House prices and behavioral bias

What is about the rising house price of your personal residence (where you live) that appeals to us? I have never understood this bias.

Once you are in your house and all settled in, shouldn’t its market value on the upside be irrelevant? Its not like you can sell the house immediately and capture the appreciation. Its not like you can take a home equity loan (in today’s climate) and convert some of that increased equity into real cash. The only person who is gaining an advantage in this rising price environment is the tax collector, since you have to pay more $ in taxes every year on the newly assessed (rising) value.

This seems like a shitty deal! Every year there is increased outflow of cash (taxes) and no inflow, since the appreciation is an unrealized gain.

Wouldn’t the rational thing to expect be,

  1. stable home prices, or a slight downward bias each year as long as it doesn’t trip your mortgage into negative LTV? This optimizes the tax outflow.
  2. Stable rents? This way you have an opportunity to get some real cash flow in case you have to move to another (bigger) house later down the line.

Why feel happy when our house price appreciates? why feel happy when you get the tax assessment from the state that shows a higher house value and thus more money out of your pocket?Why feel happy to pay more each year without expecting anything in return?

What do you guys think?

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