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A house/property isn't as illiquid as you think. You can take out loans against it and invest those, often at below or near inflation rates and very often below
by nemo44x 4y ago
A house/property isn't as illiquid as you think. You can take out loans against it and invest those, often at below or near inflation rates and very often below average market returns. The equity in a home is collateral for more property, investments, etc. I can't sell it on the stock market in an instant, but I can use the equity in my properties for a ton of things.
- bumby 4y agoRight, that’s part of the same problem. Let’s go revisit the IBM stock example and say 70% of Americans wealth is tied up in it. Now imagine we make a rule that you can’t exit that position. But you can borrow against your unrealized gains. That obliviously incentivizes even more protectionist policy. Just like with housing, you can rarely fully exit the market because you’ve got to live somewhere. But when people have most of their wealth tied up in a single asset that also acts as a revolving line of credit, it tends to overly inflate the value of that asset. It just makes people protect those unrealized gains that much more or risk being upside down on an asset you can’t sell.