Here's the real life example:
I paid $825k for the current home on the water.
The last house to sell just like mine sold for $1.225m.
After realty and closing costs, I'd clear about $360k

I sold my old house for $560k last year (not on the water)
The last house to sell like my old one just sold for $625k.
If I bought the new house for $625k, after closing costs, I'd be in it
for
under $650.


So I would net a quarter of a million dollars if I sold my current home
and
bought my old one again.


That's profit, right?


*****************

No, it's merely the reorganization of numbers on the asset side of your
balance sheet. Even if your house was in investment, you haven't
realized a gain until you sell it. Your neighbor's sale didn't put any
money in your pocket. You need the house to live in. The amount of
money the house is worth is meaningless, as long as you are going to
personally consume the asset by taking it for exclusive use.

The good news is that if the average income in Nipples doubles in the
next couple of years, (is that likely?) your $1.2mm pad will be "worth"
$2.4mm. The bad news is that if you sell the one you've got, and don't
elect to lower your standard of housing, you'll simply have a higher
number attached to an asset you don't have the flexiblity to sell.

Now, it you had purchased *two* or more homes for $825k and sold oneof
more of them for $1.225, that $400k spread would indeed be gross
profit. You'd probably walk off with about $300k net after
commissions, cap gains taxes, local conveyance taxes, etc. Selling your
personal house, and immediately replacing it with one costing as much
or more, does not create "profit".