If a house down the street sells for a high price, we think ours is worth more. If that house sells for a low price, we know ours won’t drop because it’s so much better.

Hey, let’s upgrade the kitchen since we’ll get our money back when we sell. We forget that buyers have different preferences. They don’t care what we spent in upgrades. They care only about the value to them. The buyer may only want the land to build a monster house.

We were looking at houses recently and were appalled at some of the crazy designs. A hallway closet that juts into the garage and removes one parking spot. Or a house “upgraded” with vinyl siding in a neighbourhood of brick or stucco exteriors. Or a basement with the kind of flooring you’ll find in school or hospital hallways. The owners overestimated the market values of their houses but did not realize this until they tried to sell at premium prices.

Benjamin Tal at CIBC World Markets said that for every $1,000 increase in the value of our real estate, we feel $80 richer. This lets us turn our house into a bank machine. Why not go out for dinner when it’s “on the house”?

I’d rather build equity for a rainy day than spend it for immediate consumption.

In his early married life, Warren Buffett was loathe to spend on home renovations because he knew understood the power of compounding. Spending $10,000 now was akin to spending $1,000,000 later.

It just blows me mind that the stock market can still be down as much from its peak, unemployment can be so high but there’s little to no substantial change in the prices of homes. There’s really only one answer for this (and we’ll pay for it in about 5 years). Low interest rates are heavily influencing the amount of money individuals can spend on their homes. Once that changes you won’t see people putting 0% or 5% down on a home for a long time because the interest payments will kill them.