To be clear, I understand what inflation is, but something that’s only keeping up with inflation doesn’t make sense to me as an *investment.* I can understand increasing value by actively doing something, like fixing the roof or adding an addition, but not by it just sitting there.
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A large part of the price of a home and its appreciation is the land/location. There are limited amounts of land within proximity to amenities people want — whether that’s commute time to jobs, ocean/mountains, good schools, etc. — and people are willing to pay more for access to those. As populations grow, travel times increase due to traffic, etc. the demand for the best increases, and the competition for the best real estate then sets benchmarks for all the less desirable real estate. If the homes on the ocean jump from $5m to $7m, then the homes a couple blocks away will similarly see appreciation somewhat inline.
And homes themselves are regularly maintained, so old homes with timeless types, modern updates will command more than dated homes. The charming 100 year old Tudor style will sell for top dollar if it has a modernized kitchen, perhaps for more than the similar sized new home lacking the same character. May also have benefits like more mature landscaping, larger trees, etc.
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