Despite what you all may think, The Wife and I are not millionaires. We will be (someday), but when is anyone's guess.
I was thinking about millionaires as I jogged through our neighborhood here in Palo Alto. Depending on how you look at the numbers, every single one of my neighbors is a millionaire. So how can a doctor and VP with no debt be the poorest people in the area?
The answer of course is "home value." The smallest home on my street is about 1700 square feet and right now Zillow lists it around $1.5 million. It's an older home, and I'm assuming the people that live there own it outright. It's not an unreasonable assumption. It's a beautiful area with very little moving in and out. So why are they driving a beat up 1990s Toyota and not a Ferrari? Well, some of them are, and I bet it's not because they are independently wealthy. It's because banks wouldn't hesitate to give them loans. See, on paper, they are worth a mint. The bank sees that home as collateral of a million+ and it's free and clear.
What they failed to account for was two fold:
1. No one could or would buy that house if the bank took it as collateral.
2. It's a bit overvalued*
If you want to see what's wrong with home values in America, it's right here in this photo. And on this street. Maybe we're not so poor after all.
* A "slight" exaggeration - home prices here are about $800 to $1000 a square foot. 15 years ago they were about $100 to $150 a square foot.