yenzen>
Nah, they'll invent a 50 year mortgage after prices hit 400k
In addition to mortgages with amortization schedules longer than most people could reside in the dwelling, one alternative used in some parts of Europe (i.e. London) is to separate RE transactions into:
sale of freehold
sale of leasehold
A freehold sale is that category which most Americans think of when they hear residential RE sales.
A leasehold sale is familiar to those Americans familiar with rentals of commercial RE, where a long-term lease with below-market rent is a tangible asset which can be bought and sold.
In US leasehold sales, the remaining lease term is usually not more than a decade or two.
However, in London it is not uncommon to see advertised a leasehold with a term of 100 years or more.
And people can get mortgages for purchasing just the leasehold without the freehold.
This allows separating the financing of a residential purchase from a RE investment.
This bears some analogies to the securitization of mortgages here in the USA.
(The British monarchy is one of the largest freehold owners.)
SteveD>
A car is a depreciating asset!!! .... A house will last for over 100 years, for God's sake. It is, in most cases, an appreciating asset. Once the loan is paid off you have something of value.
A properly built house will last over 100 years. But, this assertion is based upon observing houses built 100 years ago which are still standing today. The quality of construction which allowed those to last a century is quite different from the trend of reduced quality becoming more pronounced since WW2.
Tract homes built for returning WW2 veterans were slapped together and are being kept together only through significant maintenance.
Even today, the quality of construction varies widely, and only very expensive homes are built to the standard of quality which was common in prior decades. Even the oft-abused term "luxury" is often associated with shoddy construction. (As just one example, in recent years was a major class-action suit in Texas for housing materials which deteriorated due to mold.)
When colleagues visit from Europe and see how American housing is constructed they sometimes wonder why they are built so cheaply. In Europe, it is more common for a house to stay in the family and be pased down from generation to generation. Hence the desire to build something which will last long enough to allow for this. I've sometimes explained that Americans tend to move from one dwelling to another at different stages of their lives, so they view it in a more utilitarian fashion of only having enough quality to last for the duration of their residency in a particular dwelling.
Another factor relating to longevity and appreciating values is the cost of additional investment into renovating a dwelling. When people cite those post-WW2 tract homes which appreciated from $20K to $300K over 50 years, they are not accounting for the cost of renovations performed over the years. Do you really think that over 50 years a house has retained its originally installed roof, siding, insulation, flooring, appliances, lighting, windows, heating system, plumbing fixtures, kitchen cabinets, etc?
What's more, too many people try to refer to such improvements as investments. However, Consumer Reports in their November 2002 issue reported the increase in home value as a percentage of improvements cost. In no case was there a positive ROI from a pure investment perspective. In other words, such renovations are a depreciating asset, an expense, rather than a capital investment.
There's a lot of subjective opinion back and forth on this thread. If you are seriously interested in getting more objective numbers about this topic, perhaps you might read more at Harvard's JCHS (Joint Center for Housing Studies):
http://www.jchs.harvard.edu
