Everyone is lamenting the deflation of the housing bubble. But there's at least one bright side to its departure. The housing boom did a major disservice to the house. It caused nearly everyone—owners, bankers, Realtors, builders, and even architects, in some cases—to think of houses as investments.
When you think of a house as an investment, you begin to expect a substantial return. Many people who bought prior to 2005 tracked the purported appreciation of their house like they would a promising stock in their portfolios. They took comfort in the idea that they wouldn't have to wait until they sold the house to realize the return. They could simply tap the extra with a home equity loan or line of credit and fund some other pleasures in life—maybe even a second home, or more.
What else that we love so dearly and that serves us so well do we think of in this way? We already accept that the fancy car we buy will likely be worth $10,000 less than we paid for it the moment we drive it off the dealer's lot. And that special bottle of wine we shared with someone last night? Well, unless we make a candlestick holder out of it, it also has sacrificed its value and potential for mere moments of sweet, ephemeral experience.
There are many things we spend lots of money on, and we don't expect anything more from the expenditure than pure enjoyment. True, there are collector automobiles and rare vintages of outstanding wine that may increase in value over time, but it's tough to predict. It's more magic than math—a witch's brew of popular taste, perceived quality, availability, and the state of the economy. And therefore, no one considers appreciation in these arenas a sure thing. It''s a “nice-to-have” rather than a “must-have.”
Now, in most cases, houses cost a great deal more than a car or a bottle of Bordeaux. They do represent the biggest purchase of ordinary folks' lives. Given that the stakes are so high, people are understandably anxious that the money they put toward their house doesn't appear to evaporate before their eyes—a concern their banker shares as well. Still, during the boom, we began to count on double-digit growth for this repository of our funds. Suddenly a new kitchen that in other times was a nice-to-have became a must-have. You had to have a spanking new kitchen and baths to sell your house with multiple offers and big sums over the asking price.
All of that was a huge burden for the beleaguered house to bear. And it's a new burden. Back when people stayed put in one place longer, their houses needed only to show a small return over 30 years of care. If you put in a new kitchen, it was because you wanted one and would derive enjoyment from it. And likely you'd choose one in harmony with the house and comprising the elements important to you, rather than the bling of real estate brochures. Cynical, strategic choices squeeze the soul out of a house.
These days, the pendulum has swung too far in the other direction. Because we still think of houses as our most important investment, we're frozen with fear about making changes we really want or need to make. We fear overspending and exceeding the quality and price of other houses in the neighborhood. Alas, what makes good financial sense doesn't always make a good and satisfying home. The rule for a house is like the rule for a bottle of wine: If you love it, that's what matters most, and therein lies its real worth.
Comments? E-mail: S. Claire Conroy at email@example.com.