Globalization typically reduces local differences. Shake Shack in Toronto is a lot like the Shake Shack in Dubai. But does this also apply to the inside of our homes?

This is a question that was recently asked by researchers at the MIT Senseable City Lab. And to answer it, they used AI to analyze over 400,000 interior images across 80 global cities. The images were taken from Airbnb, but they did also do a "robustness check" and pull images from Craigslist, Zillow, Zigbang, and Ohou.

What they discovered was that geography still matters. Local customs persist, and when two cities are close to each other, they tend to share visual similarities — both in terms of the objects that show up and how they look. So much so that their model was able to predict a city with an accuracy of about 45% just by looking at interior photos.

This is somewhat surprising to me as I thought that Airbnb listings might have skewed toward homogeneity. There can also be an Airbnb aesthetic. But local tastes and traditions still exist. For example, the study found that Turkey seems to place a high level of importance on curtains. Big drapery people over there, apparently.

At the same time, globalization is doing things. One of their findings was that cities with high flight volumes tend to exhibit more visual similarities. This says something about the value of physical connectivity. We're, of course, all connected digitally, but apparently that's not the same as getting on a plane and physically being somewhere.

"The same, but different" feels like an accurate description. To download a copy of the study, click here.

Cover photo from the MIT Senseable City Lab

The US just announced that they are working on a plan to introduce 50-year mortgages. I don't know what this plan entails, but my first reaction to the headline was: “Yeah, this is a bad idea.” But then I thought to myself, why is a 50-year amortization period too long? And is there any magic to 25- and 30-year mortgages?

At the most basic level, you could think of it this way: the average life expectancy of both sexes in America is currently 78.4 years. That means the average American would need to buy a home — with a 50-year mortgage — at 28.4 years old in order to fully pay it off by the time they die. At that point, why not rent?

A more rigorous analysis of amortization periods would likely involve a myriad of trade-offs related to housing affordability, homeownership rates, asset-price stability, household debt, overall financial risk, and other factors. But the primary feature of a long-ass mortgage is that it's alleged to make homeownership more attainable.

The obvious benefit of a 50-year mortgage is that it lowers a borrower’s monthly payment. For example, an $800,000 mortgage at 6% would create the following payments:

• 25-year amortization: $5,154 per month

• 30-year amortization: $4,796 per month

• 50-year amortization: $4,211 per month

But it's important to keep in mind that this is a synthetic affordability solution. It does not address fundamental constraints such as land use, zoning, construction costs, and the overall supply of new housing. Here's an excerpt from a speech that Carolyn Rogers, Senior Deputy Governor of the Bank of Canada, delivered last year:

"...we need to resist the temptation to try to solve the housing affordability challenge by tinkering too much with the mortgage market... leaning too much on measures that reduce the short-term cost of financing could have long-term impacts on the financial health of households, the mortgage market and the economy."

The corollary to these lower monthly payments is that if you can afford a monthly payment of $5,154, you now have the option of taking out a bigger mortgage with a longer amortization period. With a 50-year amortization, that same monthly payment could support a $979,173 mortgage.

But what increased leverage does is drive up home prices even further, in the same way that lowering interest rates creates upward pressure. Imagine that mortgage rates drop from 6% to 3%. This same $5,154 monthly payment would now carry a $1.6 million mortgage with a 50-year amortization period.

I'm not an economist and, from what I can tell, there's no perfect amortization period. But there does appear to be a Goldilocks zone that balances a number of the trade-offs, and it is somewhere between 20-30 years. In fact, as recently as 2008, Canada offered government-backed 40-year mortgages. But then a consensus emerged that they were "really not in the best interest of Canadians."

I know that lots of people would love to own a $2 million home. But economic history has shown us that 50-year mortgages are likely to raise home prices for everyone, slow equity build-up for owners, and increase overall financial risk in the system. As Howard Marks once wrote in one of his memos, “There’s no free lunch in economics."

Cover photo by Kimson Doan on Unsplash