What Part Of A House Appreciates?
Infrastructure tends to appreciate
Foundation, Plumbing Electrical & Lumber, etc.
– These building materials rarely go out of style.
– Usually, undamaged and untouched, the lumber and copper is as good as it was the day it was installed. Increased production and labor costs they are now worth more.
– In a difficult economy, however, prices on these raw building materials can actually fall, these changes affect the cost of building new homes which can possibly affect the value of older homes.
Functional Features tends to Depreciate
Siding, landscaping, appliances, cabinets, roofing, flooring, etc.
– These items either wear out, or go out of style every few years.
– Even when kept in good conditon, the style might change, rendering the feature “out of date.”
– Many functional features such as roof or HVAC systems have a limited life-span.
– Typically, owners invest 0.5% – 1.0% annually on maintenance and improvements. When these regular improvements aren’t made, homes can lose value.
Ground has historically appreciated
LOCATION, LOCATION, LOCATION
– Recently, housing values in some parts of California have been literally cut in half. Why did the housing depreciate there? The roofs did not depreciate rapidly and the carpet did not go out of style. The ground value plummeted.
– Ground is typically 15% – 40% of the overall value, so when it’s value changes, a home’s market value is drastically affected.