Economics 102: Why do houses appreciate?

So the common wisdom is that houses appreciate. Here's a fun mental exercise: Why do houses appreciate?

I mean fundamentally, I'd expect houses to follow the paths of other objects and depreciate. My 12 year old car is worth less today than when I bought it 4 years ago. Excluding antiques (which are valuable because of scarcity and sentimental/scientific appeal), objects generally decay and rust with time. And most of us prefer non-decayed non-rusty objects.

Given that houses are objects, and that they decay with time in a myriad of ways, why do we expect houses to appreciate? Here's my list:

1. Land & Demand: House prices generally include land, and land is a very fixed quantity. Given that the earth's population is growing, we'd expect land to become more valuable. It's not necessarily guaranteed that the population will grow, but typically, despite our violent nature, human population has grown.
   
   
2. Society/Location: Locations change in how much they are worth. A bad school system improving to a good school system will improve demand. Businesses providing jobs or services nearby make a location nicer. Likewise, a business going away can drop nearby value.
   
   
3. Environment/Location: Environmental issues (the discovery of pollution, failed levees, or new fault lines) also shift a location's value.
   
   
4. Relative Wealth: This idea is similar to the limited supply of land: If more people have more money, they may be willing to pay more for housing, thus driving the price of homes up.

That's off the top of my head. It's not a complete list, and I suspect economists would have a lot more points to make. But it's an interesting question to ponder: Why is my home going to appreciate when my car doesn't? (And, if I sleep in my car, will it appreciate?)

What points would you add?

Halo: Intelligent Design or Evolution

I've decided that I haven't irritated my evolution-friendly readers enough lately, so here's a post designed to do exactly that. (Actually, most of the irritation is in the title, because I'm pitting design against chance, and chance isn't a good representation of evolution without an extended argument about whether or not chance is a fair representation. But I digress...)

This halo video poses an interesting question: How do we assign probabilities of various events to past outcomes? (Here is another example.)

Were the kills in these videos designed or random chance? If they were designed, was this the first try or were there many attempts? Was the grenade death the intended goal, or merely a side-effect of another goal? Were the videos faked? (Note that just because the videos faithfully render a genuinely possible scenario in the halo universe doesn't mean that they aren't faked. Of course, if they render an impossible scenario, they are certainly fakes.)

Here's the tricky part: Can we decisively differentiate between the possibilities from just the video? Assume we can't communicate with the original posters, are the videos, a community of experts, and our own XBox 360s enough to settle the question?

Appropriately Welcomed

So I spent Saturday helping my church organize one of our training sessions for our greeting team. One of its main ideas was the idea of appropriately welcoming guests. One of the great aspects of a large church is the ability to be anonymous when checking it out. One of the difficulties is feeling important and relevant when one has a question. The idea of appropriately welcoming guests means not pouncing on the people who want to be left alone, but also helping the people who, well, want help.

Fast forward twenty-four hours, and I was attending a bridal show and checking out all the vendors. It's striking to me how the same principle applied: Often I was standing around, mildly interested in a vendor, but not really knowing what to ask or how to start the conversation. The vendor would say hi - or perhaps just ignore me - but didn't try to engage me and find out what I wanted. I'm not sure I wanted the product to begin with, but I certainly didn't make a mental note to check out that vendor's site when I got home.

Other vendors did a good job of saying hello, asking about my interest, and providing a relevant spiel. They were enthusiastic and informed, and while they didn't overwhelm me with sales pitches, they answered my questions and invited me to ask more. Intellectually, I know that people skills and competence don't go together, but emotionally I feel warmer toward these vendors. They certainly presented themselves better - and I'll probably check them out again.

(And yes, there were the vendors that launched sales pitches at me no matter what I said? "What, you want to move to Africa? Well, you need a $10,000 2,000lb cooking set, brand new. Sign up now and you can win a free cruise - nevermind if you are easily motion sick...")

It's weird to look at how a very basic Christian principle "Love people; be hospitable." intersects with the capitalistic business principle of "sales."

Tax Deductions

Alright, pop quiz: What's a $1,000 tax deduction worth to you?

That's what I've been puzzling over recently. As far as I can tell, the answer at most about $330. Assuming that I'm uber-rich and being taxed at 28%, plus that I can somehow get the deduction on my state (4%) and local (1%) taxes, a $1,000 deduction means the government won't charge me $330. Of course, the government will give me a standard deduction of about $5,000, so the first tax deductible $5,000 I spend is a complete loss for me.

Maybe I'm crazy. But given a choice between spending money and saving money, tax deductions seem like a lousy way of saving me. Now if I'm going to spent the money anyway, a 33% sale is certainly a great deal. But 67% savings (not buying the item) is significantly better than 33%.

Anyone more familiar with taxes want to correct where I'm off here?

(Why does this come up? Well, basically I've been trying to figure out a bunch of financial decisions - 401K deductions for payroll, housing implication, how to claim deductions on taxes, and the bunch. And my general impression from talking to people is that either I'm really confused about how tax deductions work, a bunch of my acquaintances aren't very good mathematicians, are both. And it's hard to decide whether something is a good deal when one doesn't know the actual price.)