing loans. The more the better.

Thankfully, I don't think banks are the blocker on more construction. The blocker is a combination of other things, especially municipal zoning and building code regulations making it illegal to build missing middle forms of housing.