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Originally Posted by ChargerCarl
This is largely semantics, but my point is you can't really separate degradation from depreciation. It's what we mean by the term. So to say housing isn't essentially a depreciating asset is incorrect as all housing, no matter how well built, decays. A house being damaged by hail is exactly what we mean by depreciation. If nothing ever degraded we wouldn't even need the term depreciation, we would be able to describe everything in terms of consumer preferences and technological advancements of similar goods.
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There's a term for decay and there's a term for damage and there's a term for wear... and they're all different words from depreciation.
Hail damage isn't depreciation. It's damage due to a specific event. It's like the neighbor going over your car with a baseball bat, as opposed to your car simply depreciating normally through aging.
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I'm not sure why you're saying he's agreeing with you, as his point is that houses always depreciate unless maintained (which is investment.)
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The reason him and I (and you, too) are in agreement is that all his analysis has been for new and new-ish houses (and cars). If you read my initial post that I re-quoted lately, his parents' house from 1978 to 2014 is a perfect example of a building in the first phase (depreciation due to growing old and out of taste and lacking the efficiency of newest technology) that I describe in my post.
But he's focusing on a newer, suburban cookie-cutter house and all his arguments are tailored to that situation. That "always" doesn't belong there. (Exact same thing applies to cars.)
I live in the same province as him, but in my neighborhood (my duplex is from the 1830s and most buildings around seem to be close to 200 years old; in any case, basically everything in the area is at least a century old) the passage of time does not noticeably reduce the desirability of the structures because they're already so old that it makes no difference.
For a brand new house though, sure, in 20 years it'll be a house where everything is dated, namely, out of style by exactly 20 years and lagging in tech and construction techniques by exactly 20 years.
Anyway, I'm sure we agree on everything but the semantics.
If I maintain my 2007 Civic well, in ten years it will be worth much less than what it's worth now, _even_ after I've regularly spent money to fight decay / keep it in the same stable condition. That car is an inherently depreciating item. Even if you manage to keep it in the same pristine condition, with zero wear or decay, it will still inexorably depreciate.
If I maintain my 1830s duplex well, in ten years the value of the "improvements" (calculated as property value minus land value) will almost certainly be as much as what it's worth now, ignoring -- as in the case of the Honda above -- the maintenance money regularly spent to fight decay / keep it in the same stable condition. It's not something that inherently depreciates through aging unless you let it decay, and even then the loss of value is due to the fact it's in a poorer condition, not that it's older, so it's semantically not inherent depreciation.
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