People are now waking up to the fact that what that real estate investment guru was pitching at the seminar wasn’t necessarily an "investment":

 

London: During the housing bubble a lot of people confused consumption with investment, a fact now becoming painfully obvious in Britain as prices fall and businesses suffer.

As in the United States, home owners helped inflate a wider bubble by plowing money into housing-related consumption, from granite kitchen countertops to living room furniture to under floor heating. The illusion, or justification, was that this consumption, often financed via mortgage debt, was actually investment in a can’t-miss real asset.

It wasn’t, it’s stopping and the impact on the economy will be considerable.

Think of it as the "Land of Leather Fallacy," named after the British furniture retailer now coming to grief because people are no longer thinking that buying a lemon yellow L-shaped sofa will be repaid with a higher house price.

I remember talking to a neighbor who said that she and her husband had decided to quit investing in things like stocks and 401Ks.  She said that rather than traditional investments, they were doing things like installing a pool and a new barbeque.  "When we can make 25% a year investing in our home," she said, "Why would we invest in anything else?"

James Sauft of Reuters continues:

Don’t get me wrong. I’m sure Land of Leather makes comfy sofas and in some ways what has happened is not their fault. But they were part of a huge misallocation of resources.

I wonder if my old neighbor is digging out that pamphlet on her 401K now.