Quote:
Originally Posted by lowside67
What exactly do you think a net worth is? It's an estimate at a given time of what would be in your bank account at the end of the day if you sold everything and repaid all debt. I agree that people let it go to their head sometimes that they think of themselves as this savvy investor who has made their way with real estate when the reality is any idiot who bought just about any house is looking very smart right now despite no effort or expertise on their part.
But with that said, there is nothing "false" about their net worth by including their house in it. A $1.6MM house is not guaranteed to be worth that in one year or ten years, but if there is a reasonable expectation it could be resold today for $1.6MM, then its value is $1.6MM, regardless of whether you or I think the real estate market is overhyped.
"It's only physical when you cash out at a profit, otherwise the value remains in thin air."
Uhh... a house is physical all the time. You know, it's a thing, you live in. On the other hand, your stock portfolio is very much a hypothetical thing... it's only real when you cash out at a profit. And statistically the volatility of the equity market dwarfs the housing market, so that's not really a great case to make for why your friends are idiots for including their house values in their estimate of their net worth...
Mark
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I think he's getting at the people who think because they live in a 1.6 million dollar home that the bank owns 1.2 million of consider themselves as "owning" that home. People with these massive mortgages need to stop considering themselves homeowners.
All I did was pay a down payment to get a landlord (the bank) that couldn't tell me what to do quite as much and wouldn't wake me up with her 4am coke binges in the suite below me.