[squiffy]

You can define an investment in any way you want. You can define an investment to be a small furry animal with four legs, which other people call a beaver. You will just have trouble getting other people to agree that your definition is useful or meaningful.

If you define an investment to mean only what you get when you actually sell the property, that is a pretty narrow investment.

If you pay 200k for a home. And today your neighbor's identical home sells for $1 million. Then it is customary to assume that you have 800K equity in your home. And bankers will lend you money even if you haven't sold the home.

You are right. Bankers can be stupid. And they are doing way too much lending. And when everyone wakes up, they will realize that their "equity" is an illusion.

I think you are right though. People assume that the values are lasting and permanent. Whereas the truth is, in theory, you MIGHT be able to sell your home for the market price, IF you were to put it on the market today, and IF your 100 neighbors don't put their homes on the market simultaneously.

But that is how our economic system is set up. If the bankers will lend me the money, I can borrow it.

You are right though, if there were some restrictions on lending terms, we might all be better off and it might discourage bubble formation.

Just as they limited lending stock market gambling money on margin. They should probably do more to limit overboard lending to buy real estate.