How does the case shiller index account for true depreciation? What I mean is that when house X is 50 years old the walls and roof might be just as valuable as they were (assuming they were maintained) but some things just aren't. Electrical outlets for example. Floor plans? A layout that is great for a family with 4 kids is less than optimal for a family with 1.
I think they mainly take out homes that have major renovations. But normal repairs and upgrades, like updating appliances, etc. aren’t tracked. So I’m sure some untracked general improvement in the properties tends to happen over time.
Thanks. My point is actually a little different (I think). In a world without NIMBYism, the value of houses and rents should grow more slowly than inflation. Certain aspects of wear and tear just can't be repaired or compensated for.
It seems likely, given your point, that the long-term stability of the real Case-Shiller index is the accumulation of various biases in the index, regarding the value of structures, net of depreciation and upgrades, that roughly even out over time.
How does the case shiller index account for true depreciation? What I mean is that when house X is 50 years old the walls and roof might be just as valuable as they were (assuming they were maintained) but some things just aren't. Electrical outlets for example. Floor plans? A layout that is great for a family with 4 kids is less than optimal for a family with 1.
I think they mainly take out homes that have major renovations. But normal repairs and upgrades, like updating appliances, etc. aren’t tracked. So I’m sure some untracked general improvement in the properties tends to happen over time.
Thanks. My point is actually a little different (I think). In a world without NIMBYism, the value of houses and rents should grow more slowly than inflation. Certain aspects of wear and tear just can't be repaired or compensated for.
I think you have a good point.
It seems likely, given your point, that the long-term stability of the real Case-Shiller index is the accumulation of various biases in the index, regarding the value of structures, net of depreciation and upgrades, that roughly even out over time.