People buy things for its "utility": the pleasure or service received from a product or service, be it gas, food, clothing, a wide-screen TV, a cell phone, a hair cut, a manicure, etc., etc.
I can attest first hand to the fact that when I show potential homebuyers a home, I do not 
hear: "Oh look honey, we can make $15,000 on this kitchen when we go to sell it in 7 years", or, "Wow, this wonderful back yard will net us $50K in 2015. People generally don't think like that. They are looking at a home for its potential use and pleasure, its utility.
This doesn't mean the homebuyer shouldn't be prudent with their money. Most people should eventually buy a home, but not everyone and not at every point in their lives.
There are those that argue that a home's future appreciation is extremely important in making a purchasing decision. I certainly don't advocate purchasing a home to loose money! But are we talking short term, or long term?
If I hear: I am looking to sell in 2 years and realize a 10% return. Well, if that's the case, we need to look at an investment property for you, or perhaps an income producing property, such as a multi-family or apartment unit, where we can focus on aggressive capitalization rates.
Purchasing a home for personal use continues to be thought of as a relatively safe long-term investment, according to the National Association of Realtors® (NAR) 2007 Profile of Buyers' Home Feature Preferences. The survey of buyers who purchased homes in 2006 reports that more than half of home buyers feel their home has high investment potential
I will often ask a potential homebuyer the reason they are looking to purchase. A good majority of the time, the answer in a nut shell: utility. "We need more space." "I need to find a home closer to work." "I am relocating to the area and need to find a home that will suite my family's lifestyle." "We have one child and one on the way and we need at least 3 bedrooms with a back yard." "I am looking for a single family with a home office."
To sum it all up, A home pays an annual dividend: A roof over your head and the personal enjoyment that the real estate provides.
Isn't that the real reason people buy homes? I hope this basic fundamental principle doesn't get lost.
John,
Great post. Thanks for your insight, keep it up.
Great post-remember, people want what they want but buy what they need! I think with the easy mortgage money of the last few years-many buyers forgot this principle and got caught in the "have whatever you want" fever. Most buyers I meet now have returned to this basic principle....
"kitembilla"-the string at the base of a kite
Homes are a utilitarian purchase and an emotional purchase. But they also have to make sense financially.
Great reminder.
Wow, I smell an economics background in there somewhere! I also agree with you 100% on this post!
Bob Mitchell
ValueList Real Estate Services, Inc.
Nice to see your blog. Too often agents get wrapped around a home as a monetary investment. It will be nice when it again becomes the "American Dream" to own ones own home as a source of pride and security.
you can't think of your home in an investment mindset
if you get utilization and make a buck, great....
it is like all the people who throw big bucks at a house at the last minute but don't realize the full gain
if it is a short term ownership situation, will you benefit from the property's use? will you get any value out of the use of the upgrade?
This is a great post...I think people forget sometimes that they are looking for a place to live, not a hot stock tip.
D'Ann Faught
EXIT Capitol Realty
I thought this was a great post. I couldn't agree more about people just sitting on the side lines because they are unsure about the mortgage industry. If you want to buy a house buy a house. The lending industry is fine. Buy that home for your kids if you can afford it. I always tell my clients buying a home will be the best experience and choice of your life if you buy within your means. If you stay within your budget life is great!!!
Jake Bowlby
Professional Mortgage Group
Columbia MO. 65201
573-777-1198 ext. 2251
573-424-1748
Thank you for all your responses, all of which which have been very positive!
I truly appreciate your insights!!!