Abstract: Building Assets: Institutional Lending and Mortgaged Homeownership in the United States, 1880-1929

H. Daniel Wadhwani


Between 1880 and 1929, urban residential mortgage loans became widely available in the United States and their terms became more attractive to borrowers of modest means. This paper examines the causes of these changes in residential mortgage financing, and their impact on the economic strategies of American households. I find that these developments were prompted by changes in financial institution regulation and shifts in the lending practices of major intermediaries. The expanding flow of funds from intermediaries, combined with longer maturities on loans issued by building and loan associations and the expanding availability of second mortgages, made low down payment, small denomination mortgages widely available. Such financing had an impact on household economy strategies. Mortgaged home owning became increasingly common for young adults in their 20s and 30s, even as the real costs of homeownership were increasing. The tradeoff they accepted came in the form of lower rates of personal saving and a much higher likelihood of running a deficit than their peers who rented. Though these developments were not fully institutionalized until after World War II, the new patterns by which Americans saved and borrowed were emerging by the 1920s.