Ask the REALTOR: Does my home ever stop appreciating?

Ask the REALTOR® is a regular video series in which I answer your real estate questions. If YOU have a real estate question that needs an answer, drop me a note here.

This week’s question: Does my home ever stop appreciating? Here’s the answer in this brief video, and don’t miss the transcript below.

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Transcript:

Hi, this is Cari McGee with Keller Williams Tri-Cities. Welcome to this week’s episode of “Ask the Realtor.” This week we are answering a question submitted by Rob Rettig of Back 2 Basics Chiropractic. So shout out to Back to Basics — Rob is my chiropractor and has been for many years. So Rob asked recently, “Does my home ever stop appreciating?” — which is a fantastic question. And the answer, as in a lot of questions, is yes and no.

The land under your home will never stop appreciating because land is a finite resource. If we’re gonna look at the law of supply and demand, which is what all economic decisions are based on, land is a finite resource. Sure, out in the Pacific Rim where there’s volcanoes that are spewing lava into the ocean, we will have more land in … I don’t know, 50 – 100,000 more years. But for the foreseeable future, the land that we have is all that we have, and therefore, that land is valuable and increases in value as time goes on.

The house, however — the structure on the land may not appreciate, and here’s why. There is a term in real estate called functional obsolescence. Functional obsolescence is a quality or a characteristic of a home that used to be kind of commonplace and standard, but because of how we live in houses now, is considered obsolete.

For example, some … an example of this would be a one bathroom home. A home with one bath, which back in the day was fine, right? You would go to the bathroom inside, what more could you possibly want? Well, now we have two, or three, or four, or more bathrooms in a home. Same kind of thing with a house without a garage, or just a one-car garage. Most homes now have two, three, four-car garages attached to them. So, yes, you could go ahead and add a bathroom, or add another bay to … or add a garage, or add an additional bay to a one-car garage. But that’s difficult, there’s not always space, there’s not always a way to make it look like it’s a cohesive part of the plan. And therefore, really, your best bet for that house then would be to tear it down and erect a new one in its place. And that’s because those characteristics of the existing home are obsolete. They have functional obsolescence, and therefore, they’re not gonna appreciate in value or anything like that.

So, that’s the story. The land will always appreciate, the structure on the home may not appreciate.

So, hope that answers your question, Rob. And if you have any questions for me regarding real estate, by all means, give me a shout via any one of the methods on the next screen. Thanks so much. Have a great day.