> Why do so many rational people and businesses make irrational decisions to sell the house then? Well a decision like this doesn't have one dimension. For ins

> Why do so many rational people and businesses make irrational decisions to sell the house then? Well a decision like this doesn't have one dimension. For instance, some people in their 60's see that they don't need a big house anymore and could use the extra money on their retirement plans. The tricky thing about houses is that they serve a purposes while can be used as an investment tool. > As the house and underlying materials get older, maintenance and replacement costs go up, so eternal appreciation is questionable. True, but in many cases what changes the value is not the house itself but the land where it is located. I agree with other commenter though, this should be a evaluated in a case by case fashion, and my over-simplification was just for discussion's sake. > I understand the long-term statistics are on your side, I'm just trying to understand the rationality of microeconomics behind it. And you are right, in the short term it doesn't makes sense because it assumes you'd pay with cash and there are better tool for investment. But if you need a place to live it might make sense to buy a house under certain conditions (you plan to stay in the area for a long time, the economy is not under a bubble, etc.)