4 ms·

> House prices were bounded by wages and were understood to be depreciating assets. When was this ever true? If you literally abandoned a house and let it rot

> House prices were bounded by wages and were understood to be depreciating assets. When was this ever true? If you literally abandoned a house and let it rot then yeah maybe in ten years it will have lost value because it will need a lot of work, but other than that I think it's never been the case they're depreciating in any meaningful sense.

jlbbellefeuille 4y ago
Detroit would like a word with you… https://tinyurl.com/Detroit-2009-to-2019 https://tinyurl.com/Detroit-2009-to-2019
- chrisseaton 4y ago
  That’s not a case of normal depreciation - I’m not sure people understand what the word means due to the responses here. You don’t say that your oil painting has depreciated because it was damaged in a house fire. Property in Detroit has been ‘damaged’ by social decline.
blululu 4y ago
Pretty much every capital asset depreciates. Even with basic maintenance everything wears out over time. Only legal entities are immune from the ravages of time.
- chrisseaton 4y ago
  > Even with basic maintenance everything wears out over time. There's basic ongoing maintenance yeah, but I don't think that counts as deprecation in any sensible way does it? If you keep your oil paintings in a mouldy cupboard they'll rot, but we don't say art is a deprecating asset because of this. You just make sure they don't rot and clean them every now and again. Houses can stand for hundreds and hundreds of years. As they get older they get more valuable because people like older buildings for aesthetic reasons.
  - CogitoCogito 4y ago
    > As they get older they get more valuable because people like older buildings for aesthetic reasons. Is this really true in general? I mean sure I can find examples of it being true, but it's kind of assumed that many of the old houses in my parent's neighborhood of San Diego are teardowns whenever a buyer comes interested.
    - synu 4y ago
      Maybe it’s something with the way houses are built there? I am in a smaller old city in Europe and I’d say the majority of houses around me are about as old as the US, or a little older, and it’s not all about to fall down (or even close).
  - RhysU 4y ago
    > If you keep your oil paintings in a mouldy cupboard they'll rot, but we don't say art is a deprecating asset because of this. The house fundamentally is in a "moldy cupboard". Its entire purpose is to provide shelter from the "mold".
- s1artibartfast 4y ago
  My house has appreciated 500x since construction. Strange
  - jjav 4y ago
    Where is this? So if it was 20K new, it's 10M now?
    - s1artibartfast 4y ago
      Bay area. Built a little more than 100 years ago and was 3K new and now worth 1.5M. Inflation would only be an 30x increase from 3k to 90K
    - chrisseaton 4y ago
      How much do you think it cost to build houses a couple hundred years ago?
      - s1artibartfast 4y ago
        In some places it was and times, it was literally free. The government would give you the land and you would build a house using your own labor and materials on that land
- synu 4y ago
  My house was built in 1650 and doesn’t take much maintenance at all. Definitely not more than the equivalent in rent I’d pay for it.
  - giaour 4y ago
    > 1650 I don't think your house is representative of the US housing market. I once lived in an apartment in a 17th century masonry building in Alsace, and it didn't seem to give my landlord nearly as much grief as my parents' 1960s-era suburban home in Houston did to them.
    - synu 4y ago
      Sure, just mentioning that it is possible to build a house that lasts a long time. There isn’t some law of nature that prevents it.
      - giaour 4y ago
        True, but houses like that are far more expensive to build today. I'm not sure you could "flip" a new home built with traditional masonry since it would require a larger upfront investment. (Edit to add: the normal American usage of "flip" (buying a degraded property, fixing it up, and reselling) is also not really applicable to houses in move-in-ready condition.) The original construction costs will probably have been recouped after 370 years of continuous occupancy, though. :)
- RHSeeger 4y ago
  I guess my problem with this statement is that, if you can sell the asset for more than <cost to buy + cost to maintain>, has it really depreciated? And, excluding external factors (ex, the area the house is in has declined), this has been possible to do in most areas for longer than I've been alive; half a century at least.
- s1artibartfast 4y ago
  Land is a pretty significant exception to this, and extremely relevant to the topic of housing.
m0llusk 4y ago
Take just the roof alone. On a typical house roof replacement is at least a few thousand dollars and for a nice house in an urban area it will cost at least ten thousand and maybe much more. Even with good materials and installation roofs stay in good condition for around 30 years and become completely degraded in around 50. Some napkin math for a common and kind scenario is another $10k roof every 30 years which is $333/year or $27/month just to keep basic structure integrity. Now add on to that interior details, floor coverings, appliances, and such many of which are lucky to last 10 years and the numbers start to add up.
- toomuchtodo 4y ago
  An asphalt roof with dimensional shingles on your average house in the sunbelt will set you back $10-15k every 15-20 years, more if significant amounts of decking need to be replaced. From a building sciences perspective, if possible, I almost always recommend a standing seam metal roof due to a 40-50 year lifetime (and you can mount solar panel racking to the standing seams without penetrating the roof).
- solidist 4y ago
  But a roof is the "main cost event" to maintain a single family home in a decade timescale. With decades/century timescales and the flux increase appreciating nature of housing, these type of costs are pulverized to the ground. $27/month really became at least half that on inflation alone (seeing the past thirty year on the dollar), coupled by increases equity of the house, renos done on borrow, and over its course of time it becomes cents or disappears into an upside. I think it will be more interesting with "basic structure integrity" at the century scales. Do we really know economic impacts when tract housing/wood structures are tested well? I'm thinking past time scale of the electric and plumbing overhauls at the 50-100 year marks. There is a ton of housing out there that is less than a century old.
- jjav 4y ago
  For a typical US house that's about true, but I feel like your numbers show the opposite of what you're stating. Less than $30/mo for the major replacement item budget. So basically nothing. Houses can be constructed better, as well. The house I grew up in is now over a century old and it's the same roof, because it's concrete.
giaour 4y ago
The overall value of a "house" is the value of the structure plus the value of the land, and it's common for the former to depreciate while the value of the latter increases. Construction costs have gone down over time (adjusting for inflation), and most building materials degrade. When I was looking for a house in Seattle, many of the $800K bungalows were sold with the expectation that the buyer would level the existing house and build something new. During the same time frame in the rust belt (particularly Detroit) , however, many housing parcels were sold for less than the value of the structure due to the undesirable location of the land.
- mistrial9 4y ago
  this makes sense, yet there is another lense to view valuation. The value of the house is in the legal statement of ownership. What is owned is important of course, but the legal statement of ownership itself is traded for these values. A corollary is that the ability to trade ownership records is a gating factor. "Do not cast your gaze here, these fine things are not for the likes of you" .. is a poetic line from the point of view of someone that is outside that line.
  - giaour 4y ago
    > The value of the house is in the legal statement of ownership. What is owned is important of course, but the legal statement of ownership itself is traded for these values. And yet, I own many worthless things that also exhibit that property (like a picture my niece drew of me and my cat). There is a totemic quality to possessing something, but that is almost always personal and independent of the thing's market value. Outside of "collectible" properties (structures with historical significance like castles or Frank Lloyd Wright houses), houses have a market value related to the imputed rent they produce and potential productivity of the land.
    - mistrial9 4y ago
      yes agree -- the insight is into the additional restrictions on access. Market values react to scarcity in most cases. The legal titles, the ability to obtain and dispense of loans, the ability to exchange titles and resolve blocks in titles, contribute to the valuation. In the case of a child's drawing, very few impediments exist to exchange or declare title to that one drawing, and there is little scarcity since most children draw a lot of pictures.

jlbbellefeuille 4y ago

Detroit would like a word with you… https://tinyurl.com/Detroit-2009-to-2019 https://tinyurl.com/Detroit-2009-to-2019

chrisseaton 4y ago
That’s not a case of normal depreciation - I’m not sure people understand what the word means due to the responses here. You don’t say that your oil painting has depreciated because it was damaged in a house fire. Property in Detroit has been ‘damaged’ by social decline.

blululu 4y ago

Pretty much every capital asset depreciates. Even with basic maintenance everything wears out over time. Only legal entities are immune from the ravages of time.

chrisseaton 4y ago
> Even with basic maintenance everything wears out over time. There's basic ongoing maintenance yeah, but I don't think that counts as deprecation in any sensible way does it? If you keep your oil paintings in a mouldy cupboard they'll rot, but we don't say art is a deprecating asset because of this. You just make sure they don't rot and clean them every now and again. Houses can stand for hundreds and hundreds of years. As they get older they get more valuable because people like older buildings for aesthetic reasons.
- CogitoCogito 4y ago
  > As they get older they get more valuable because people like older buildings for aesthetic reasons. Is this really true in general? I mean sure I can find examples of it being true, but it's kind of assumed that many of the old houses in my parent's neighborhood of San Diego are teardowns whenever a buyer comes interested.
  - synu 4y ago
    Maybe it’s something with the way houses are built there? I am in a smaller old city in Europe and I’d say the majority of houses around me are about as old as the US, or a little older, and it’s not all about to fall down (or even close).
- RhysU 4y ago
  > If you keep your oil paintings in a mouldy cupboard they'll rot, but we don't say art is a deprecating asset because of this. The house fundamentally is in a "moldy cupboard". Its entire purpose is to provide shelter from the "mold".
s1artibartfast 4y ago
My house has appreciated 500x since construction. Strange
- jjav 4y ago
  Where is this? So if it was 20K new, it's 10M now?
  - s1artibartfast 4y ago
    Bay area. Built a little more than 100 years ago and was 3K new and now worth 1.5M. Inflation would only be an 30x increase from 3k to 90K
  - chrisseaton 4y ago
    How much do you think it cost to build houses a couple hundred years ago?
    - s1artibartfast 4y ago
      In some places it was and times, it was literally free. The government would give you the land and you would build a house using your own labor and materials on that land
synu 4y ago
My house was built in 1650 and doesn’t take much maintenance at all. Definitely not more than the equivalent in rent I’d pay for it.
- giaour 4y ago
  > 1650 I don't think your house is representative of the US housing market. I once lived in an apartment in a 17th century masonry building in Alsace, and it didn't seem to give my landlord nearly as much grief as my parents' 1960s-era suburban home in Houston did to them.
  - synu 4y ago
    Sure, just mentioning that it is possible to build a house that lasts a long time. There isn’t some law of nature that prevents it.
    - giaour 4y ago
      True, but houses like that are far more expensive to build today. I'm not sure you could "flip" a new home built with traditional masonry since it would require a larger upfront investment. (Edit to add: the normal American usage of "flip" (buying a degraded property, fixing it up, and reselling) is also not really applicable to houses in move-in-ready condition.) The original construction costs will probably have been recouped after 370 years of continuous occupancy, though. :)
RHSeeger 4y ago
I guess my problem with this statement is that, if you can sell the asset for more than <cost to buy + cost to maintain>, has it really depreciated? And, excluding external factors (ex, the area the house is in has declined), this has been possible to do in most areas for longer than I've been alive; half a century at least.
s1artibartfast 4y ago
Land is a pretty significant exception to this, and extremely relevant to the topic of housing.

m0llusk 4y ago

Take just the roof alone. On a typical house roof replacement is at least a few thousand dollars and for a nice house in an urban area it will cost at least ten thousand and maybe much more. Even with good materials and installation roofs stay in good condition for around 30 years and become completely degraded in around 50. Some napkin math for a common and kind scenario is another $10k roof every 30 years which is $333/year or $27/month just to keep basic structure integrity. Now add on to that interior details, floor coverings, appliances, and such many of which are lucky to last 10 years and the numbers start to add up.

toomuchtodo 4y ago
An asphalt roof with dimensional shingles on your average house in the sunbelt will set you back $10-15k every 15-20 years, more if significant amounts of decking need to be replaced. From a building sciences perspective, if possible, I almost always recommend a standing seam metal roof due to a 40-50 year lifetime (and you can mount solar panel racking to the standing seams without penetrating the roof).
solidist 4y ago
But a roof is the "main cost event" to maintain a single family home in a decade timescale. With decades/century timescales and the flux increase appreciating nature of housing, these type of costs are pulverized to the ground. $27/month really became at least half that on inflation alone (seeing the past thirty year on the dollar), coupled by increases equity of the house, renos done on borrow, and over its course of time it becomes cents or disappears into an upside. I think it will be more interesting with "basic structure integrity" at the century scales. Do we really know economic impacts when tract housing/wood structures are tested well? I'm thinking past time scale of the electric and plumbing overhauls at the 50-100 year marks. There is a ton of housing out there that is less than a century old.
jjav 4y ago
For a typical US house that's about true, but I feel like your numbers show the opposite of what you're stating. Less than $30/mo for the major replacement item budget. So basically nothing. Houses can be constructed better, as well. The house I grew up in is now over a century old and it's the same roof, because it's concrete.

giaour 4y ago

The overall value of a "house" is the value of the structure plus the value of the land, and it's common for the former to depreciate while the value of the latter increases. Construction costs have gone down over time (adjusting for inflation), and most building materials degrade. When I was looking for a house in Seattle, many of the $800K bungalows were sold with the expectation that the buyer would level the existing house and build something new. During the same time frame in the rust belt (particularly Detroit) , however, many housing parcels were sold for less than the value of the structure due to the undesirable location of the land.

mistrial9 4y ago
this makes sense, yet there is another lense to view valuation. The value of the house is in the legal statement of ownership. What is owned is important of course, but the legal statement of ownership itself is traded for these values. A corollary is that the ability to trade ownership records is a gating factor. "Do not cast your gaze here, these fine things are not for the likes of you" .. is a poetic line from the point of view of someone that is outside that line.
- giaour 4y ago
  > The value of the house is in the legal statement of ownership. What is owned is important of course, but the legal statement of ownership itself is traded for these values. And yet, I own many worthless things that also exhibit that property (like a picture my niece drew of me and my cat). There is a totemic quality to possessing something, but that is almost always personal and independent of the thing's market value. Outside of "collectible" properties (structures with historical significance like castles or Frank Lloyd Wright houses), houses have a market value related to the imputed rent they produce and potential productivity of the land.
  - mistrial9 4y ago
    yes agree -- the insight is into the additional restrictions on access. Market values react to scarcity in most cases. The legal titles, the ability to obtain and dispense of loans, the ability to exchange titles and resolve blocks in titles, contribute to the valuation. In the case of a child's drawing, very few impediments exist to exchange or declare title to that one drawing, and there is little scarcity since most children draw a lot of pictures.