So, does that mean that you’ve re-gained all of the value lost in the “Great Recession?” No! Values dropped anywhere from 30-50%, depending upon the area. Those losses aren’t going to come roaring back in a few months. While we are seeing positive appreciation in some areas, in general the good news has been that value losses have slowed or stopped and some prices are even inching their way back up. Do the math on how long it will take to recover a 30% drop in value, if he appreciation rate settles in at the historic norm of 3% to 4% and you can see that it will take a decade or more to get back to the 2005/6/7 value levels.
Remember that even with multiple offers at or maybe even above asking price, the place still has to appraise for a value high enough to support the mortgage. That is currently one of our bigger challenges in the market. Appraisers are quicker to adjust than assessors and distressed sales (foreclosures and short sales) are declining dramatically as a percentage of total sales in most markets; so, the “comps” that they use will be a better reflection of the current market and values will not be as impacted by distressed sales. That’s good news. I suppose that you can take the fact that assessors have overshot the mark in the downward direction as good news too, since taxes will be lower longer as their upward adjustments will lag by a year.
The real question remains whether it’s time for you to list. The standard answer is “that depends.” Did you buy at the peak of the market? Did you re-finance at the peak and take the equity value out for other uses at that time? If you answered yes to either of those questions it’s still probably too early for you to consider listing (unless you had a big down payment when you bought and are willing to take some loss on that). Having a house that is now worth less than when you bought it is called being “underwater.” If you are underwater on your home and don’t have the cash to make up the difference a short sale may be your best option.
Many people aren’t really underwater on their homes. They don’t owe more than it’s currently worth. They just can’t let go of the “paper profit” that they thought they had when values were high. I run into many older homeowners who might have bought their home in the 60’s or 70’s for right around $100,000 and watched in delight as it increased in value to around $300,000 in the early 2000’s. Then things crashed; and now they are sitting in a home that might only be worth $170,000 to $200,000. In many cases these people were fiscally conservative and did not cash out equity with refinances; so , many of them owe relatively little on the house. What they can’t let go of is that “$100,000 loss” that they just took on paper. Sometimes it’s because the value of their home was a big portion of the nest egg that they thought would fund their retirement. So, they are holding on and hoping that the value comes back soon. That’s just not going to happen soon.
The sad thing is that many of the retired folks who feel trapped in their homes would be just as well off to bite the bullet and sell now for what they can get and get on with life. There are so many a deferred dream of retirement that I hear that it’s a shame. That is unfortunately all too true for many Baby Boomers who did treat their McMansions like piggy banks, taking loans out for the boats and new cars and other toys along the way. They really are trapped in their homes and many did not plan well for retirement and have little in the way of funds to use to cover a shortfall at closing. For them a short sale may be the only way out.
For the rest of the would–be sellers in the market the answer remains that the value loss that you might take on the sale of your home will be made up partially or in total by the great value deals that you can get right now on a new home. That works best for those trying to move up in the market. You may be taking a $30,000 hit on your home, due to lost value; however, if you can buy a new home that has experienced a $100,000 loss in value, you are actually coming out ahead when things recover. It’s not so good if you are trying to downsize or maybe move from a house into a condo. You’ll still get a good deal, but you likely won’t make up all of your loss on the two transactions.
The best time to list your home is really more about your life needs. Do you want to retire and get on with life? Do you have to move to take a new job? Is your current home sucking all of your savings down with it? Are you just tired of taking care of the yard and property? Do you want to move to be closer to family? Has your life situation changed dramatically and now your old home just doesn’t fit? All of those are good reasons to decide to list. You may have to take the course of pursuing a short sale and just get out from under the house. You may even have to take money to the closing in order to sell.
It’s a good time to sell right now. The real question is whether selling at the current market value works for you. Talk to a real estate professional about your options and which might work best for you. Call or email me for an appointment to discuss your options. If you’d like to read about the short sale option, go to my web site www.MIShortSales.com and read through the FAQ section. If you want to see what houses are selling for inthis are, go to my web site www.movetomilford.com and browse the data under the What have homes in this area sold for