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The vast majority of affordable cars are used cars. Used cars are cheaper when there's tons of new cars, and they get more expensive when new car production sl
by YokoZar 4y ago
The vast majority of affordable cars are used cars. Used cars are cheaper when there's tons of new cars, and they get more expensive when new car production slows - prices jumped so much in the past two years that some used cars were sold for more than they were originally purchased for.
We treat that weird situation as obvious undersupply in the car market, but somehow expect it with houses. Why should old, used houses sell for more than their purchase price?
- xapata 4y agoPeople forget that houses depreciate. It's the land that appreciates.
- seoaeu 4y agoThis isn’t true in all markets. Higher labor costs (for instance, caused by higher rents…) makes it more expensive to construct new homes. That makes any existing homes more valuable, potentially even accounting for depreciation
- rbanffy 4y agoThe cost of replacing a house appreciates, but a new house has higher value than an old one.
- mrexroad 4y agoThe mental model of buying something new/used doesn’t apply same as cars. Unlike a car, the structure is simply an improvement that’s factored into the price of what you’re purchasing — the rights to the physical space itself. Sometimes a lot of the “value” is locked up in the structure, and sometimes the structure is barely functional and most of the value is in the land. At some point that ratio of the land:improvements values reaches a point where the “used” structure is relatively worthless and gets replaced, the ratio rebalances.