[tanzam75]

> No mortgages = 10x lower property prices.

Without mortgages, housing would simply stabilize at the rental value. This will be lower than the current price -- but not anywhere close to 90% lower. The price floor would be the cost of new construction -- in other words, all the value in the structure, zero value in the land.

Instead of buying MBSes, investors who wished to have real estate exposure would simply supply capital to REITs that owned the properties directly. Banks would run these REITs for a fee, equivalent to the mortgage origination fee.

The equilibrium condition would not be objectively worse than the current equilibrium. You may have a subjective preference for an ownership society, but Germany does just fine with a rental society.

The problem is that it's socially costly to move from one equilibrium to another. If you go from the German model to the US model, then you hurt the renters. If you go from the US model to the German model, then you hurt the owners. You don't start out with a blank slate, so you cannot just pick an equilibrium.