[mbauman]

> Otherwise whatever gains you had on paper also apply to the nearby houses, so you can't afford them.

Why are you so certain you couldn't you afford them? You were able to purchase a 200K house many years ago. Now you just need another 200K to buy that bigger house — and it's a bigger house! You did it once long ago, you can probably do it again even easier (in addition to everything else, you have a huge downpayment now). And no, you typically don't pay capital gains taxes against your primary residence.

In any case, the point is that you're in a way better place than if you hadn't made that 200K purchase. That's what I mean by "floating on the water" — you have a stake in the market so now as it moves, so does your asset.

[jjav]

> And no, you typically don't pay capital gains taxes against your primary residence.

A married couple can exclude 500K from taxes, but the rest (given example above) is taxable.

> In any case, the point is that you're in a way better place than if you hadn't made that 200K purchase.

For sure. Owning is better than renting.