Why is it that cars and most other vehicles only ever depreciate in value, whereas homes generally appreciate continuously?
In: Economics
The value of any good or service is determined by one thing: supply and demand.
Cars have a relatively short useful life (i.e., the period of time during which the car can be used without undue cost to maintain). When you buy a new car, it will only last about 10-15 years or so and then it will either conk out or cost so much to maintain that it’s not worth it. Also, newer, better cars are constantly being produced, making an older car generally less desirable to potential buyers. These factors make the demand for older cars significantly less than when the car was new.
Homes, on the other hand, have very long useful lives. My house is about 100 years old, and with proper maintenance will last for hundreds of years still. So, to any potential buyer, the useful life of the home almost certainly would exceed the period which the buyer would intend to use it. Additionally, as others have pointed out, the land parcel you purchase with the home also has value, and has an unlimited useful life. As the population of an area expands this increases demand, and so the land and home tends to appreciate in value. Finally, for many people, older homes are considered “quaint” and thus desirable over newer homes that have less “character.” These factors make the demand for older homes still robust and in many instances equal to or greater than that when it was first purchased/built.
Note that homes don’t always appreciate in value, take a look at some of the real estate prices in downtown Detroit.
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