[ilya_m]

First, ~10-20% of residential home sales are new (the proportion swings widely year-to-year), with a non-trivial fraction of their costs going to materials and labor.

Second, 5-6% of the typical sale go toward the agents and closing costs. Again, this is money that leave the system.

Third, if some of the sale proceeds are applied to repaying an existing mortgage or to finance a home purchase, this is neutral as far as the "investor-backed mortgages create money" argument goes.

[globular-toast]

I think actually your assumption that someone needs to cough up the cash for a mortgage to happen is wrong? Why do you think that? The banks control the ledger. They just create money. If they go under, they get bailed out by the tax payers. A large part of the money in the economy is the difference between mortgages issued and mortgages paid back. So that cash "leaving the system" is the money being created. As long as people still haven't paid back their mortgages, the money remains in the economy. I've heard it described like a bathtub. The tap is new mortgages being issued, the drain is people paying them back. The tap has been running faster than it drains for a long time now.