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> For existing homeowners this isn't a crisis, it's a free paper money bonanza. Just by living in their houses home "owners" (most are heavily leveraged) "earn"

> For existing homeowners this isn't a crisis, it's a free paper money bonanza. Just by living in their houses home "owners" (most are heavily leveraged) "earn" 100k in paper money year in year out - magic! Is this appreciation consistent with the rest of the country, or areas with comparable quality of life? If you only have one home, real estate appreciation only makes you money if it’s higher for your house relative to other houses you’d actually want to live in, since if you sell your house and buy another house of comparable quality that’s also appreciated to a similar degree, you wouldn’t come out ahead. So yeah, that starter house you bought for $300k 25 years ago that’s worth over a million now? Unless you’re willing to move to a much lower cost of living part of the country, you could sell that house and buy…another million dollar starter house.

dragonwriter 5y ago
> you only have one home, real estate appreciation only makes you money if it’s higher for your house relative to others, since if you sell your house and buy another house of comparable quality that’s also appreciated to a similar degree, you wouldn’t come out ahead. Equity can be leveraged meaningfully without selling, so that's not true.
- MontyCarloHall 5y ago
  Besides HELOCs, what are you referring to? A HELOC is just a tool for getting lower interest rates on another loan, which only would make you wealthier if you happened to invest it in some other appreciating asset with an extremely high ROI.
  - issa 5y ago
    A HELOC is, literally, a line of credit. You can do anything you want with that money: start a business, go to college, buy bitcoin, buy another property, etc.
    - blacksmith_tb 5y ago
      ... anything you want, but you have to repay what you borrowed? It's true the interest rate is likely better than many other kinds of credit, but it's still a loan.
      - issa 5y ago
        I'm sort of at a loss for understanding the misunderstanding here. Someone without equity in their home probably cannot get a loan of any sort. Access to capital, as a loan or any other form, is a huge thing. So if your home gives you access to that loan, this is important.
        bcrosby95 5y ago
        There is no misunderstanding. Most people don't have a use for a line of credit other than to spend it on things that don't make them any money. Everyone I know that did this used it to say, pay off a bunch of credit card debt, or build a new kitchen that will be worthless by the time they sell their house anyways.
        hypothesis 5y ago
        Paying off credit card debt should be beneficial here, right? I would assume that trading a 15%-25% rate to something lower is good thing.
        dragonwriter 5y ago
        > Most people don't have a use for a line of credit other than to spend it on things that don't make them any money. Even if that were true (it's really not—it may be at any one moment but over a substantial period of years people tend to have emergent needs and opportunities that not having access to capital, or higher cost access to capital, either misses with real costs or pays more with, quite obvious, real costs) people tend to borrow and spend money on things that don't make money fro time to time; if you have a lower financing costs for such frivolous purchases, you are richer than someone who has the same spending pattern with higher financing costs.
  - dragonwriter 5y ago
    > A HELOC is just a tool for getting lower interest rates on another loan Yes, paying less money if you have to borrow to meet the same emergent need or opportunity as another person makes you richer than the one who pays more.
Waterluvian 5y ago
For the most part this is an important point. But there is a minor perk that a greatly appreciating house gives you considerably more equity to act as a large rainy day battery via a home equity line of credit or traditional loans backed by home equity. My home appreciated 20% last two years and while I hate the condition of the housing market, this unlocked a lot of equity years earlier than I expected it to.
- MontyCarloHall 5y ago
  A HELOC just lets you unlock lower interest rates for accruing additional debt. It’s very different from actually having that additional money in your pocket.
  - Waterluvian 5y ago
    Yep. But it’s still a valuable tool and the tool is made more powerful with this ridiculous market.
- seanmcdirmid 5y ago
  Unless you are taking that equity out via home equity loans, it doesn’t really matter until you sell. My home went up 18% this year but…so what? It’s not like we are leaving anytime soon. It’s just a paper gain that could be gone next year.
  - garmaine 5y ago
    Salaries go up to match cost of living increases for the area, but your actual cost of living is locked in to a prior rate, so you profit in that way.
    - chii 5y ago
      > your actual cost of living is locked in your own imputed rent, if you owned your own place is not "locked in". By living in the property, you are giving up receiving the rent that could've been generated. This means a general rental increase also affects property owners - it's just invisible and often not counted since no money changes hand.

dragonwriter 5y ago

> you only have one home, real estate appreciation only makes you money if it’s higher for your house relative to others, since if you sell your house and buy another house of comparable quality that’s also appreciated to a similar degree, you wouldn’t come out ahead. Equity can be leveraged meaningfully without selling, so that's not true.

MontyCarloHall 5y ago
Besides HELOCs, what are you referring to? A HELOC is just a tool for getting lower interest rates on another loan, which only would make you wealthier if you happened to invest it in some other appreciating asset with an extremely high ROI.
- issa 5y ago
  A HELOC is, literally, a line of credit. You can do anything you want with that money: start a business, go to college, buy bitcoin, buy another property, etc.
  - blacksmith_tb 5y ago
    ... anything you want, but you have to repay what you borrowed? It's true the interest rate is likely better than many other kinds of credit, but it's still a loan.
    - issa 5y ago
      I'm sort of at a loss for understanding the misunderstanding here. Someone without equity in their home probably cannot get a loan of any sort. Access to capital, as a loan or any other form, is a huge thing. So if your home gives you access to that loan, this is important.
      - bcrosby95 5y ago
        There is no misunderstanding. Most people don't have a use for a line of credit other than to spend it on things that don't make them any money. Everyone I know that did this used it to say, pay off a bunch of credit card debt, or build a new kitchen that will be worthless by the time they sell their house anyways.
        hypothesis 5y ago
        Paying off credit card debt should be beneficial here, right? I would assume that trading a 15%-25% rate to something lower is good thing.
        dragonwriter 5y ago
        > Most people don't have a use for a line of credit other than to spend it on things that don't make them any money. Even if that were true (it's really not—it may be at any one moment but over a substantial period of years people tend to have emergent needs and opportunities that not having access to capital, or higher cost access to capital, either misses with real costs or pays more with, quite obvious, real costs) people tend to borrow and spend money on things that don't make money fro time to time; if you have a lower financing costs for such frivolous purchases, you are richer than someone who has the same spending pattern with higher financing costs.
- dragonwriter 5y ago
  > A HELOC is just a tool for getting lower interest rates on another loan Yes, paying less money if you have to borrow to meet the same emergent need or opportunity as another person makes you richer than the one who pays more.

Waterluvian 5y ago

For the most part this is an important point. But there is a minor perk that a greatly appreciating house gives you considerably more equity to act as a large rainy day battery via a home equity line of credit or traditional loans backed by home equity. My home appreciated 20% last two years and while I hate the condition of the housing market, this unlocked a lot of equity years earlier than I expected it to.

MontyCarloHall 5y ago
A HELOC just lets you unlock lower interest rates for accruing additional debt. It’s very different from actually having that additional money in your pocket.
- Waterluvian 5y ago
  Yep. But it’s still a valuable tool and the tool is made more powerful with this ridiculous market.
seanmcdirmid 5y ago
Unless you are taking that equity out via home equity loans, it doesn’t really matter until you sell. My home went up 18% this year but…so what? It’s not like we are leaving anytime soon. It’s just a paper gain that could be gone next year.
- garmaine 5y ago
  Salaries go up to match cost of living increases for the area, but your actual cost of living is locked in to a prior rate, so you profit in that way.
  - chii 5y ago
    > your actual cost of living is locked in your own imputed rent, if you owned your own place is not "locked in". By living in the property, you are giving up receiving the rent that could've been generated. This means a general rental increase also affects property owners - it's just invisible and often not counted since no money changes hand.