Hacker News Reader

Comment by logfromblammo | Hacker News Reader

The house that the owner lives in is not an asset. It's a durable consumer good.

Wanting your home to appreciate in value forever is like expecting your 20-year-old car to sell for more than its sticker price. It really only works for art installations, created by a collaboration of architect, engineer, and builder, with some living space inside.

Framed in these terms, most families do not have any significant assets, and a hefty chunk of their resources dedicated to maintaining their gigantic shelter-providing consumer appliance.

View on HN

> The house that the owner lives in is not an asset. It's a durable consumer good.

Thank you. I had already figured that considering one's house to be an asset is the wrong way to think about it, but lacked the words for how to then accurately describe what it actually is. "Durable consumer good" captures what a house is and does much better, IMO.

Getting this attitude more widespread is going to be difficult, sadly. The land that the house rests upon absolute is an asset, and the house thereupon can't be readily decoupled from the land (trailers and double-wides not withstanding). Thus conflating the actual asset, the land, with the consumer good it is presently being used to produce, the house, is a reasonable mental shortcut.

The location is an asset. But it's one whose value is largely dependent on the value of other nearby locations, and its connectedness to them. As that is something the owner cannot do much to influence individually, that's more a speculation than an investment.

I don't think the US will even be able to start on a tear-down-and-rebuild attitude until there is already a sufficiency of housing. As it is now, it appears to be in a cycle of new development, then decline, then revitalization, where redevelopment only occurs when property values in a place have already collapsed, and ruined those who weren't able to move before the wave hit.

The house sits on land and that is in a good school district or otherwise desirable location. That is worth something to someone and why properties become more valuable. When land and development is constrained you have to go up to support the density or out. All new communities are basically townhome communities across the US except in some places where land is not constrained... even then the homes are very similar and sit next to each other. It increases the affordability.. This makes existing homes on larger lots worth more b/c you get space despite needing to remodel the 1960s decor. But you get a nice view.

So you're saying that a house is not a good investment? That despite a trend in increasing property values over the long term, as we have seen in the data since .. the beginning of cities, that a price correction is coming where homes will return to ... prehistoric levels? I don't see it. Instead look at a sample of home prices in the last twenty years in the Bay Area for example, and graph it against the value of a sample of cars bought in 2000.

I suppose it's no surprise that tax laws everywhere do not classify homes as durable goods that depreciate in value.

It's the distinction between the building and the land. Buildings usually depreciate over time, but the land appreciates. In the bay area, the value of the land is significantly more than the building which is why so many people tear down houses and rebuild. Where land is cheaper people don't tear down and rebuild houses that have more life in them when they buy a house.

Residences are mainly exempted from depreciation, but commercial real estate is allowed to be depreciated because buildings do have a useful life.

Although recently in the Bay Area construction costs have skyrocketed so much that in the last 5 years my home replacement cost (for insurance) has about doubled causing the land value to actually drop.

Housing returns are so location dependent it's hard to generalize if housing is a "good investment". Historically, buying in the SFBA clearly netted a good return, but what about Flint, Michigan? On the whole, re-invested dividends in an S&P index fund would have better returns than nearly all housing markets -- about 11% annually. The math is more nuanced, since homes mortgages require interest payments, but also offer leverage (only ~20% down payment).

I think the point of the argument is that this trend is abnormal, and the increases we see are the result of (decades of) govt policies distorting the housing market.

I think it's silly to try to separate the home from the land it sits on, unless you're suggesting that people buy homes with nothing beneath them.

"Do you get to the Cloud District very often? Oh, what am I saying, of course you don't."

If I'm not mistaken, most of the value of the home in places like the Bay area is not the house itself, but the land it sits on. In that case, it's super reasonable to expect it to appreciate in value, just like any other commodity. Arguably more so.

Location, location, location.

The house is absolutely an asset and it will appreciate in completely different terms than a car.

Land entails a totally separate kind of economics than 'durable goods'.

Possibly, the physical home itself might be considered a 'durable good'.

Wait, what? My regular family house in the Bay Area has almost tripled in 20 years. I'm not banking on that for retirement, but homes can definitely appreciate in value.

Reply on news.ycombinator.com