Housing markets

Buying housing = rolling dice?

The value of a house seems to have nothing to do with the house itself and everything to do with the whims of the market.

Among my friends, several have “lost” 40% of their home value. Hypothetically. They have not sold, so they have not lost it yet, I guess.

It is a very strange concept that an investment can change so much in value in just a few years. Of course, other investments work that way too — take stocks, for example. And yet I always thought that was very strange as well. Stock prices change day to day (or even minute to minute), even though almost nothing changes in the company whose stock you are buying over that time scale. The market seems to take on a life of its own, creating its own dynamics.

So too with houses: the houses are not changing; it’s just the buyers and sellers and their financing that are fluctuating around for reasons entirely unrelated to # of rooms, square footage, and earthquake-soundness.


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