Because consumers are primarily used to buying consumables, it results in them not having an intuitive sense when it comes to investments. Buying a house is essentially mostly an asset allocation problem, not a purchasing problem.
Think of it this way, would you rather buy 1 house in Palo Alto or 5 houses in Des Moine? What would 5 houses in Des Moine get you? Well, you could rent the other 4 houses out and get some sort of rental income but you get a higher salary working in Palo Alto, both are income streams.
After X number of years, your 5 houses in Des Moine will be worth some amount and your 1 house in Palo Alto will be worth a different amount. Your houses in Des Moine are probably $600,000 worth of brick and concrete which are guaranteed to depreciate over time and $400,000 worth of land which may appreciate. Your Palo Alto home is like, $200,000 of brick and concrete and $800,000 worth of land so much more likely the growth in land will make up for the depreciation in house. Plus, in Palo Alto, you can be a part of the NIMBY coalition that defends against any law that threatens the value of your house while encouraging office space to be built that increases it's value.
You can apply the same calculus to say, buying a $200K Des Moine house and $800K of index funds or renting in Palo Alto and buying $1000K of index funds or any other asset allocation mix you like.
At the end of the day, even though they look like big scary numbers, the relative impacts are much tinier because you're just shifting assets between different classes. Most asset classes grow at about the same risk adjusted rate because the market is efficient (excepting brick and concrete which is guaranteed to depreciate as a consumable).
Of course, this is assuming every person has essentially access to infinite amounts of credit providing they can put up the collateral to back it up. Once you get into the nitty gritty of who can and cannot gain access to credit, then issues of privilege also get involved.
Think of it this way, would you rather buy 1 house in Palo Alto or 5 houses in Des Moine? What would 5 houses in Des Moine get you? Well, you could rent the other 4 houses out and get some sort of rental income but you get a higher salary working in Palo Alto, both are income streams.
After X number of years, your 5 houses in Des Moine will be worth some amount and your 1 house in Palo Alto will be worth a different amount. Your houses in Des Moine are probably $600,000 worth of brick and concrete which are guaranteed to depreciate over time and $400,000 worth of land which may appreciate. Your Palo Alto home is like, $200,000 of brick and concrete and $800,000 worth of land so much more likely the growth in land will make up for the depreciation in house. Plus, in Palo Alto, you can be a part of the NIMBY coalition that defends against any law that threatens the value of your house while encouraging office space to be built that increases it's value.
You can apply the same calculus to say, buying a $200K Des Moine house and $800K of index funds or renting in Palo Alto and buying $1000K of index funds or any other asset allocation mix you like.
At the end of the day, even though they look like big scary numbers, the relative impacts are much tinier because you're just shifting assets between different classes. Most asset classes grow at about the same risk adjusted rate because the market is efficient (excepting brick and concrete which is guaranteed to depreciate as a consumable).
Of course, this is assuming every person has essentially access to infinite amounts of credit providing they can put up the collateral to back it up. Once you get into the nitty gritty of who can and cannot gain access to credit, then issues of privilege also get involved.