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The problem with it these people will not sell their houses. Its not a liquid capital. Selling their only house would be something like once-in-lifetime decisio

The problem with it these people will not sell their houses. Its not a liquid capital. Selling their only house would be something like once-in-lifetime decision. What i'm saying, and you're failing to understand is that a if citizen A has a million dollar house and 10K in savings but his income is very low, he is actually much much poorer than citizen B who has 1.01million in cash, 80K salary and rents an apartment. >"Pro-accuracy" Its clearly obvious B has more economic impact, but with networth they seem as identical.

leetcrew 8y ago
your argument essentially reduces to "$1.01mm net + $80k salary is much more well off than $1.01mm net + low salary". unless A happens to be a financial wizard, this is always going to be true no matter how A's assets are allocated. i'm not sure what your point is with respect to counting primary residences in net worth. if A were truly worse off for having the house (and they very well may be with that lopsided allocation), they could just sell it. a typical yearly return on $1.01mm is very close to the median household income in the US.
CamTin 8y ago
Yeah, they have the same wealth right now. I'm not sure what "economic impact" means here, but Citizen B will likely be much much richer in the future, seeing has how his 1million in cash can basically instantly be converted to securities that allow him to live without working at all, and he can either quit his $80k/year job or save all o it. Citizen A can likewise sell his house, buy those same securities, and also live without working, but evidently doesn't have the same option to work for $80k/year and save even more, which is all the more reason he should diversify his portfolio. Forgetting the potential salary (assume both lose their jobs and can't work ever again), they are exactly as rich as one another, but A has foolishly constructed his portfolio such that his house is 90%+ of his wealth. Yes, he is in a financially precarious situation due to his reliance on strong housing prices, but it's totally of his own design. He can sell at any time and cash out. If he can't actually sell (no one will buy the house for what it's "worth") then his house isn't really worth a million dollars.
gwenzek 8y ago
Also the article explains that the main wealth of the 9.9% is that they live in the best neighborhood, with the best schools and the best neighbora. They use their zip code to recognize themselves. So it make sens that they place a big chunck of their wealth into their house because your house is your social status.

leetcrew 8y ago

your argument essentially reduces to "$1.01mm net + $80k salary is much more well off than $1.01mm net + low salary". unless A happens to be a financial wizard, this is always going to be true no matter how A's assets are allocated. i'm not sure what your point is with respect to counting primary residences in net worth. if A were truly worse off for having the house (and they very well may be with that lopsided allocation), they could just sell it. a typical yearly return on $1.01mm is very close to the median household income in the US.

CamTin 8y ago

Yeah, they have the same wealth right now. I'm not sure what "economic impact" means here, but Citizen B will likely be much much richer in the future, seeing has how his 1million in cash can basically instantly be converted to securities that allow him to live without working at all, and he can either quit his $80k/year job or save all o it. Citizen A can likewise sell his house, buy those same securities, and also live without working, but evidently doesn't have the same option to work for $80k/year and save even more, which is all the more reason he should diversify his portfolio. Forgetting the potential salary (assume both lose their jobs and can't work ever again), they are exactly as rich as one another, but A has foolishly constructed his portfolio such that his house is 90%+ of his wealth. Yes, he is in a financially precarious situation due to his reliance on strong housing prices, but it's totally of his own design. He can sell at any time and cash out. If he can't actually sell (no one will buy the house for what it's "worth") then his house isn't really worth a million dollars.

gwenzek 8y ago

Also the article explains that the main wealth of the 9.9% is that they live in the best neighborhood, with the best schools and the best neighbora. They use their zip code to recognize themselves. So it make sens that they place a big chunck of their wealth into their house because your house is your social status.