I can’t see anyone wanting to spend tens of thousands of dollars keeping their Toyota Corolla running for generations.
They just might if a 2023 Toyota Corolla was effectively the same as a 1823 Toyota Corolla, differing little beyond coming in a more appealing colour of paint. Only needing to spend tens of thousands of dollars to have a new car would be a good deal.
That doesn’t happen because of the technical innovation happing in cars. Restoring your 1823 Corolla to new condition is nothing like a 2023 Corolla. It will still get you around, but with no cabin, air conditioning, power steering, radio, slower speeds, etc. who would want it? We already discussed this.
the person I was replying to makes it seem like a house’s value should always be in decline.
They are always in decline. You can spend more to buy the depreciation out when you restore it, or you can let it slip and spend that when you sell it, but the decline happens either way. There is no avoiding it.
Well, there is one way to avoid it: If the cost of new housing goes up sufficiently, it will drag the used market it with it. That could see an appreciation in value even with some wear and tear. In fact, we saw exactly that happen in the used car market recently when the “chip shortage” sent the new car market sky high. People were selling their used cars for more than what they were new.
That doesn’t happen because of the technical innovation happing in cars.
That doesn’t happen. Exactly. The comparison between cars and homes is silly and we can end it here.
They are always in decline. You can spend more to buy the depreciation out when you restore it, or you can let it slip and spend that when you sell it, but the decline happens either way. There is no avoiding it.
If there is a decline, yet people are able to profit from selling them home, then there isn’t a practical decline, is there?
Circling back to the original comment that I replied to, “A home is meant to be a depreciating asset like a car is.”, we’ve already established that a home without upkeep would be depreciated until it actually costs money to demolish the thing. We’ve also established that a home that’s been maintained and updated should not only hold its original value, but be worth more than it cost.
I still don’t understand what the argument is. Are people hoping that nobody can ever make money from the sale of a home or the land that their home sits on? Who would want that?
The comparison between cars and homes is silly and we can end it here.
They are not comparable in every way, but with respect to depreciation, the reason they both depreciate is the same: They both deteriorate over time and with use. Depreciation measures the cost of that decay. The original context was specific about it referring to the deprecation aspects.
We’ve also established that a home that’s been maintained and updated should not only hold its original value, but be worth more than it cost.
I’m not sure that is established. It is established that it is technically possible for that to be true if new homes prices are rising in kind. That has definitely been the case over the past decade, or even the past few decades.
But over the long history? Traditionally, homes in good condition have only kept pace with inflation. Historically, if you bought a home for $100,000 then you should be able to sell it for $100,000 (we’ll assuming inflation is zero to keep things simple) a decade later, assuming you’ve kept it in the same condition. Great.
But let’s say you had to put $25,000 into upkeep during that decade. So your original cost was actually $125,000. You had to eat $25,000 in depreciation costs when you sold it for only $100,000. Had you done nothing, letting it rot over those 10 years, then the house would only sell for $75,000. You also had to eat $25,000 in deprecation costs. It’s the same either way.
I still don’t understand what the argument is.
I didn’t see an argument. What are you referring to?
They are not comparable in every way, but with respect to depreciation, the reason they both depreciate is the same: They both deteriorate over time and with use.
As it was pointed out, a car in good upkeep is only expected to last around 12 years or just over 300,000km. A home in good upkeep can last 100+ years, so what depreciation did the original poster think would happen if someone decided to sell their home after 5 or 10 years?
But let’s say you had to put $25,000 into upkeep during that decade. So your original cost was actually $125,000. You had to eat $25,000 in depreciation costs when you sold it for only $100,000. Had you done nothing, letting it rot over those 10 years, then the house would only sell for $75,000. You also had to eat $25,000 in deprecation costs. It’s the same either way.
Yes, and I agree that’s how it works. Except that home/property values fluctuate, so after 10 years, that house (and the land it sits on), even without $25,000 put into upkeep, may sell for $100,000 or more.
I didn’t see an argument. What are you referring to?
The original poster seemed to have a problem with people being able to recoup and profit from the sale of their home. I don’t see why homeownership should be at a loss when it comes time to sell. The difference between a money pit (i.e. a car) and an investment (i.e. a home) is that you can get the money back that you invested + extra if you are lucky.
