Economic Fix, sometimes simple ideas are best

[Sburn]

Originally Posted by kokopellimotorsports

To go back further, I don't even know why housing appreciates. It would make more sense to have it depreciate with time like most other things.

Ty

Housing appreciates because the underlying utility value doesn't change. With a few percantage points of the total yearly mortgage spent on basic maintenance, a house is just as good of a dwelling 50 years after it was built.

So the value should go up roughly at the same rate as inflation. That value is the cost of building or replacing a structure plus the infaltion rate over the years.

Also, house values are also determined by the prevailing rents in the area. That's what a bank would look at if you were aksing for a loan to buy a rental property. Prevailing rents are pretty much determined by what the average hosehold monthly income is.

Any more appreciation beyond the above tends to be speculation, i.e., the buyer thinks the value will increase more than the rate of inflation and there will be a buyer when it comes time to cash in. Or, that somebody will pay a premium over renting because they want to own a place of their own.