More on yesterday's topic...

Yesterday I wrote about how to interpret the news that one reads about the housing market. Perhaps the most misleading have been the stories that carried headlines like "Average Housing Values up 19% over last year." Many (if not most) people took may have looked only at the headline and come away with the impression that the price that people can expect to get for their house when they sell is up 19%. That is not only not true, but it really isn't even what the headline or the story actually says.

 If you read the accompanying stories to those types of headlines you will find that the headline was based upon the fact that the average of the sold prices for houses in the area went up 19% when compared to the averages for sold houses in the same area the year before. Isn't that saying the same thing? No. the averages being referenced take all home sales in the area into account. Those sales include short sales and foreclosures, both of which are at substantially lower prices than regular retail sales. As the number of short sales and foreclosures has drifted down as a percentage of all sales, the AVERAGE price for the total sales has gone up. The prices for non-distressed sales in many areas have bottomed out and have even started back in some places; however, the values of those houses has not jumped 19%. In places where we are seeing positive appreciation again, we are seeing 4-7% rises in sold values, not 19%.

So there is good news. The market locally seems to have bottomed out in most places and there are lots of instances where positive appreciation has begun again. But, if you read those rosy real estate stories and think that you can now somehow get a much higher price for your house, maybe even what you bought it for in 2005/6 – think again. That ain’t gonna happen.  If you bought your house during the peak years (2005/6) it has likely lost between 30-50% of the value that you paid for then, depending upon where it is located. So your market value for that $250,000 house is now likely in the range of $160,00 to $170,000. If you are lucky enough to find someone willing to pay above market for it, say $175 – 180K; you still have to hope that it will appraise for enough to justify that purchase price. Right now that is pretty much a fools bet, since appraisers are still leaning to the conservative side and many are still baking in further value loss into their appraisals.

My advice is to work with a good Realtor to establish a fair market price (one that an appraisal would support) and then decide if you can afford to sell at that price (or maybe decide to do a short sale at an even lower price). No amount of wishfully positive news stories is going to magically restore your home’s value to where it was 5-6 years ago or where you wish it was. If you can’t afford to sell, see if you could at least take advantage of one of the new government mandated re-financing programs. Some of them deal with the loss of equity and could put you in a much better position to sell later.