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Wealth is only useful if it increases the net options of the wealth holder. In the case of housing wealth - if base level housing is expensive - then owning a h

Wealth is only useful if it increases the net options of the wealth holder. In the case of housing wealth - if base level housing is expensive - then owning a home is less of a measure of wealth than it is a balwark against the cost of renting and a bet on the ongoing increase in the cost of housing. If you sell your house the only option is to re-enter the housing market through a different, equally expensive, door. You can't repurpose the money for any other purpose. The only time it becomes "wealth" is when parents die, leaving their children with a suddenly valuable asset.

tyre 3y ago
In your example, the bulwark against rising cost of renting leaves optionality for the net $$$
epistasis 3y ago
It does increase the net options of the wealth holder. The home owner can always sell, move to a smaller home, or, shudder, start renting. The options of somebody with a massive amount of housing wealth are so much better than those without the housing wealth.
- monkeydreams 3y ago
  My point was rather that the person with $600k of shares has more options than a person with $600k of housing wealth.
Spivak 3y ago
Or when you move somewhere cheaper. Or when the equity increases and becomes a financial instrument to borrow against for lower interest rates than personal loans.
octodog 3y ago
If the value of your house increases by, say, $100k, the play is not to sell the house but to tap into that equity to make new investments. The ability to do that will depend on your income, as you still need to be able to service a larger loan. But if your loan-to-value ratio improves you will also get a better rate from your bank, which makes this process a little easier. The main benefit is to individuals who have a high income but not a lot of capital. Generally this benefits early or mid career professionals who are high earners but may not have come from really wealthy backgrounds.

tyre 3y ago

In your example, the bulwark against rising cost of renting leaves optionality for the net $$$

epistasis 3y ago

It does increase the net options of the wealth holder. The home owner can always sell, move to a smaller home, or, shudder, start renting. The options of somebody with a massive amount of housing wealth are so much better than those without the housing wealth.

monkeydreams 3y ago
My point was rather that the person with $600k of shares has more options than a person with $600k of housing wealth.

Spivak 3y ago

Or when you move somewhere cheaper. Or when the equity increases and becomes a financial instrument to borrow against for lower interest rates than personal loans.

octodog 3y ago

If the value of your house increases by, say, $100k, the play is not to sell the house but to tap into that equity to make new investments. The ability to do that will depend on your income, as you still need to be able to service a larger loan. But if your loan-to-value ratio improves you will also get a better rate from your bank, which makes this process a little easier. The main benefit is to individuals who have a high income but not a lot of capital. Generally this benefits early or mid career professionals who are high earners but may not have come from really wealthy backgrounds.