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> This means that my family's wealth has increased by $75,000 per year just from owning our home. Sort of, but in practice not really (particularly when intere

> This means that my family's wealth has increased by $75,000 per year just from owning our home. Sort of, but in practice not really (particularly when interest rates are higher, like now). The only meaningful way to realize that extra wealth is to sell. But then you’ve got to live somewhere, but everywhere else has (on average) gotten proportionally more expensive too. The only way to really capture that wealth is to downgrade or to go to an area that has underperformed, neither of which are typically appealing options, nor are they generally aligned with our notions of “increased personal wealth”. What’s really happened is that non-homeowners have effectively gotten effectively poorer since their only options are to pay increasingly-large rents or buy at inflated prices.

throw_nbvc1234 3y ago
Except when interest rates are near 0%, you can take a loan against the house and use as leverage to buy more stocks (or property).
mabbo 3y ago
> The only meaningful way to realize that extra wealth is to sell. But then you’ve got to live somewhere Which is one of many reasons we're considering leaving Toronto
epistasis 3y ago
No, this is purely wealth, it's not a "sort of" it's the actual real wealth just like a bag of diamonds in a safe. Indeed, homes are some of the most liquid form of wealth, easily leveraged with loans to buy even more property. And home values are one thing that governments are most likely to protect through drastic policy changes. Sure, you can take out a loan backed by your diamonds, but it won't be on terms as good as that of your home. Home wealth really is one of the strongest forms of wealth there is, and people trying to pretend it is not have no concept of how lucky they are, or even what wealth really means. People without this wealth are forced to pay their rent to others, who accept both the rent and then the real estate gains.
- twic 3y ago
  > Indeed, homes are some of the most liquid form of wealth "Liquid" means fast to sell without giving a deep discount. Homes are far less liquid than listed securities.
  - deleted 3y ago
    [deleted]
- stouset 3y ago
  > People without this wealth are forced to pay their rent to others, who accept both the rent and then the real estate gains. I note this in that not owning results in being beholden to increasing rents and at a cost disadvantage in buying a future home. But the property value gains are hard to realize in a meaningful way. Yes, you can potentially leverage your equity into acquiring more homes. But real estate gains have traditionally lagged the stock market. So as you continue this cycle, you increase your leverage dramatically while investing in highly-correlated and slightly underperforming assets. Meanwhile, little of these gains are able to be used for actual lifestyle improvements until you start unloading these properties.
  - lazide 3y ago
    Uh, home equity lines of credit are a thing in most places. They certainly are in the US! Also, renting out rooms. Also ‘granny flats’, etc.
    - raydev 3y ago
      HELOC isn't free money. You have to pay it back. Unless you're suggesting that you use the money to make bets.
      - pseudo0 3y ago
        That's a pretty common investing strategy. Take a HELOC, invest the money in index funds or whatever, and take a tax write-off for the interest. As long as the average return beats the HELOC rate (minus tax deductions) you come out ahead.
chongli 3y ago
The only way to really capture that wealth is to downgrade or to go to an area that has underperformed, neither of which are typically appealing options, nor are they generally aligned with our notions of “increased personal wealth”. There are people doing that. I know of multiple people who have sold their $1m++ houses in the city and moved out to retire on farms. Their property taxes and total cost of living went way down and all of that real estate wealth turned into cash.
- djkivi 3y ago
  A lot of Ontario license plates here in Alberta these days.
  - otoburb 3y ago
    Do you mean that there are a lot of Ontarians temporarily staying in Alberta for less than 183 days, or that a lot of those newly minted former-Ontarians Albertans arrived in the last 90 days[1]? [1] https://www.alberta.ca/transfer-vehicle-registration https://www.alberta.ca/transfer-vehicle-registration
TrainedMonkey 3y ago
> The only meaningful way to realize that extra wealth is to sell This is true only on first approximation. On second approximation rent prices are positively correlated with property prices. This means that rent_amount / mortgage >>> 1 and if you rent the place out you can essentially get passive income. You are correct that you still need to live somewhere and that is going to come at a cost which will eat up the passive income, but effective rent will still be lower. Another option is to realize that lower mortgage compared to equivalent rent means that extra cash is freed up towards other things. This can either be extra investments every month, experiences such as traveling the world, or even a lower paying job with a lot less stress.
- psunavy03 3y ago
  The problem these days, though, is that the equity in House 1 is often needed to buy House 2 if you move, otherwise you're dipping into your nest egg for a second down payment, which is not financially wise. Equities generally have a higher rate of return than real estate. Also, multiple homes mean multiple maintenance bills, and also the potential for bad tenants wrecking the place. I had a rental property in the past and had to spend multiple thousand dollars staging it for sale because, renters generally DGAF about maintenance, and property managers get lazy and do the bare minimum to get it rented.
  - creato 3y ago
    I don't see the problem here. You aren't entitled to ownership of multiple houses. Being forced to sell one house in order to buy another one sounds like working as intended to me.
    - stouset 3y ago
      But that’s entirely my point. It’s hard to actually realize these gains in practice since when you sell your house, the increase in value is absorbed by buying your next residence, which has on average also inflated in value.
somerandomqaguy 3y ago
Not necessarily. Home Equity Lines of Credit (HELOC) are a thing. My admittedly overly simplistic understanding is that the higher the valuation of your house, the higher line of credit you can borrow against it, thus the incentive to keep valuation high even if it's unrealized.
- djbusby 3y ago
  It's not just the valuation of the house it's debit to equity. In a $100k home where you owe $80k the HELOC would be like only $10k - and the rate would be less good. In the same home where you owe $20k (have $80k equity) you could borrow $50k at a better rate.
- DonsDiscountGas 3y ago
  They would still need to pay back the HELOC using actual cash, not unrealized gains from estimated home value. Seems like an extremely small benefit.
  - compiler-guy 3y ago
    A large part of the 2008 housing crash in the US was driven by HELOCs where the borrower ended up not being able to repay or refinance. Such loans can be a good way to access the value of the home, but only at the expense of reduced consumption while paying the loan off or reduced payout when it finally selling.
CydeWeys 3y ago
It works out to effectively way more than $75k/yr in realizable income because, in the US at least, long term capital gains on your primary residence are heavily tax-advantaged in a way that income isn't.
- bardak 3y ago
  Even better in Canada since capital gains on your primary residence is not taxed at all.
  - nly 3y ago
    Same in the UK
- doctorpangloss 3y ago
  This entire thread is unsophisticated people bemoaning (or celebrating) things they don't understand. A median that is going to be less than 1 house for a 30 year old, and maybe 3 in the average lifetime, so truly, what do they know? 90th percentile is probably 10 trades. It's garbage in, garbage out, and it's why there is zero progress made on any of these issues. Nobody forces you to buy, or sell, a house. And if you feel strongly about the politics of the issues, try to get elected.
majormajor 3y ago
It's one of the only assets available to "normal people" that is highly leveraged (yet also protected in many ways). So that 200-something-thousand-dollar increase is on a downpayment that may have originally just been 200K or less. Short-term "stepping up" through a series of properties can be much more wealth-building than, say, renting + investing in stocks. The longer you stay in one place the less advantageous the returns are over just putting the down payment in the market, but then having a concrete asset has its own benefits even then.
nly 3y ago
tl;dr your wealth should be measured as "1 house" not in dollars.

throw_nbvc1234 3y ago

Except when interest rates are near 0%, you can take a loan against the house and use as leverage to buy more stocks (or property).

mabbo 3y ago

> The only meaningful way to realize that extra wealth is to sell. But then you’ve got to live somewhere Which is one of many reasons we're considering leaving Toronto

epistasis 3y ago

No, this is purely wealth, it's not a "sort of" it's the actual real wealth just like a bag of diamonds in a safe. Indeed, homes are some of the most liquid form of wealth, easily leveraged with loans to buy even more property. And home values are one thing that governments are most likely to protect through drastic policy changes. Sure, you can take out a loan backed by your diamonds, but it won't be on terms as good as that of your home. Home wealth really is one of the strongest forms of wealth there is, and people trying to pretend it is not have no concept of how lucky they are, or even what wealth really means. People without this wealth are forced to pay their rent to others, who accept both the rent and then the real estate gains.

twic 3y ago
> Indeed, homes are some of the most liquid form of wealth "Liquid" means fast to sell without giving a deep discount. Homes are far less liquid than listed securities.
- deleted 3y ago
  [deleted]
stouset 3y ago
> People without this wealth are forced to pay their rent to others, who accept both the rent and then the real estate gains. I note this in that not owning results in being beholden to increasing rents and at a cost disadvantage in buying a future home. But the property value gains are hard to realize in a meaningful way. Yes, you can potentially leverage your equity into acquiring more homes. But real estate gains have traditionally lagged the stock market. So as you continue this cycle, you increase your leverage dramatically while investing in highly-correlated and slightly underperforming assets. Meanwhile, little of these gains are able to be used for actual lifestyle improvements until you start unloading these properties.
- lazide 3y ago
  Uh, home equity lines of credit are a thing in most places. They certainly are in the US! Also, renting out rooms. Also ‘granny flats’, etc.
  - raydev 3y ago
    HELOC isn't free money. You have to pay it back. Unless you're suggesting that you use the money to make bets.
    - pseudo0 3y ago
      That's a pretty common investing strategy. Take a HELOC, invest the money in index funds or whatever, and take a tax write-off for the interest. As long as the average return beats the HELOC rate (minus tax deductions) you come out ahead.

chongli 3y ago

The only way to really capture that wealth is to downgrade or to go to an area that has underperformed, neither of which are typically appealing options, nor are they generally aligned with our notions of “increased personal wealth”. There are people doing that. I know of multiple people who have sold their $1m++ houses in the city and moved out to retire on farms. Their property taxes and total cost of living went way down and all of that real estate wealth turned into cash.

djkivi 3y ago
A lot of Ontario license plates here in Alberta these days.
- otoburb 3y ago
  Do you mean that there are a lot of Ontarians temporarily staying in Alberta for less than 183 days, or that a lot of those newly minted former-Ontarians Albertans arrived in the last 90 days[1]? [1] https://www.alberta.ca/transfer-vehicle-registration https://www.alberta.ca/transfer-vehicle-registration

TrainedMonkey 3y ago

> The only meaningful way to realize that extra wealth is to sell This is true only on first approximation. On second approximation rent prices are positively correlated with property prices. This means that rent_amount / mortgage >>> 1 and if you rent the place out you can essentially get passive income. You are correct that you still need to live somewhere and that is going to come at a cost which will eat up the passive income, but effective rent will still be lower. Another option is to realize that lower mortgage compared to equivalent rent means that extra cash is freed up towards other things. This can either be extra investments every month, experiences such as traveling the world, or even a lower paying job with a lot less stress.

psunavy03 3y ago
The problem these days, though, is that the equity in House 1 is often needed to buy House 2 if you move, otherwise you're dipping into your nest egg for a second down payment, which is not financially wise. Equities generally have a higher rate of return than real estate. Also, multiple homes mean multiple maintenance bills, and also the potential for bad tenants wrecking the place. I had a rental property in the past and had to spend multiple thousand dollars staging it for sale because, renters generally DGAF about maintenance, and property managers get lazy and do the bare minimum to get it rented.
- creato 3y ago
  I don't see the problem here. You aren't entitled to ownership of multiple houses. Being forced to sell one house in order to buy another one sounds like working as intended to me.
  - stouset 3y ago
    But that’s entirely my point. It’s hard to actually realize these gains in practice since when you sell your house, the increase in value is absorbed by buying your next residence, which has on average also inflated in value.

somerandomqaguy 3y ago

Not necessarily. Home Equity Lines of Credit (HELOC) are a thing. My admittedly overly simplistic understanding is that the higher the valuation of your house, the higher line of credit you can borrow against it, thus the incentive to keep valuation high even if it's unrealized.

djbusby 3y ago
It's not just the valuation of the house it's debit to equity. In a $100k home where you owe $80k the HELOC would be like only $10k - and the rate would be less good. In the same home where you owe $20k (have $80k equity) you could borrow $50k at a better rate.
DonsDiscountGas 3y ago
They would still need to pay back the HELOC using actual cash, not unrealized gains from estimated home value. Seems like an extremely small benefit.
- compiler-guy 3y ago
  A large part of the 2008 housing crash in the US was driven by HELOCs where the borrower ended up not being able to repay or refinance. Such loans can be a good way to access the value of the home, but only at the expense of reduced consumption while paying the loan off or reduced payout when it finally selling.

CydeWeys 3y ago

It works out to effectively way more than $75k/yr in realizable income because, in the US at least, long term capital gains on your primary residence are heavily tax-advantaged in a way that income isn't.

bardak 3y ago
Even better in Canada since capital gains on your primary residence is not taxed at all.
- nly 3y ago
  Same in the UK
doctorpangloss 3y ago
This entire thread is unsophisticated people bemoaning (or celebrating) things they don't understand. A median that is going to be less than 1 house for a 30 year old, and maybe 3 in the average lifetime, so truly, what do they know? 90th percentile is probably 10 trades. It's garbage in, garbage out, and it's why there is zero progress made on any of these issues. Nobody forces you to buy, or sell, a house. And if you feel strongly about the politics of the issues, try to get elected.

majormajor 3y ago

It's one of the only assets available to "normal people" that is highly leveraged (yet also protected in many ways). So that 200-something-thousand-dollar increase is on a downpayment that may have originally just been 200K or less. Short-term "stepping up" through a series of properties can be much more wealth-building than, say, renting + investing in stocks. The longer you stay in one place the less advantageous the returns are over just putting the down payment in the market, but then having a concrete asset has its own benefits even then.

nly 3y ago

tl;dr your wealth should be measured as "1 house" not in dollars.