The ratio of profit you make moving from a $2m house to a $1m house is the same as moving from a $200k house to a $100k house in a "stable" area.
We put a certain positive intrinsic value on a local move (and a very high negative intrinsic value on a remote move), because we like the area but the house we're in is not ideal. If the cost of a local move is less than this intrinsic value, we'll move, otherwise we won't. The higher prices go, the higher the actual cost of moving goes, and the less likely we are to move.
Sans CA taxes, this is relative to the increase of wealth you've accumulated. So yes in the absolute it's higher, but relatively speaking you've still are earning more money in liquidity during the transaction.
> This has to do with the actual cost of a move, that is, the difference in your net worth at the end of the day once all the dust settles.
I think I finally understand your position now. The cost isn't prohibitive, it's the negative impact on your wealth. Which is true. The reason I and others are reacting strongly to your position is because your conflating transactional costs (expenses, fees, etc) with wealth (accumulation of assets). Two very different things that use a common medium to interact (i.e. currency).
Here's the predicament. Your implying that you can transfer assets (wealth) without any transactional costs. This is just not how the market for any asset transfer works (stocks, cash, etc), because someone or some system has to be setup to broker the transaction. What your essentially complaining about is why you have to pay fees to complete an asset transfer. I know very few markets were transferring assets doesn't incur a fee. I don't know what to tell you other than this is basically economics 101.
CA taxes on the other hand - that's something to complain about. CA taxes inadvertently nudge people to hold on to property longer, reducing supply and thus driving overall prices up.
So? How does that benefit us in any way? We don't need to sell to have liquidity. We have a HELOC so we can turn our equity into cash on demand.
> your conflating transactional costs (expenses, fees, etc) with wealth
No, I'm not. I'm just saying that transactional costs decrease your wealth, which is simply a fact.
> The cost isn't prohibitive, it's the negative impact on your wealth
What exactly is the difference between "cost" and "negative impact on your wealth"? Those two seem like the same thing to me.
Do you really feel like you'd be better off if your house sold for exactly what you bought it for?
But that HELOC has financing terms associated with it. Getting cash out from your HELOC does impact your overall "wealth" because you have to pay a fee (financing terms) to actual turn that credit line into cash. You could in turn take that cash that you borrowed at 3% interest and put it into assets that net you 4% return and effectively increase your wealth. You may take a short term hit to your income (the 3% interest fee) but you net out in the end.
> I'm just saying that transactional costs decrease your wealth, which is simply a fact.
That's not true in real terms. Your talking about a decrease of your perceived wealth. If the only asset I own is $1,000 in public traded stocks (i.e. I look at the stock market this second and they're worth $1,000), you could say your wealth is $1,000, but only for that second. However in practice your real wealth is the amount someone is willing to pay for your assets (when you put a sell order out) minus the transaction fees associated with making the transaction. That's the actual process ("in real terms") you would go through to realize your wealth.
This is effectively what people say when someone is "paper rich" E.g. a startup founder who has 30% of a business that is worth $300M, now has wealth valued at $90M...if he/she were actually liquidate to a seller at $300M, his/her wealth would probably be more like $40M-ish after taxes, transaction fees, etc.
> What exactly is the difference between "cost" and "negative impact on your wealth"? Those two seem like the same thing to me.
I should have probably said income instead instead of "cost". From wikipedia:[0]
Economic terminology distinguishes between wealth and income. Wealth or savings is a stock variable, that is, measurable at a date in time, for example the value of an orchard on December 31 minus debt owed on the orchard. For a given amount of wealth, say at the beginning of the year, income from that wealth, as measurable over say a year is a flow variable. What marks the income as a flow is its measurement per unit of time, such as the value of apples yielded from the orchard per year.
In other words, your wealth is measurable at a moment in time and can't realize a true negative impact on it unless it actually gets liquidated. Otherwise the measurement of it today is simply theoretical.