why does a house not lose value similarly to a car when sold?


why does a house not lose value similarly to a car when sold?

In: 3

Cars eventually decline to the point where it breaks and stays broken.

Homes may decline, but the LAND that it’s built on will always retain its value. Land is a finite commodity and no one’s making anymore of it.

The land a home is built on is a huge part of the value, and that isn’t likely to decrease over time.

Because they can’t make more land. Generally a house goes up because occupants improve it, something you can’t do with a car. The area becomes more sought after etc. Of course there are circumstances when the house goes to ruin or like a sinkhole opens up etc, but those are rare. Contrary to that a car only gets less tech advanced less safe more worn out etc. Rarely they appreciate like in the case of sports cars or rare cars.

A car actually has a shelf life – eventually, it’ll reach a point where it costs more to replace broken parts than it would to just buy a better car. So cars are sold with that shelf life in mind – engines, transmissions, the expensive parts have a general lifespan, and they lose value as they’re used.

Houses, in general, have parts that can break and stay broken, but the actual structure and foundation of the house, unless something really bad happens, can stick around for centuries with typical upkeep. And, more importantly, when you buy a house it comes with land, and no matter what you do to the house, the land will retain its value. A 40-year old house will likely sell for less than a 30-year old house, because parts of the house have lost value and will need more upkeep, but that land it’s built on (again, unless something catastrophic happens) doesn’t change, and retains a huge chunk of the overall sale value.

Much of the value in real estate is the land/location… that doesn’t really change. A nice lot in a good neighborhood will remain so almost all the time (provided they don’t build a highway behind your house, etc). And you can’t relocate land… a shortage of cars in one area means dealers can just bring in cars from elsewhere.

Houses are more easily/readily updated. You can take a 100 year old house and make it as desirable as a new one by updating the kitchens and bathrooms. In fact some buyers prefer the home’s with more character, provided they also have the modern amenities people want.

But the structure does depreciate like a car… if it’s out date and worn out, if it has a layout/features buyers don’t want, it’ll sell for less that the home that was freshly painted and re-carpeted in modern, tasteful colors or the home that has the master en-suite bathroom.

Unlike a car, which is only valuable insofar as the car itself, a house’s value is based on other factors such as location and demographics of the area.

1. Restricted supply. This is partly because physically isn’t room for more housing in good locations, but more often it’s because of NIMBYs blocking new construction, dumb zoning laws that artificially make land scarce, etc. In the face of inelastic demand (people ***need*** places to live), prices go up and up and up.
2. Some of the value is actually from repairs/upgrades made by the owner. ***If you just let a house sit and rot, the value will eventually go to zer***o. Those repairs cost money, so the house isn’t actually appreciating like a stock or trading card going up in price, in this case. Cars just fall apart so fast that it’s almost impossible to make them last longer than 25 years, no matter how good care you take of them.

Don’t believe the people who say “the value of the land goes up”. This is only true in certain places with very expensive land. If a house cost $200,000 10 years ago but costs $400,000 today, but the vacant lot next door only costs $80,000, clearly the cost increase of $200,000 did not come from the land.

Location is part of the reason why old houses are so expensive, though. New houses are usually built in crappy locations, so an old house in a good location can command surprisingly high prices.