A great piece – You're Not as Rich as You Think by Satyajit
Das
Das notes:
“Yet the appreciating
value of one’s own home doesn't automatically translate into purchasing power.
A primary residence produces no income. Indeed, maintenance costs, utility
bills and property taxes -- which often rise along with home prices -- mean
that houses are cash-flow negative.
To monetize one's gains would require borrowing against the value of the property. Those loans cost money to service and expose owners to fluctuations in property values. The property can always be sold, of course. But much of the profit is likely to be eaten up by transaction and relocation costs -- not to mention the cost of a new home, which will also have risen in value.”
To monetize one's gains would require borrowing against the value of the property. Those loans cost money to service and expose owners to fluctuations in property values. The property can always be sold, of course. But much of the profit is likely to be eaten up by transaction and relocation costs -- not to mention the cost of a new home, which will also have risen in value.”