If you use a house as a collateral, there is a probability you will lose your house, if I am not confused about collaterals. As such, someone accepting your house as a collateral is almost the same as them playing a lottery where with some percent chance they are forced to buy your house. So I think we should consider that transaction to be in the same category as selling the house.
It’s worth noting that projected prices play a significant role in decision-making, since decision-making is all about evaluating counterfactuals. Suppose Scrooge ties his purchasing decisions to his paper net worth; then his effective purchasing power changes even though he isn’t getting an income stream directly from the apartment. (Cases where he takes out a loan on the apartment, as jimrandomh suggests, do seem somewhat different.) That is, if his home is increasing in value, that means he doesn’t need to convert other income streams into savings as much, and so can convert them into consumption instead. Or he might make riskier financial decisions with other asset classes, trusting that the more valuable house could better offset losses elsewhere.
You could take a loan with your house as collateral if you are more certain than your loan-giver that you will not default. If a bank tries to give people loans based on the probability they determine that you default, some of the population will happen to know their probability of defaulting to be underestimated, and take a loan at a profit. The bank would rather have their “fraudulent customers” be the ones that pay back loans more often than expected.
No, the whole point of using a house as collateral is that the bank only loses money if you default and the asset depreciates by more than the (loan size/house value) ratio.
If you use a house as a collateral, there is a probability you will lose your house, if I am not confused about collaterals. As such, someone accepting your house as a collateral is almost the same as them playing a lottery where with some percent chance they are forced to buy your house. So I think we should consider that transaction to be in the same category as selling the house.
It’s worth noting that projected prices play a significant role in decision-making, since decision-making is all about evaluating counterfactuals. Suppose Scrooge ties his purchasing decisions to his paper net worth; then his effective purchasing power changes even though he isn’t getting an income stream directly from the apartment. (Cases where he takes out a loan on the apartment, as jimrandomh suggests, do seem somewhat different.) That is, if his home is increasing in value, that means he doesn’t need to convert other income streams into savings as much, and so can convert them into consumption instead. Or he might make riskier financial decisions with other asset classes, trusting that the more valuable house could better offset losses elsewhere.
Edit: Epistomological status: armchair reasoning
You could take a loan with your house as collateral if you are more certain than your loan-giver that you will not default. If a bank tries to give people loans based on the probability they determine that you default, some of the population will happen to know their probability of defaulting to be underestimated, and take a loan at a profit. The bank would rather have their “fraudulent customers” be the ones that pay back loans more often than expected.
No, the whole point of using a house as collateral is that the bank only loses money if you default and the asset depreciates by more than the (loan size/house value) ratio.