Elucidating these concepts will highlight some of the follies of subscribing to these beliefs. Forced savings is not a bad idea; almost everyone ought to save more. But a home, as a savings vehicle, is quite unlike a traditional savings account.
Because the balance in my bank account doesn't fluctuate, I know I can recoup all of it. In addition, many savings accounts offer a rate of return that keeps pace with inflation. What's more, savings account balances are readily available, or liquid.
Conversely, if you needed funds immediately, it would be difficult to turn your house into cash overnight—and certainly for a fair price. In finance, we refer to this as the "liquidity discount." In short, your asset—in this case, your home—is worth slightly less because it is illiquid.
(Read more: Discuss money before saying "I do")
However, one of the key changes we've witnessed over the past several decades is that banks are making it easier to borrow against your home with a home equity loan. When you do this—which many people across the country have—you effectively wipe out your "savings."
As household behavior shifts toward people treating their home equity as a savings account that can be easily tapped to fuel bad consumption habits, overreaching to buy a more expensive home becomes a very bad idea.
Of course, we're assuming homeowners aren't using funds borrowed against their home equity to invest in more profitable investment opportunities. If that were the case, it might be a rational use of available capital. But we feel comfortable that our assumption that this money is being spent—rather than invested—is probably accurate.