In recent years, I’ve been doing a lot of reading and watching videos trying to understand homeownership and investing more generally. One of the most common claims is that a home is an appreciating asset sort of like many stocks are – they often go up in value over time. But does the house go up in value, or just the land? Or are they somehow connected?

The physical building – is unlikely to be an appreciating asset on it’s own. Human-made structures are regularly attacked by the forces of nature and wear and tear. Indeed, I find it hard to believe that a house is actually an appreciating asset, although a building combined with land — housing — often is an appreciating asset, as people will pay more for a house over time, as land gets allocated to housing and a growing population seek housing close to work with a shorter commute.

I find the paradox to be quite fascinating. How a depreciating underlying asset – a physical building that is getting worn out and needing repair and replacement – can appreciate in value when maintained and upgraded due to it’s location. Maintenance and upgrade cost can be quite substantial – 2 to 3 percent of building’s entire value each year. A lot of tearing up, throwing away and buying new. Maybe that’s what I don’t like about suburban houses, with so much of their fragile material that quickly becomes landfill.