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A comment on Low interest rates in advanced countries have pushed money into real estate. Parent comment

Re:Low interest rates in advanced countries have pushed mone... by skybrian on Wednesday November 24, 2021 @05:36PM (#29335985)
"Paper wealth" is an odd term that's not used in the study. It seems particulary odd to call real estate investments "paper wealth." After all, land and buildings are pretty darn real, hence the name.

These investments may be overvalued and if prices change, owners will find they're not as wealthy as they thought, but they'll own the same thing.

Also, what does it mean to say that wealth is "tied up" in real estate? Prices going up doesn't change anything real. The effect might be more resources going into construction and renovation, though.

Debt and financial derivatives backed by inflated asset prices might be the problem, as in 2008. Those income streams might be less solid than they look.

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Re:Low interest rates in advanced countries have pushed mone... by analyte123 on Wednesday November 24, 2021 @05:51PM (#29336125)
If you have to spend 5x your net worth on a house, that’s capital that is not spent on building businesses, whether through direct investment (buying tools or paying workers at your own business) or indirect (through stocks or other securities).
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Re:Low interest rates in advanced countries have pushed mone... by 01100011 on Wednesday November 24, 2021 @06:24PM (#29336411)
Devil's advocate: Doesn't that mean the person who sold you the house now has the money to invest?

It seems to me that wealth isn't being lost. It's being transferred to those wealthy, smart, or lucky enough to have invested in real estate.

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Re:Low interest rates in advanced countries have pushed mone... by jackcosgrove on Wednesday November 24, 2021 @08:45PM (#29337385)
I think in most cases it's being transferred to someone older than you.

Real estate is a seniority system.

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Re:Low interest rates in advanced countries have pushed mone... by skybrian on Thursday November 25, 2021 @12:54AM (#29338604)
Well yes, in a sense it has to be that way, because people aren’t born owning anything but eventually younger people will end up with everything when older people die.

However, sometimes the transfer is via inheritance and sometimes it’s by selling property. I wonder to what extent retirement could be considered to be funded by real estate sales? It’s certainly something people do: sell the house and move somewhere cheaper.

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Re:Low interest rates in advanced countries have pushed mone... by skybrian on Wednesday November 24, 2021 @06:15PM (#29336330)
Your debt is someone else's income. They could spend it on any of these things, assuming you keep paying. (All you get is a house, though.)
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