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Comment by cs702 | Hacker News Reader

Two-thirds of paper wealth is in real estate. For most families that have any wealth, the biggest component of that wealth is the current valuation of the home in which they live. If the valuation of real estate in relation to income globally reverts to long-term historical norms, a lot of regular people would be affected, not just the wealthy.

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For someone for whom the biggest component of that wealth is the current valuation of the home in which they live, the fluctuations of that price affects only the theoretical number, but does not affect their life in any meaningful way; they own and use the exact same asset as before, they are not trading it.

These price fluctuations matter for people who either want to invest into real estate or withdraw previous investment, not for people who want to live in their current house.

That's true except for cash out refinancing. Lots of middle class folks take out home equity loans to pay down credit card debt. This was a big component of the 2008 financial crisis. That and banks leveraging 40-1 and betting big that housing would never decrease in value.

> take out home equity loans to pay down credit card debt

I'm sure I'm preaching to the choir, but this is a terrible strategy. In a perfect world it cuts the interest payment a lot, but the risks are significant.

The risk is magnified if you’re the type of person with a track record of running up credit card debt.

> If the valuation of real estate in relation to income globally reverts to long-term historical norms […]

a lot of everyday people will tell you that just won’t happen. that governments perceive the risk of falling home values to be so large that they will do everything in their power to prevent that from happening.

That does seem to be what happens. In Australia, if the prices of houses even look to be standing still, the government will hand out taxpayer money to buyers to prop the prices up. Or they will let people withdraw from their retirement funds to buy.

It really depends. If you're not moving or borrowing against the value, does the value of your house matter that much?

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