Why is the rising cost of housing considered “good” for homeowners?


I recently saw an article which stated that for homeowners “their houses are like piggy banks.” But if you own your house, an increase in its value doesn’t seem to help you in any real way, since to realize that gain you’d have to sell it. But then you’d have to buy or rent another place to live, which would also cost more. It seems like the only concrete effect of a rising housing market for most homeowners is an increase in their insurance costs. Am I missing something?

In: 1833

You don’t have to sell. You can refinance or take out a Home Equity Line of Credit as well. You can also take other types of loans using it as collateral. When people say this though, they’re mostly just referring to the idea that they WILL eventually get to cash out all that value one day.

>I recently saw an article which stated that for homeowners “their houses are like piggy banks.” But if you own your house, an increase in its value doesn’t seem to help you in any real way, since to realize that gain you’d have to sell it. But then you’d have to buy or rent another place to live, which would also cost more. It seems like the only concrete effect of a rising housing market for most homeowners is an increase in their insurance costs. Am I missing something?

It’s a gain. An unrealized gain is a significant improvement over an unrealized *nothing* because it gives you **options**. Having options (like the option to exchange your real estate for cash) is desirable. Not having the option (because it’s not worth anything) is undesirable – whether you actually want to sell or not.

Having a passport that allows you to travel to 100 countries without a visa is objectively better than having a passport that allows you to travel to only 20 countries without a visa – whether you actually travel or not.
Having 5 job offers is better than having 1 job offer.
Having… you probably get the idea.

For a while in the 1990s or the early 2000s in the San Francisco area,, the AVERAGE increase in value of a standard house was about $100,000 a year. Imagine that, you just living your life and each week your house makes you $2000. Next week, $2000 more.

How is this good for the home owner? You are correct that if they sell their house and buy next door there is not any real advantage to them. However, if we assume that the house is otherwise paid off this is how it is good for them…

The home owner borrows $100,000 against their house, buys a new Mercedes, and takes a 2 week trip to Europe. Now they owe $100,000. A 30 year note at 3% would be about $421 a month for a payment, but they pay more (because they can) and after a year they owe $75000 on that loan. Next year their house is worth $100,000 more, so they take a new $100,000 loan, pay off the first one and then use the $25,000 extra to upgrade their kitchen, so now ther house is worth an additional $25,000…

And they could keep doing this never owing more than $100,000 at the cost of $421 a month.

…and when they do sell after 15 years, they take their $2milllion dollars from selling the house and buy a 90 acre pice of land in Wilson County Tennessee with a nice house on it for $500,000, and put the $1.5 million in the bank.

There are two benefits…

– Homeowners can borrow against that equity in the terms of a home equity line of credit or home equity loan, allowing them to remodel their home (ie. pull out money to re-do the kitchen), or use that equity for other purchases, paying down debt, etc.

– The leverage of real estate (buying w/ 20% down) still makes sellers better off even if they have to buy a new house. Let’s say they bought a house for $250k, putting down 20%. House is now worth $400k. Their initial equity of $50k is now worth $200k plus whatever they’ve paid down on their mortgage. That means they now have more than $200k to put down, meaning they could put down 20% for a $1m house. Or assuming they don’t have the income to support buying a home that expensive, the might be able to put down something like 33% on a $600k home. And ultimately, home owners get to a point where they want to downsize from their large family home into something smaller in retirement. So even if prices are up, a 20% increase in a $500k 4 BR home means more gains than they have to spend 20% more on, say, buying their $250k 2BR condo.

Yes, you are. Namely, that you do not have to buy a home in the same locale as the home you are selling.


My wife and I are nearing retirement. When we do, the plan is to sell our home near Toronto, buy a place in a small town, and cash in the difference. I am expecting a net profit of a half million, at least.

It’s great if you’re looking to downsize like a lot of baby boomers are. A lot of baby boomers own big houses which they raised their children in, and are now empty-nesters. They can comfortably move into a house half the size, in which case, they have plenty of money to put in the bank, or reinvest, or buy a second property that they can rent out to someone else for extra income.

Lots of good answers already, but I want to add…

Someday you will not need a house anymore. If the value has been growing more than inflation, that means a lot more buying power for you to be in a better renting or long-term-care situation. Or, if you never sell, you’ll be giving a bigger inheritance to your loved ones.

Many people who live in high cost areas rely on the rising value of their homes as an investment that they can monetize by selling and relocating somewhere cheaper.

The dream is to buy a house for $300K in NYC in 1982, sell it for $3 million in 2022 and retire to Florida.

No. The world would be a better place if housing were less expensive. In the long run paying more for it (and more interest on it) drains money from the working class.

The upper class use housing as something between a gambling game, extorting high rent from the poor, and an investment.

In the short run, rising values help people who already own a house. That’s like a pyramid scheme where people who already are in get ahead while newcomers lose.

Rising home prices is actually bad for most people, excepting those who own multiple homes or apartment complexes. The problem is that the American legal system and American development patterns inhibit the construction of new affordable housing. As landlords’ power and political influence grows they become more able to extract value from the economy without needing to invest in improvements or new construction. Its a runaway reaction. Landlords are absorbing all economic growth and not innovating.

Regular single home owners think it is good because they see their net worth grow, but they don’t realize that their buying power isn’t really growing at all.


More equity in house if you need to borrow

More value of house if selling

Some people talk about taking off PMI but it doesn’t work with many mortgages and not something simple.


High property tax. This is the biggest downside if you’re not planning to sell.

Higher insurance cost.

I’m on the negative side. Not planning to sell my house soon and the house is costing me more every year.

One way it helps is that your mortgage is a hedge against inflation. The size of your mortgage in dollars doesn’t increase but your ability to pay it off improves over time as your salary increases more or less with inflation. Meanwhile the value of your house is increasing, giving you options. True, you can’t easily convert it to cash. But, when you are ready to downsize or move somewhere cheaper, you can extract the lifetime of appreciation.

This is why I shrug at my value going up. I’m not moving or selling for a long time.

I agreed to a price and if the value goes down i’ll feel the same way.

It is nice to see an asset appreciate though. It just depends on if you think this is the new normal or we’re in a bubble. I think the answer is a little bit of both but the days of 150k houses in any desirable city are gone forever.

The housing prices literally saved my house this year. I had what I thought was winter storm damage to my gutters and soffits. Had a contractor out and found out that it was way worse than I thought. No drip edge had ever been installed on the roof way before I ever bought the house. It wasn’t caught on any inspection. So water had been destroying the fascia boards. I need a new roof, fascia and gutters. I’ve only had my house 6 years. I didn’t have enough equity to pay for a $13,000 roof. My home owners insurance would have dropped me and I wouldn’t be able to get insurance which means that my mortgage would default since I’m required to carry home owners. I would have lost my house. I called my mortgage company and they had it reappraised. My house in 2015 appraised for $55,000. This year it appraised for $102,000. I was able to refinance for $72,000, pay for the whole roof and pay off some credit cards and other bills. My mortgage went up less than the amount of bills I paid off were every month so I came out ahead. I got incredibly lucky that the storm revealed the damage when it did. It could have happened two years ago before housing went up and I would have been screwed. The problem was going to reveal itself eventually, no matter what. If it had happened later, it would have been more costly, with damage in the walls or ceilings. I got so lucky and I never get lucky like that. I’m so grateful it happened right now.

You’re completely right. The house you’re living in isn’t really an asset. Even the government recognizes this and doesn’t exact a gains tax when you sell it. The rising price of your house also increases your property taxes even though you gain no benefit from the theoretical value. You can get lucky if your house is in an area with inflated prices and you plan to move to an area with lower prices. But that’s a difficult situation to plan for.

Also inflation makes your loan cheaper (if you have a fixed interest rate). Which is a good thing.

the limiting factor in homebuying for a lot of people is not the house payment that they can afford, but the down payment needed to secure financing. when you sell high, you extract a sum of cash that can be used to leverage a larger loan.

consider that when someone bought their home, they may have had 10% to put down. if their home doubled in value (for the sake of simplicity), and then they buy a new home for the same price as the one they’re selling, that appreciated value turns into a 50% down payment. that can give folks a lot more choice in their next home, and depending on their particular circumstances, they might not even have to use all of it while the house payment stays basically the same.

Increase in property tax, increase in HOA costs, increase in utility costs, decrease in home accessibility… it benefits the old and corners the young into renting. Rising rent, just makes it not worth it

As a homeowner with no mortgage and no desire to put my home under a mortgage it doesn’t help. If anything it sucks because more property taxes and higher insurance costs.

The average person is probably in debt on their home so I guess it opens some freedom to refinance at a lower interest rate maybe. Other than that when you die and your kids get your home they can sell it for more money.

For a lot of people it’s just a status thing I think tbh lol

It’s a generational money grab. Banks like it because they make more money on higher value loans. The media narrative is more influenced by those groups.

If I hear one more story from some old guy about how cheaply he bought his $million house I’ll barf.