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> Given that, you buy your house to remove risk of local changes to your detriment. I think the more reasonable complaint is that people don't like thinking ab

> Given that, you buy your house to remove risk of local changes to your detriment. I think the more reasonable complaint is that people don't like thinking about how much of a risk a leveraged, illiquid investment worth >100% of your net worth is, so they have to delude themselves into thinking of housing as unrelated to their finances (incidentally, this is why richer households' net worths recovered so much better from the financial crisis: poorer households' were more likely to have a portfolio tilted ludicrously towards a single, illiquid asset). That is to say, you're definitely correct that getting equity in the housing market has concrete second-order benefits, financial and otherwise, that don't show up in a simple assessment of the asset classes in your portfolio. But the _amount_ of house people choose seems to be systematically skewed upwards, often for no real reason other than financial illiteracy and an aversion to sitting down and thinking through the purchase decision.

hinkley 8y ago
Oh man. They say there are two things you can't discuss over beers, but it's three. Politics, religion, and whether their house is an investment. People get pissed at you if you tell them that having all of their money in their house is a bad investment. You'd get less aggression telling your friend you think their wife is cheating on them. If you are in a lower income bracket than what we used to call middle class (before being middle class meant "up to your eyeballs in credit card debt"), it's likely that the majority of your net worth is the equity the house. That's bad. And that doesn't mean "take out a second mortgage and start playing the stock market", that means you have more house than you can afford long term. The people for whom it works as an investment are diversified. If less than 30% of your money is in your house you are probably doing it right. If it's 75% and you also don't have a retirement fund, well you're subsidizing those of us who are both more fortunate and better at math.

hinkley 8y ago

Oh man. They say there are two things you can't discuss over beers, but it's three. Politics, religion, and whether their house is an investment. People get pissed at you if you tell them that having all of their money in their house is a bad investment. You'd get less aggression telling your friend you think their wife is cheating on them. If you are in a lower income bracket than what we used to call middle class (before being middle class meant "up to your eyeballs in credit card debt"), it's likely that the majority of your net worth is the equity the house. That's bad. And that doesn't mean "take out a second mortgage and start playing the stock market", that means you have more house than you can afford long term. The people for whom it works as an investment are diversified. If less than 30% of your money is in your house you are probably doing it right. If it's 75% and you also don't have a retirement fund, well you're subsidizing those of us who are both more fortunate and better at math.