A home is meant to be a depreciating asset like a car is.
A car and a home are two very different things, so they can’t be compared here.
Even the land your home is on increases in value over time, and I’ve yet to see a home in good condition that’s worth less than the amount it was purchased for. Unless you’re talking about those ghost cities in China.
What exact reason would you give to devalue a perfectly good home?
A car and a home are two very different things, so they can’t be compared here.
With respect to depreciation they are quite comparable. Deprecation is just the reflection of the remaining lifetime value of something.
Depreciation just tends to be more obvious in cars, because:
- Cars have pushed the technical advancement envelope a lot faster than houses. A 20 year old house still feels like something that was built recently. A 20 year old car feels like it was built by a much earlier civilization. This keeps greeter interest in having the absolute latest model in cars.
- Because of #1, people are more likely to recondition a home back to new condition. If a support structure in a house is seeing signs of rot, you are bound to fix it. If a car’s frame starts to rust through, you’re apt to throw the car away and get a new one.
I’ve yet to see a home in good condition that’s worth less than the amount it was purchased for.
A home in good condition has approximately the same remaining lifetime value as a new home, so that stands to reason. Not to mention that with ever more stringent building codes, new construction cost has gone up, up, up. The used market always follows the new market.
Even the land your home is on increases in value over time
Land does, but that’s independent of the home. I mean, they are usually sold together, but the buyer will determine their utility value independently. Two identical houses will not fetch the same price if one of them sits on more desirable land.
With respect to depreciation they are quite comparable. Deprecation is just the reflection of the remaining lifetime value of something.
And the remaining lifetime of a home kept in good condition could be many generations. Where with a car… you could pass that gas guzzler to your kid, but that’s about it.
In fact, homes can often be renovated to extend their original life far beyond even a few lifetimes. This ignores any upgrades that increase the value (i.e new pool, deck, etc.)
A home in good condition has approximately the same remaining lifetime value as a new home, so that stands to reason. Not to mention that with ever more stringent building codes, new construction cost has gone up, up, up. The used market always follows the new market.
Right, so it wouldn’t be depreciated like a car (which loses value to nearly nothing at the end of its usable life).
Land does, but that’s independent of the home. I mean, they are usually sold together, but the buyer will determine their utility value independently. Two identical houses will not fetch the same price if one of them sits on more desirable land.
That’s my point, though. When you invest in a home, you are also investing on the land it sits on. So you’re free to sell the home AND land, or just the land, if you like. It’s rare to see just a home (without the land) being sold.
In your example, the homes are still the same value, only the land changes the sale amount.
There’s no reason why either home would depreciate in value like a car, and the commenter has yet to expand on this idea.
And the remaining lifetime of a home kept in good condition could be many generations.
Kept in good condition is the key. If you keep a car in good condition, it can last many generations too.
In fact, homes can often be renovated to extend their original life far beyond even a few lifetimes.
Same goes for cars, of course. There is a whole automotive industry around taking beat up old cars and restoring them to pristine condition. And, indeed, many of those cars can sell for way beyond their original price.
Right, so it wouldn’t be depreciated like a car
Right, it would deprecate because houses deteriorate. If you keep your house in good condition, it’s just you paying the deprecation cost up front when you restore it rather than taking the hit with the next guy in line. The math works out the same either way. The depreciation doesn’t go away.
It’s rare to see just a home (without the land) being sold.
Less common, but not unheard of. It happens often enough that there was once a Canadian TV series about moving houses.
In your example, the homes are still the same value, only the land changes the sale amount.
Exactly. Their values are evaluated independently of each other. The house can depreciate and the land can appreciate.
Well, a home needs to be repaired and improved before sale. This is part of what the market demands. Gets more complicated with land, yeah… leads me back to zoning laws. If the land is so valuable in the suburb of a city, it should have multi-unit housing on it. Then the rich are forced to pay that raising cost and the poor get an increased supply of housing.
Well, a home needs to be repaired and improved before sale. This is part of what the market demands.
This is part of the investment a homeowner makes, and increasing the value of a home through repairs and renovation really shouldn’t be looked at as a bad thing.
If you are renting a place, you expect the same repairs and improvements to be made, which is why rent doesn’t simply drop because of “depreciation”.
If the land is so valuable in the suburb of a city, it should have multi-unit housing on it. Then the rich are forced to pay that raising cost and the poor get an increased supply of housing.
Well, some people do sell their land so that developers can have their way with it. I don’t think that’s a good thing overall, since there needs to be some balance.
But multi-unit housing on expensive land does not make it affordable. Having an income that’s above the median, in addition to renting, is what Stats Canada says is affordable housing to the majority of Canadians.
