First, I know it fully well how bad the housing market here is.
Second, that's my point, unless it's an investment property or if you're selling and leaving the city altogether, you haven't actually earned $75,000/year.
Take two people X and Y, both have $500k in the bank. X buys a house with it, Y sticks to renting. A few years later, they want to move to another place with the same costs. X's house now sells for $1M and he is able to buy a new place for the same money, thus his new house effectively only cost him the $500k he had spent years ago. Y, having not bought a house previously, now has to pay $1M, which he does not have.
Nothing about these gains are imaginary. Imagine this person rented the entire time instead of buying. They did buy, so let's imagine they decided to sell today and rent instead. How did they just convert those imaginary gains into real ones?
Exactly. You need a place to live, and other places to live have become more expensive too, but you own more of the place you live thanks to appreciation. You don't have to sell it either to realize the gains, you can borrow against it to make more money for instance, opportunities they certainly wouldn't have had without the appreciation.
Because the rents have gone up equally in the city? I rented a 1 bedroom condo back in 2017 for $1700/month. The same unit is around $2600/month now. So the price to either rent or purchase the same unit in the city has gone up significantly regardless.
Okay but they'd be paying the higher rate regardless. On the hypothetical "rent the whole time" track they have much less money than the "bought ten years ago" track they actually took. In both cases housing costs more, but in the latter they have hundreds of thousands of dollars more in easily liquified assets.
You’re still missing the point. The gains are real - you not willing to give up your house to realize them) or insisting that you need another house in exchange) doesn’t make them not real.
Yes, every other homeowner is sitting on the same gains, so relative to them, it feels like nothing has changed. But relative to the non-owners, you have been given a free handout of wealth. Which you are « consuming » by staying in the same house you were in before.
If the rent has gone up, then your house you live in is now producing 2600 dollars of value per month rather than 1700 (even though it feels like nothing has changed to you)
> Second, that's my point, unless it's an investment property or if you're selling and leaving the city altogether, you haven't actually earned $75,000/year.
Yes, you have. You can take loans against your property value, for example. But even if you sell and put the money right back into another inflated asset, you still actually earned it.
Sure, you can take out HELOC against it, and but you're playing a very dangerous game when interests do rise. That has literally been happening right now.
Second, that's my point, unless it's an investment property or if you're selling and leaving the city altogether, you haven't actually earned $75,000/year.