Home Value Down 12%……..Is It Really Bad News?
February 5th, 2009 | 
Author:
Last night on the 11 o'clock news they reported that home values had
dropped 12% in King County. To most people listening this
would sound like bad news, but is it really? The answer is,
it all depends when you bought your home.
Real Estate has never been a get rich quick investment. Sure there were a couple years where appreciation rates reached double digits, but not only is that unrealistic, it priced many would be buyers out of the market. Prices needed to be corrected and this means they needed to come down a bit. But that doesn't mean you are upside down in you home, if you bought a few years ago. I don't suggest you take my word for it, let the numbers speak for themselves.
Let's say you bought a home 10 years ago for $200,000. If the appreciation rate was 5% each year for 10 years your home would be worth $325,778.93 today. You've made $125k+ in ten years.
Now a scenario similar to the pricing we saw in King County. If you take the same $200k home and have 6 years with 5% appreciation, 1 year with 14% appreciation, 1 year with 10% appreciation and 2 years with 2% your home would be worth $349,674.27 today. You've made $149k+ in ten years and with 2 years at 2% appreciation you are still well ahead of the game!
Even if appreciation stayed at 2% for two more years you are at $363,801 versus $359,171.27 which is where you'd have been had appreciation stayed at 5% all along. Not bad!
Now of course for those people who bought in the height of the boom, you may be facing little or no equity as of today. But like those who bought ten years ago have done, you must wait and your equity will too build! Real Estate ALWAYS goes up in value. The most important thing to remember is DO NOT REFINANCE AND TAKE OUT ALL YOUR EQUITY!! Every time you take all your equity it's as if you just bought the home all over again!! Now is a great time to refinance if you can get a lower rate, but leave your equity alone, you'll need it when you decide to move up to another home.
For those contemplating selling, you may be thinking "my neighbor got $20,000 more than what my Realtor told me my home is worth today and he sold a couple of years ago". This may be the case because he sold during the height of the boom when prices were driven up because of multiple offer situations, and sometimes more was paid than a home was really worth! The other thing to keep in mind, is if your home has decreased in value based on selling prices of two years ago, so has the home you are wanting to buy!
The best part about buying and selling right now.....historically low interest rates! You can actually afford more home today with rates around 5% than you could have two years ago with rates at 6-7%! Here's a link to a mortgage calculator you can play around with. Put in your purchase price and play with the rates. You'd be surprised what 1% can do to your payment!
Bad news sells stories! I wish the truth or good news did too, but it isn't as drama filled so the media will continue to only report the bad news. The best way to get informed is to seek the help of a Real Estate Professional or Mortgage Professional. We are the ones with the factual data and we'll help you to make informed decisions when selling, buying or refinancing real estate. And there hasn't been a better time than now to sell and buy if you've positioned yourself right!!
(This example is for homes in western Washington, contact your local area expert for information about the values of homes in your city).
Sandy Noll
Realtor
Keller Williams Realty Kirkland
425-890-0878
sandy@sandynoll.com
www.letsachieveyourgoals.com
Your Kirkland, Woodinville, and Bothell Home Expert
Real Estate has never been a get rich quick investment. Sure there were a couple years where appreciation rates reached double digits, but not only is that unrealistic, it priced many would be buyers out of the market. Prices needed to be corrected and this means they needed to come down a bit. But that doesn't mean you are upside down in you home, if you bought a few years ago. I don't suggest you take my word for it, let the numbers speak for themselves.
Let's say you bought a home 10 years ago for $200,000. If the appreciation rate was 5% each year for 10 years your home would be worth $325,778.93 today. You've made $125k+ in ten years.
Now a scenario similar to the pricing we saw in King County. If you take the same $200k home and have 6 years with 5% appreciation, 1 year with 14% appreciation, 1 year with 10% appreciation and 2 years with 2% your home would be worth $349,674.27 today. You've made $149k+ in ten years and with 2 years at 2% appreciation you are still well ahead of the game!
Even if appreciation stayed at 2% for two more years you are at $363,801 versus $359,171.27 which is where you'd have been had appreciation stayed at 5% all along. Not bad!
Now of course for those people who bought in the height of the boom, you may be facing little or no equity as of today. But like those who bought ten years ago have done, you must wait and your equity will too build! Real Estate ALWAYS goes up in value. The most important thing to remember is DO NOT REFINANCE AND TAKE OUT ALL YOUR EQUITY!! Every time you take all your equity it's as if you just bought the home all over again!! Now is a great time to refinance if you can get a lower rate, but leave your equity alone, you'll need it when you decide to move up to another home.
For those contemplating selling, you may be thinking "my neighbor got $20,000 more than what my Realtor told me my home is worth today and he sold a couple of years ago". This may be the case because he sold during the height of the boom when prices were driven up because of multiple offer situations, and sometimes more was paid than a home was really worth! The other thing to keep in mind, is if your home has decreased in value based on selling prices of two years ago, so has the home you are wanting to buy!
The best part about buying and selling right now.....historically low interest rates! You can actually afford more home today with rates around 5% than you could have two years ago with rates at 6-7%! Here's a link to a mortgage calculator you can play around with. Put in your purchase price and play with the rates. You'd be surprised what 1% can do to your payment!
Bad news sells stories! I wish the truth or good news did too, but it isn't as drama filled so the media will continue to only report the bad news. The best way to get informed is to seek the help of a Real Estate Professional or Mortgage Professional. We are the ones with the factual data and we'll help you to make informed decisions when selling, buying or refinancing real estate. And there hasn't been a better time than now to sell and buy if you've positioned yourself right!!
(This example is for homes in western Washington, contact your local area expert for information about the values of homes in your city).
Sandy Noll
Realtor
Keller Williams Realty Kirkland
425-890-0878
sandy@sandynoll.com
www.letsachieveyourgoals.com
Your Kirkland, Woodinville, and Bothell Home Expert
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