6 ms·

> appreciable asset The fact that a home goes up in value over time does not seem natural to me. In 30 years time, won't people prefer to buy a house that is

by jopsen 6y ago

> appreciable asset The fact that a home goes up in value over time does not seem natural to me. In 30 years time, won't people prefer to buy a house that is 10 years old, compared to one that is 40 years old? Why is it normal that housing prices go up?

bitshiftfaced 6y ago
The structure requires repairs and maintenance over time. If the owner keeps up with this cost, there isn't as much reason for the structure itself to decrease in value. Some homes can be outdated and need a remodel, but that gets baked into the price as well. Land is finite, and becomes more in-demand as the population increases. When homes appreciate in value over time, I reckon that's mostly the result in land being more in demand and/or asset inflation.
- jopsen 6y ago
  But population isn't set to go up in any industrialized countries.
  - bitshiftfaced 6y ago
    But it has consistently grown: https://tradingeconomics.com/united-states/population https://tradingeconomics.com/united-states/population. Don't forget the other part I mentioned: asset inflation (here the asset is the land and structure). Money supply has grown over time: https://fred.stlouisfed.org/series/M2 https://fred.stlouisfed.org/series/M2
  - dharmab 6y ago
    It is when you consider immigration.
- jopsen 6y ago
  > asset inflation That makes sense. But then other investment vehicles should also do fine. I suppose it then comes down the fact housing can have a higher leverage than any other investment vehicle. So buy a house, but don't pay it off.
dharmab 6y ago
The 40 year old house is probably in an area that has been developed for 40 years with schools, business and recreation. Anecdote, but illustrative: Myself and a friend bought houses in 2020 of comparable size. My friend bought a build in a new neighborhood (technically put the money down in '19), I bought a 30+ year old house in an older neighborhood. Thanks to COVID, none of the businesses to support that new neighborhood actually materialized. My friend has to drive to the nearest convenience store, and has to hop on the highway to go to any other business. I can (and do) walk to my local convenience store, pharmacy, grocery store, pizza joint and mechanic. And I can bike or e-scooter to various parks, restaurants and healthcare. Accordingly, my old fixxer-upper of a house is worth quite a bit more than my friend's brand new house.
BirdieNZ 6y ago
House prices don't really go up; land prices go up. Land prices go up because the desirable land (land given value by its qualities, whether inherent or through value added through improvements) becomes more desirable. Land prices also go up when money is cheap (low interest rates), as do other assets. In those circumstances, house prices (the house, not the land) will depreciate slower than usual because having a deteriorating house is better than having cash.
mixmastamyk 6y ago
What bitshiftfaced said. Population growth is real, also folks moving to cities. Note, the government will do anything to support housing prices because voters and homeowners heavily overlap. - Mortgage deduction on taxes - 0% interest rates - Bailing out lenders - Heavy zoning that has made new apartment buildings somewhere between impossible to uneconomical to build. - In CA we have P13 to further limit supply. Housing prices going up, even in a pandemic are not a surprise.

by jopsen 6y ago

bitshiftfaced 6y ago

The structure requires repairs and maintenance over time. If the owner keeps up with this cost, there isn't as much reason for the structure itself to decrease in value. Some homes can be outdated and need a remodel, but that gets baked into the price as well. Land is finite, and becomes more in-demand as the population increases. When homes appreciate in value over time, I reckon that's mostly the result in land being more in demand and/or asset inflation.

jopsen 6y ago
But population isn't set to go up in any industrialized countries.
- bitshiftfaced 6y ago
  But it has consistently grown: https://tradingeconomics.com/united-states/population https://tradingeconomics.com/united-states/population. Don't forget the other part I mentioned: asset inflation (here the asset is the land and structure). Money supply has grown over time: https://fred.stlouisfed.org/series/M2 https://fred.stlouisfed.org/series/M2
- dharmab 6y ago
  It is when you consider immigration.
jopsen 6y ago
> asset inflation That makes sense. But then other investment vehicles should also do fine. I suppose it then comes down the fact housing can have a higher leverage than any other investment vehicle. So buy a house, but don't pay it off.

dharmab 6y ago

The 40 year old house is probably in an area that has been developed for 40 years with schools, business and recreation. Anecdote, but illustrative: Myself and a friend bought houses in 2020 of comparable size. My friend bought a build in a new neighborhood (technically put the money down in '19), I bought a 30+ year old house in an older neighborhood. Thanks to COVID, none of the businesses to support that new neighborhood actually materialized. My friend has to drive to the nearest convenience store, and has to hop on the highway to go to any other business. I can (and do) walk to my local convenience store, pharmacy, grocery store, pizza joint and mechanic. And I can bike or e-scooter to various parks, restaurants and healthcare. Accordingly, my old fixxer-upper of a house is worth quite a bit more than my friend's brand new house.

BirdieNZ 6y ago

House prices don't really go up; land prices go up. Land prices go up because the desirable land (land given value by its qualities, whether inherent or through value added through improvements) becomes more desirable. Land prices also go up when money is cheap (low interest rates), as do other assets. In those circumstances, house prices (the house, not the land) will depreciate slower than usual because having a deteriorating house is better than having cash.

mixmastamyk 6y ago

What bitshiftfaced said. Population growth is real, also folks moving to cities. Note, the government will do anything to support housing prices because voters and homeowners heavily overlap. - Mortgage deduction on taxes - 0% interest rates - Bailing out lenders - Heavy zoning that has made new apartment buildings somewhere between impossible to uneconomical to build. - In CA we have P13 to further limit supply. Housing prices going up, even in a pandemic are not a surprise.