So here's the thing: if housing prices crash you still have a house.
Maybe. Generally the economic turmoil around a housing crash means many people will lose their jobs, so they may or may not be able to afford to continue to own their house. Which is why so many houses end up getting foreclosed during a housing crash - people can't afford to make the payments, and they can't sell and pay off the loan.
Which is irrelevant to the incorrect idea that housing market appreciation is a Ponzi scheme.
The point of a Ponzi scheme is that the underlying asset was only valuable if you could resell it to someone else for more then you bought it. Housing, by definition, doesn't meet that since it's still housing.
Whereas Madoff investment credits or whatever are worth literally nothing now, because they never represented any underlying asset.
but it's relevant when you're trying to convince someone
"well at least you still have a house" after the market crashes and the bank kicks them out because they can't pay the mortgage. And unlike a stock where they only lose the value of the stock, the house could be so far underwater that they owe money to the bank even after the house is sold.
No one loses their house because the market crashes, they lose their house if interest rates are raised heavily and they have a variable rate mortgage, or if the subsequent economic turmoil wipes out their job.
This line of discussion has got a lot of weird perceptions on what a housing crash actually means. But unless you're holding investment property, then you can't lose your house in a crash without somthing else happening (and in 2008 plenty of people just defaulted on their loans, then rebought their houses at the true market value and ate the credit rating problem as the better option).
That's not to say their aren't significant follow on effects, but to reiterate the core point: it's not a Ponzi scheme if you own as a result of the transaction a physical product with utility (and plenty of people do in fact own their house's outright: no housing crash will make the title deed be magically not yours, the corruption and incompetence of the US banking and court system notwithstanding - again see foreclosures in 2008).
This doesn't happen. And can't happen, because if it could, banks would do this all the time to take advantage of reselling the property and the mortgage to a new buyer for a higher price when the market was favorable.
Maybe. Generally the economic turmoil around a housing crash means many people will lose their jobs, so they may or may not be able to afford to continue to own their house. Which is why so many houses end up getting foreclosed during a housing crash - people can't afford to make the payments, and they can't sell and pay off the loan.