7 ms·

Exactly what I was going to reference. An Aussie with a $1M home, and a $500k mortgage will have $500k in "wealth." But if that wealth is tied to their home, a

by dntrkv 5y ago

Exactly what I was going to reference. An Aussie with a $1M home, and a $500k mortgage will have $500k in "wealth." But if that wealth is tied to their home, and all other homes cost the same or more, what good does that do them? We're seeing the same happen in many US cities.

kiba 5y ago
Is wealth in a home an illusion, then?
- ceejayoz 5y ago
  To some extent, yes. It's fairly illiquid, and unless you're willing to be homeless, move from the city to a rural area, or take a serious cut in living style, you're likely going to need to buy a replacement at similar cost. It's certainly not the same thing as having that wealth in the bank, or as stocks.
  - annoyingnoob 5y ago
    It does help with loans.
    - ceejayoz 5y ago
      If I take a $100k loan, my wealth doesn't go up $100k.
      - annoyingnoob 5y ago
        To the OP's question, the value in a home is not an illusion if you can do things like borrow against it.
- lowercased 5y ago
  maybe not a full 'illusion', but it's just not liquid. when using 'net worth' calculators, I severely underestimate the value of my home - between delays, fees in selling, and the cost of moving someplace else, there's probably 10-15% gone from whatever paper 'wealth' the raw number is. It doesn't really help me in any meaningful way with respect to planning. Most of my stocks are liquid. There's a potentially similar hit re: taxes, but... I can buy and sell $1000 of stocks tomorrow, I can't buy/sell $1000 of 'house' tomorrow (REITs notwithstanding).
- acchow 5y ago
  Sort of. In the same way that selling 2% of your company for $10M gives your company a valuation of $500M. We don’t know what the other 98% of shares would really sell for. In a given year, just over 1% of a typical city’s homes are transacted. Over a decade, about 10-15% are transacted.
- imtringued 5y ago
  It's an illusion because it is based on the presence of infrastructure, other people and their work. If those people weren't there your house wouldn't be worth as much. You can build the same house in the middle of nowhere and it would be worthless.
  - chrismcb 5y ago
    That doesn't make it an illusion. Yes if they circumstances are different the house will have a different value.
- annoyingnoob 5y ago
  Right up until you downsize, move to a cheaper area, or pass the value along to the next generation (you die).
giantg2 5y ago
Same here. Most of my "wealth" is tied to the house and I would have to move to an area of limited opportunities to get one substantially cheaper. The other interesting part is that one has to pay annual tax and maintenance on that "wealth". Unless the market is very hot, primary homes are not a very lucrative investment compared to other assets.

by dntrkv 5y ago

kiba 5y ago

Is wealth in a home an illusion, then?

ceejayoz 5y ago
To some extent, yes. It's fairly illiquid, and unless you're willing to be homeless, move from the city to a rural area, or take a serious cut in living style, you're likely going to need to buy a replacement at similar cost. It's certainly not the same thing as having that wealth in the bank, or as stocks.
- annoyingnoob 5y ago
  It does help with loans.
  - ceejayoz 5y ago
    If I take a $100k loan, my wealth doesn't go up $100k.
    - annoyingnoob 5y ago
      To the OP's question, the value in a home is not an illusion if you can do things like borrow against it.
lowercased 5y ago
maybe not a full 'illusion', but it's just not liquid. when using 'net worth' calculators, I severely underestimate the value of my home - between delays, fees in selling, and the cost of moving someplace else, there's probably 10-15% gone from whatever paper 'wealth' the raw number is. It doesn't really help me in any meaningful way with respect to planning. Most of my stocks are liquid. There's a potentially similar hit re: taxes, but... I can buy and sell $1000 of stocks tomorrow, I can't buy/sell $1000 of 'house' tomorrow (REITs notwithstanding).
acchow 5y ago
Sort of. In the same way that selling 2% of your company for $10M gives your company a valuation of $500M. We don’t know what the other 98% of shares would really sell for. In a given year, just over 1% of a typical city’s homes are transacted. Over a decade, about 10-15% are transacted.
imtringued 5y ago
It's an illusion because it is based on the presence of infrastructure, other people and their work. If those people weren't there your house wouldn't be worth as much. You can build the same house in the middle of nowhere and it would be worthless.
- chrismcb 5y ago
  That doesn't make it an illusion. Yes if they circumstances are different the house will have a different value.
annoyingnoob 5y ago
Right up until you downsize, move to a cheaper area, or pass the value along to the next generation (you die).

giantg2 5y ago

Same here. Most of my "wealth" is tied to the house and I would have to move to an area of limited opportunities to get one substantially cheaper. The other interesting part is that one has to pay annual tax and maintenance on that "wealth". Unless the market is very hot, primary homes are not a very lucrative investment compared to other assets.