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If you have to spend 5x your net worth on a house, that’s capital that is not spent on building businesses, whether through direct investment (buying tools or p
by analyte123 5y ago
If you have to spend 5x your net worth on a house, that’s capital that is not spent on building businesses, whether through direct investment (buying tools or paying workers at your own business) or indirect (through stocks or other securities).
- skybrian 5y agoYour debt is someone else's income. They could spend it on any of these things, assuming you keep paying. (All you get is a house, though.)
- 01100011 5y agoDevil's advocate: Doesn't that mean the person who sold you the house now has the money to invest? It seems to me that wealth isn't being lost. It's being transferred to those wealthy, smart, or lucky enough to have invested in real estate.
- jackcosgrove 5y agoI think in most cases it's being transferred to someone older than you. Real estate is a seniority system.
- skybrian 5y agoWell yes, in a sense it has to be that way, because people aren’t born owning anything but eventually younger people will end up with everything when older people die. However, sometimes the transfer is via inheritance and sometimes it’s by selling property. I wonder to what extent retirement could be considered to be funded by real estate sales? It’s certainly something people do: sell the house and move somewhere cheaper.