I'd actually argue that a house does depreciate, but assets that you can't change don't--school districts, waterfront, size of the lot, proximity to downtown...
Arguing the point that a house doesn't depreciate though: A car wears out, and even if it doesn't, new cars are generally nicer, safer, faster, more comfortable, or cheaper (MPG) or something else. A new car is better than an old car, in general, for most people.
A house is a house. It's main function is much, much simpler than a cars--It keeps me dry and warm. The best house today isn't that much better than the best house 50 years ago. Sure, there have been improvements--but the house itself doesn't wear out. It is also cost effective to IMPROVE the house as time goes on, whereas it is NOT cost effective to make a 1985 car as [safe, comfortable, fast, reliable] as a 2003 car. I could pump $10,000 into a 1992 Honda Civic and make it brand new... Or I could go and by a 2010 Civic for the same price, and it will be better in just about every way (enthusiasts ignore that comment). Taking that to a housing example, if I were to build a house I would still have to put in a new fridge or countertop, so I'm not actually saving any money.