When you think about it, the housing market is a little strange. When you buy a house, you expect the price to go up, even though the house is actively depreciating around you. With every passing year, the walls, roof, and decor get a little older and more decrepit. The changes are subtle from year to year, but over the decades, they add up.
Houses should, in theory, be like cars. When you buy a new vehicle, you pay the full price. Then over the next five years or so, the car loses about half its value as you use it, thanks to depreciation. Houses, on the other hand, don’t seem to suffer from depreciation: their value just seems to go up and up. Why?
What’s happening is a little complicated. Houses aren’t magical. They’re still depreciating like everything else; it’s just that their depreciation is being hidden by the general rise in prices, thanks to limited supply, rising wages, and mortgage inflation. House prices are rising, but the relative value of old houses is falling. It’s a tricky concept, but once you get it, you soon realize that old houses are a problem and something that you’ll want to avoid.
What Is An Older Home?
Defining an older home is harder than you might think. Is an old home one built before the second world war? Is it a home built before the Victorian era? Alternatively, it is one that just shows it’s age, no matter when it was made?
There’s no strict definition for an old home. However, the best way to define it is probably in terms of the percentage of the value of the house that you need to dedicate to upkeep. New homes cost practically nothing in maintenance: perhaps 0.5 percent of their sale price. However, older houses can cost anywhere from 3 to 5 percent of their value in upkeep per year, and lose the same amount in sale price if the owner neglects to spend any money on them.
Water damage is a common issue in old houses. Pipes can burst, toilets can overflow, and sewers can become backed up. What’s more, when there is a water issue, older homes often have no mitigating features to prevent further costly damage. A flood can quickly turn into a multi-thousand-pound clean-up operation. Water damage restoration is a significant issue in old houses.
Problems With The Foundations
Over the long term, the earth beneath homes can move. Slippage, however minor, can affect the position of foundations which, in turn, can change the shape and form of the house. Windows might not latch. Doors might not close. Floors might not be even. All of these issues result from problems with the foundations, which, as you might expect, that are horrendously expensive to fix.
Leaking roofs are a leading cause of damp and mold in older homes. Leaks also increase heating bills in the winter and make it more likely that there will be pest infestation at some point.