To monetize one's gains would require borrowing against the value of the property. Those loans cost money to service and expose owners to fluctuations in property values. The property can always be sold, of course. But much of the profit is likely to be eaten up by transaction and relocation costs -- not to mention the cost of a new home, which will also have risen in value.
This is highly misleading. The premise of the article is people think they are "rich." If you have a home you don't have significant equity in, you aren't "rich" by home. If you do, then "much of the profit" isn't going to be lost by transaction costs.
Now, if someone thinks they are rich because they bought a house with 0% down? Sure.
In recent years, equity valuations have also benefited from the rising share of national income captured by corporate profits, which may be unsustainable. Debt-funded share buybacks and corporate activity that boosts valuations -- including mergers -- may slow. Companies can't repurchase more than a certain level of outstanding shares if they want to maintain their stock-exchange listing and trading liquidity. Mergers eventually may run up against competition concerns.
Paraphrased: It may be that we may see some things which might slow down growth, but we're not sure.
An important factor is changing funds flows. Rising wealth, in part supported by forced or tax-incentivized pension savings, created strong markets for financial assets in the postwar era. Now, many aging investors are set to draw down on those savings at the same time to fund their retirement. Given fraying safety nets across the developed world, those withdrawals could well be large -- indeed, greater than new inflows. That will reduce the funds available for investment, as well as demand for property, equities, bonds and other assets.
All this could set off a vicious cycle. Lower asset prices will shrink tax revenues. At the same time, demand for essential services will increase as many find themselves unable to finance their own needs. Fiscal positions will take a hit, resulting in lower government spending and higher taxes. That will only accelerate disinvestment.
Wait, so a few more baby boomers selling assets (I thought they all were broke anyways, where did they get so much investment/capital?) is going to systemically plunge the economy into a vicious cycle? Meh.
Honestly, this article reads as fear mongering initially but when you look at it really has minimal substance. It also is written under the "everyone lives in a high cost of living area!" assumption which blatantly ignores the vast swatches of the world where housing is not ridiculously expensive.
IMO the main "worry" someone should have in 2016 is the demographic shifts worldwide (not really in the USA) as many countries barely have birth rates sufficient to sustain population or don't even achieve that.
