Is Home Depreciation Common?

Answer for "Is home depreciation common?"

Marie Becklund, Real Estate Agent

Fututre Home Realty Inc

Considering that property depreciation is the phenomenon of an asset losing worth due to its use over time, home depreciation is not only common but inevitable.

However, this is RealEstateAgent.com and we’re sure that if you came to this website with that question it’s because you want to know if home depreciation is common in regards to properties losing their worth over time.

Well, funny enough, the answer is a soft no.

Accounting-wise, residential real estate itself does not depreciate. What depreciates is the area in which the home is built on. The only residential real estate that does depreciate is mobile homes due to the vehicular part of them. Like any car, the engines, tires and electronic parts lose value over time due not only to wear and tear but also due to the constant technology development that outdates those auto-parts. And what about tiny houses? Do tiny houses depreciate? Not if they are fixated to the ground; only if they are vehicular and if they are prefab and can be moved elsewhere.

However, it is common to any property that is used as a means to make money for that property to depreciate, yes. In fact, if you use a portion of your house for work – a home office, or something - that specific part of the house can depreciate.

Cosmetically wise; home depreciation is super common. Even if you don’t “use” the property and keep it locked, with the number of floods and natural disasters America has been dealing with due to climate change, the value of the construction will go down if you’re not diligent with your maintenance. But then we move back to the argument that the area is more important than the dwelling when it comes to depreciation. For instance, taking it all into consideration, a house in one of the worst cities for natural disasters will likely depreciate its value more than one in a more natural disaster-safe area. And the argument goes the other way around too: a home which the construction is outdated can still be worth more in a big city where the demand is high and people are paying big bucks for properties, than a brand new property built with the latest of technologies at a small city where prices are low.

We understand your worries regarding what happens when a property starts to depreciate but, as you can see, the home depreciation of the dwelling hardly has any influence in the grander scheme of things. That’s why real estate is such a great investment. Just carefully consider location and community when choosing a home. You can always renovate or even rebuild the dwelling from ground-up; a community is much harder to influence in order to make its value rise.