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I find inflation is a bit of a red herring. I like to think in inflation adjusted dollars with price relative to GDP. If something goes up faster than GDP, it'

I find inflation is a bit of a red herring. I like to think in inflation adjusted dollars with price relative to GDP. If something goes up faster than GDP, it's a good investment, but less affordable over time, etc.

steveBK123 2y ago
GDP / inflation / labor hours all loosely correlated though, so we aren't too far off. Really I think of things in two main buckets- Stuff that's going up faster than income and therefore the sooner you buy it and lock in a level, the better. This is also something that you can invest in, because it means when you sell in 10-40 years at retirement, it will have appreciated. Stuff that's going up slower than income, and I'll buy it as needed. For example on the face of it - cars and houses should both depreciate. They cost money to maintain, that maintenance cost goes up over time (it is labor), and newer ones get nicer and nicer. However it is only cars that depreciate. And I don't just mean a used car. A 2000 Honda Civic started at $13k new. A 2025 Honda Civic starts at $24k new, and you now have good reliable Hyundai Elantra at $22k, which weren't as prevalent and reliable 25 years ago. The fact that we underbuild is why houses refuse to depreciate though.
- jjav 2y ago
  > cars and houses should both depreciate Perhaps, but at vastly different time scales. For most normal people a car degrades to beater status in just a couple decades. Houses last more than a lifetime in most cases, barring natural disasters. Many centuries in some cases. > The fact that we underbuild is why houses refuse to depreciate though. Given that a house is seemingly good forever (no, not forever, but longer than a human lifespan) its value must go up at least as much as inflation. This is easy to prove by contradiction. Assume it didn't: it would mean two identical houses right next to each other would have vastly different prices depending on when they were built. But we know they don't, since comparables in any given neighborhood have about the same price (the value is assessed based on the comparables, after all). If a house was built 30 years ago for $100K in labor and materials and an identical house across the street cost $400K in labor and materials to build today, the older house can't help but be worth at least as much because it is a comparable property. Sometimes the argument is made that we'll just build so much that values are pushed below this, for both the old and new comparables. It is not clear to me who that "we" can be though, since no builder is going to afford to sell houses below cost of construction.
  - steveBK123 2y ago
    Cars and houses have different useful lives, but neither is forever.. and neither can get by without significant maintenance cost after a certain point. I think we will see more baby boomer houses go on the market which are near full teardown as the remaining value is the land only. Not sure if you've lived in wood framed SFH, but stuff built in the 40s-70s really shows its age now. Lots of $10k-50k costs that start to creep in as you need to replace roof every 10-20 years, wooden siding/shingles (10-20 years), all the windows (20 years?), boiler/furnace (20 years), central air (20 years maybe), etc. If you need to replace hardwood flooring could be $20k. My parents have well water and even though it's treated, after 50 years if you were doing a gut renovation you'd probably replace all the pipes. Could switch to city water but thats about $50k. The masonry on their chimney just cracked and a baseball sized chunk fell on the deck, I dunno $5k. Speaking of the deck, it needs to be torn down and replaced.. $10-20k. Did I mention their home is worth like $300k on Zillow? These things don't go all at once, but they start to hit more and more often past a certain point. And this is before the era of particleboard pre-fab construction which I'd imagine will breakdown faster.
    - jjav 2y ago
      Everything you say is so profoundly alien to my house experience that I'm not sure how to relate. If you are replacing major structures of the house every 10-20 years, something is wrong. That is not normal. The house I grew up in is turning a century in a few years, and nothing about it suggests it isn't good to go another century at least. Original windows, who replaces windows every 20 years? Why? Multiple friends live in houses their grandparents or great-grandparents built, those are well over a century. Perfectly comparable (in valuation) to new ones built a block away. And that's why houses won't depreciate in the timescale of a human lifetime.
      - Marsymars 2y ago
        > The house I grew up in is turning a century in a few years, and nothing about it suggests it isn't good to go another century at least. Original windows, who replaces windows every 20 years? Why? Modern windows leak their argon out eventually. The break-even for replacing them is bad, but home comfort in rooms with many windows is greatly improved in cold climates with top-end triple pane windows.

steveBK123 2y ago

GDP / inflation / labor hours all loosely correlated though, so we aren't too far off. Really I think of things in two main buckets- Stuff that's going up faster than income and therefore the sooner you buy it and lock in a level, the better. This is also something that you can invest in, because it means when you sell in 10-40 years at retirement, it will have appreciated. Stuff that's going up slower than income, and I'll buy it as needed. For example on the face of it - cars and houses should both depreciate. They cost money to maintain, that maintenance cost goes up over time (it is labor), and newer ones get nicer and nicer. However it is only cars that depreciate. And I don't just mean a used car. A 2000 Honda Civic started at $13k new. A 2025 Honda Civic starts at $24k new, and you now have good reliable Hyundai Elantra at $22k, which weren't as prevalent and reliable 25 years ago. The fact that we underbuild is why houses refuse to depreciate though.

jjav 2y ago
> cars and houses should both depreciate Perhaps, but at vastly different time scales. For most normal people a car degrades to beater status in just a couple decades. Houses last more than a lifetime in most cases, barring natural disasters. Many centuries in some cases. > The fact that we underbuild is why houses refuse to depreciate though. Given that a house is seemingly good forever (no, not forever, but longer than a human lifespan) its value must go up at least as much as inflation. This is easy to prove by contradiction. Assume it didn't: it would mean two identical houses right next to each other would have vastly different prices depending on when they were built. But we know they don't, since comparables in any given neighborhood have about the same price (the value is assessed based on the comparables, after all). If a house was built 30 years ago for $100K in labor and materials and an identical house across the street cost $400K in labor and materials to build today, the older house can't help but be worth at least as much because it is a comparable property. Sometimes the argument is made that we'll just build so much that values are pushed below this, for both the old and new comparables. It is not clear to me who that "we" can be though, since no builder is going to afford to sell houses below cost of construction.
- steveBK123 2y ago
  Cars and houses have different useful lives, but neither is forever.. and neither can get by without significant maintenance cost after a certain point. I think we will see more baby boomer houses go on the market which are near full teardown as the remaining value is the land only. Not sure if you've lived in wood framed SFH, but stuff built in the 40s-70s really shows its age now. Lots of $10k-50k costs that start to creep in as you need to replace roof every 10-20 years, wooden siding/shingles (10-20 years), all the windows (20 years?), boiler/furnace (20 years), central air (20 years maybe), etc. If you need to replace hardwood flooring could be $20k. My parents have well water and even though it's treated, after 50 years if you were doing a gut renovation you'd probably replace all the pipes. Could switch to city water but thats about $50k. The masonry on their chimney just cracked and a baseball sized chunk fell on the deck, I dunno $5k. Speaking of the deck, it needs to be torn down and replaced.. $10-20k. Did I mention their home is worth like $300k on Zillow? These things don't go all at once, but they start to hit more and more often past a certain point. And this is before the era of particleboard pre-fab construction which I'd imagine will breakdown faster.
  - jjav 2y ago
    Everything you say is so profoundly alien to my house experience that I'm not sure how to relate. If you are replacing major structures of the house every 10-20 years, something is wrong. That is not normal. The house I grew up in is turning a century in a few years, and nothing about it suggests it isn't good to go another century at least. Original windows, who replaces windows every 20 years? Why? Multiple friends live in houses their grandparents or great-grandparents built, those are well over a century. Perfectly comparable (in valuation) to new ones built a block away. And that's why houses won't depreciate in the timescale of a human lifetime.
    - Marsymars 2y ago
      > The house I grew up in is turning a century in a few years, and nothing about it suggests it isn't good to go another century at least. Original windows, who replaces windows every 20 years? Why? Modern windows leak their argon out eventually. The break-even for replacing them is bad, but home comfort in rooms with many windows is greatly improved in cold climates with top-end triple pane windows.