Scather asked me about why I don’t class my home as an asset and suggested I post about it so I will. Thanks Scather. She writes a cool book review site you should check out. She is honest, articulate and funny!
My opinion, which is shared by quite a few people, is that the house you live in is not an asset. Yes it will go up in value and is worth a lot and is something I think you should aspire to own, but it is not an asset. An asset really is something you can liquidate for cash. If you sold your home, you would need to rent elsewhere and not really have anywhere to live, hence making it not really an asset.
If it were a rental property, which you were receiving an income from or a piece of property purchased purely for capital gains, then it could be classed as an asset because you could sell it off at any time. The property you live in is not usually viewed as an investment. You plan on living in it and staying there.
A bank and many other financial business will class your house as an asset and let you borrow against it to purchase other property and things, but realistically this not usually a good idea. You should keep your investments and personal home separate. If your investments turned sour you could lose your home. This is why it is better to keep them separate.
Many people here in Australia do not do this and are not so worried about our housing market since we are set up differently than the USA and our loans have been structured differently, but it does not mean we are not in a bubble and house prices won’t drop. In fact, many experts believe we are about to have just that happen. (Although this has been said for some time now, so you would need to do your own research in the areas you are interested in, as some parts have dropped considerably whereas other suburbs continue to climb.)
Many people have differing views on whether your house is an asset or not and this is just mine. What are your thoughts?