4 ms·

Is wealth in a home an illusion, then?

by kiba 5y ago

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).

Is wealth in a home an illusion, then?

by kiba 5y ago

Is wealth in a home an illusion, then?

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).