1) From market value appreciation angle: both land and structure will appreciate in its initial 2-3 decades, the structure value may flatten or decay after that, although very slowly.

2) From IRS tax point of view, they only think of structure depreciation. Over the period of 27.5% years, the value of the house will be depreciated to zero. That’s about 1% a year decay.

Miat’s comment: I print out the following OFHEO data for LA region as a study material. We can see that over the past 3 decades, LA region averaged annual growth rate in home price is about 8% a year. However, if a short sighted Electrical engineer (and the most unlucky one) bought his house in 1990 and couldn’t put up with the pain of home ownership, he sold it in 1996, he lost lots of money. However, another patient Medical doctor bought in late 70s, and still own his house till today, he has seen his house rose about 10 multiples in value. Historical pattern is simple, but to a unprepared soul, its effect can become relentlessly brutal. Where are we now? Pattern matching tells us that we are at 1991 or 1992, +/- one year. So, when you decide to buy a house today, first decide who you want to be: The short-sighted EE or a patient MD?