> Even if you need your home to live in, you can still borrow against your property value, essentially "eating the bricks".
This is not a source of money, it's only a source of collateral. Anything you borrow not only has to be paid back, you have to pay interest. And interest rates are higher than they used to be and the standard deduction is now large enough that most people don't get to deduct the interest anymore.
Moreover, it only means anything if the difference in value would have made a difference. If you want to borrow $20,000 then a house with $100,000 in equity is quite sufficient and another $100,000 in equity isn't doing much for you.
> If you desperately need money, you can move into something smaller, or more distant from the city, and cash out.
Houses are much worse for this than e.g. stocks, because they're hard (and extremely inconvenient when you live in it) to sell in a hurry unless you want to a lose a lot of value. A lot of people also can't do this anymore because they got a fixed-rate mortgage before rates went up and now they can't move or they'll have to refinance at the higher rate which would eat most if not more than all of the difference in value.
> If you do neither of these things, your children will inherit the value of your house.
But then they need a place to live and then either can't sell it because they're living in it or get the money from selling it but pay that much again to acquire a different place to live.
It's a housing version of the national debt philosophy, where debt doesn't matter as long as you're outpacing it with growth. If last decade you had $25k HELOC on a 400k house and today you have $50k HELOC on a 800k house, your finances have clearly improved
Except that you still can't sell the house or you won't have a place to live, so they've only improved on paper before you account for the opportunity cost of the higher imputed rent, i.e. the higher cost of living. Meanwhile you could have gotten the $50k HELOC against the $400k house, which was the only part doing anything that would actually affect your life.
If you sell your house and then rent then you'd be paying rent and therefore have direct negative exposure to the high housing costs. That also doesn't create any new supply. You're still living somewhere and therefore still need somewhere to live. For someone else to have a housing unit while you still have one, you have create more, not just play musical chairs.
When you are old maybe you don't need to live in a house that was made for a family? Or you can give your house to your children, and then let them pay your rent. They're already paying their own rent.
Sure, but the only thing available anywhere in your neighbourhood is big houses made for families.
That's the whole missing middle thing, there's luxury pied-à-terre sold to millionaires downtown, and then there's the endless stretch of large single-family houses in the suburbs.
>the standard deduction is now large enough that most people don't get to deduct the interest anymore.
They don't get to itemize their interest deduction, but they still get to deduct from their taxable income an amount equal to or greater than the interest they paid.
The standard deduction was not significantly increased in order to reduce total deductions, it was simply to remove the need to itemize them as often. (And incidentally, to replace the personal exemption deduction which was removed.)
This is in reference to changes to U.S. income tax beginning in 2017.
> They don't get to itemize their interest deduction, but they still get to deduct from their taxable income an amount equal to or greater than the interest they paid.
But they get to deduct that amount regardless of whether they paid any interest, so if they take the loan they're paying all of the interest themselves relative to what happens if they don't take the loan.
This is not a source of money, it's only a source of collateral. Anything you borrow not only has to be paid back, you have to pay interest. And interest rates are higher than they used to be and the standard deduction is now large enough that most people don't get to deduct the interest anymore.
Moreover, it only means anything if the difference in value would have made a difference. If you want to borrow $20,000 then a house with $100,000 in equity is quite sufficient and another $100,000 in equity isn't doing much for you.
> If you desperately need money, you can move into something smaller, or more distant from the city, and cash out.
Houses are much worse for this than e.g. stocks, because they're hard (and extremely inconvenient when you live in it) to sell in a hurry unless you want to a lose a lot of value. A lot of people also can't do this anymore because they got a fixed-rate mortgage before rates went up and now they can't move or they'll have to refinance at the higher rate which would eat most if not more than all of the difference in value.
> If you do neither of these things, your children will inherit the value of your house.
But then they need a place to live and then either can't sell it because they're living in it or get the money from selling it but pay that much again to acquire a different place to live.