What would change for them? They still need to pay that down in either case, don't they?
Granted, they can sell at some point and make a 3x their investment. But by then, buying another house will also be 3x, and rent will be 5x, so they're kind of back where they started.
The point is that if housing prices tank, they won't have made 3x on their investment. They are talking about the case where you sell below what you paid.
But they'd also pay much less for their next house, making up for it. If we all take a 90% pay cut but all products now cost 90% less, nothing really changes, does it?
I guess the exception would be if they sold and then moved to a different area with a very different housing market (or left the country), but at least for domestic migration, I suppose the more rural and the cheaper the houses are, the worse the necessities for the elderly will be, e.g. doctors will be far away, no home nursing services, no local shopping.
First, The idea behind housing as a retirement plan is that eventually you cash out that retirement plan, not take it to the Grave. If you never sell, or buy only equivalently priced houses, it's not really helping with your retirement.
Second, if you buy a house for a million dollars and sell it for 500K, it doesn't matter if you can buy an equivalent house for 500K, you are still 500k in the hole on the balance sheet.
What do you do when you cash out though, live in a van? Any house you'll then buy will be at the same price level.
And yeah, sure, you'll be down 500k in nominal value, but you'll exchange one house for the value of another. If that's 500k or 1m doesn't really matter, if you've lived in that house, you'll need another place to live at. Of course this changes drastically if it was a house you bought only for investment purposes, with no intention of living in it. But at that point, it's pure speculation, and I don't see why we should protected that asset class more than stocks or baseball trading cards.
>What do you do when you cash out though, live in a van? Any house you'll then buy will be at the same price level.
You rent or move somewhere with lower COL.
If selling your house is how you plan to pay for costs in retirement like food, healthcare, or leisure, you must must cash out at some point. If you have 500k less to spend on food, healthcare, or leisure, it will suck.
If you dont plan to sell your house for the rest of your life, the market value isn't relevant to your retirement. In that case you are right that it doesn't really matter.
