House as Home Rather Than Investment

We love our house. And our neighborhood. But every so often -- like the other night when the weather was so springy that we had to divest the children of their wheeled conveyances and make them take a walk with us around the nearest couple blocks -- we see the houses that were for sale when we bought ours that are still for sale and think: It's a good thing we're not planning to sell any time soon. This can be a little scary, given the uncertainly of the current economy.

However, I'm very much in sympathy with this Megan McArdle piece:

Although I may spend odd moments cruising through the listings to see what neighboring houses have sold for, my husband and I agree on one thing: “Who cares? We’re not going to sell,” he said the last time I told him about a comparable house that sold for less than ours.

We didn’t buy our house for an investment; that’s what our investments are for. Our house is to live in. We bought mostly because we wanted to commit to a place, and to make it over to suit us exactly. Landlords get testy when you rip out walls and replace the stove; besides, who wants to spend money installing custom blackout curtains only to have the place sold out from under you?

Before World War II, Americans recognized that housing was a consumption good, not a savings plan. But for a number of reasons—higher incomes, zoning restrictions that limited supply, and longer-term mortgages that enabled people to afford pricier homes—postwar housing prices started rising faster than inflation. When people began retiring on the proceeds of their homes, their children and grandchildren started thinking that was the natural order of things. But for most of history, housing has been a lousy investment: expensive to maintain and hard to sell.

On the other hand, houses have always made very good homes. And they still do. If we sold today, we might get less for the house than we paid for it. But to us, it’s still worth every penny.

Given that we're committed to staying pretty much within this area now we've got here, in order to remain close to family, and that we love our house, I would think of it much more as a consumption good than an investment good.