If land prices are set by ability to pay (rather than willingness to pay), that could be a good thing for buyers.
A reasonable model for the seller is to sell to the highest willing buyer. Each individual purchaser has an ability to pay and willingness to pay and will presumably only offer the lower of those two prices.
If land trades on ability to pay rather than willingness, that means that the highest bidder would have been willing to pay more but was only able to pay what they settled on, and I don't see a significant problem. The buyer is presumably quite happy, having paid less than they were willing to pay.
The chief downsides I see in such a system is that either the buyer is not actually able to pay (they misjudge their ability to pay), or for the non-buyers who are out-bid by other buyers with a greater ability to pay. (It could be frustrating to only be able to pay $X while land or properties change hands at 1.5 * $X, but no reasonable seller will sell for 2/3 the market price, so...)
That still means that you were willing to bid that much, right?
I've bought two homes in my life. In neither case did I bid all my available funds and in both cases, I got a house that served very well as my home. (There were several other houses I bid on over the years where I didn't get the property. Two cases were bank REOs where the bank was unreasonable, IMO. Two other cases I was simply outbid. Life goes on.)
You were forced to bid more than others who were willing to bid as much as they can. That is where the price tops out. If you have more money than them you still had to pledge more of your labour because bankers extended loose credit.
Life does go on. And we have to work for longer for the exact same pile of bricks than our parents because of the changes in banking, gold std and the tech enabling tracking vast quantities of digital fiat credit.
Banks are not intermediaries. Just where do you think all the new money is coming from?? $100K used to be worth something, it's worth sweet FA now for land. Banks issue money against land. There are two tiers of pricing as a result:
1. land - insane increase
2. everything else - mostly falling in price
Banks are the new churches, vast open receptions with hundreds of square feet to be in awe of in city centers.
That may no longer be true. Using mortgage backed securities in the way that triggered the financial crisis of 2007 effectively allows banks to bypass the fractional reserve mechanism.
With this process, the bank lends $1 creating a new $1 new deposit from thin air as they always have, but then start using the mortgage certificate as money to by selling it. This allows a $1 loan to create an extra $2 in new money instead of an extra $1.
If we only allow a fractional reserve of 80%, then $1 would previously have created an 80c new deposit, which in turn would create a 64c deposit on the next cycle and keeps diminishing. However, with the mortgage certificate thrown in too, $1 becomes $1.60 (80c of new deposit and 80c of sellable mortgage certificate), which becomes $2.56, which becomes $4.10 etc.
Nope, have a read of those links. Also when banks create this gets credited to other banks. And they lend and that, on average gets credited to their bank. The system bootstraps itself. Lending is only constrained by willingness to borrow, and in the new financialised world only playing money games gets you rich.
A reasonable model for the seller is to sell to the highest willing buyer. Each individual purchaser has an ability to pay and willingness to pay and will presumably only offer the lower of those two prices.
If land trades on ability to pay rather than willingness, that means that the highest bidder would have been willing to pay more but was only able to pay what they settled on, and I don't see a significant problem. The buyer is presumably quite happy, having paid less than they were willing to pay.
The chief downsides I see in such a system is that either the buyer is not actually able to pay (they misjudge their ability to pay), or for the non-buyers who are out-bid by other buyers with a greater ability to pay. (It could be frustrating to only be able to pay $X while land or properties change hands at 1.5 * $X, but no reasonable seller will sell for 2/3 the market price, so...)