November 15th, 2007 9:27 PM by Lehel Szucs
I was reading some articles recently about the loss in value of homes and homeowners losing equity in their homes. Of course this is news every day in the papers, TV, and the Internet. We discussed home values in our office and team and thought we'd share a few things on this subject:
1. People who bought a home in the last two or so years are most likely upside down on their property. That means that the value of their homes is less than what they paid for it. In most cases (especially for those that bought with zero down payment) the loans are now larger than the homes' value. This is perhaps the most dangerous place to be as may people who are upside down can walk away from the property (especially if they bought the house with zero down payment) and cause a foreclosure. We'd recommend to think about this before doing so for two reasons: 1. historically home prices over a five to ten year period have risen and 2. if you no longer own a home than you still have to live somewhere and pay rent.
2. People who bought several years ago (three or more) are most likely sitting on a nice appreciation and equity in their home assuming there were no cash out refinances. The losses for these people in value is a bit different. Lets say that a house was bought for $ 300,000 and it is today worth $ 475,000 and a year ago it was worth $ 500,000. In this scenario the home owner may think that they lost $ 25,000. However, we challenge that, and say that they gained $ 175,000.
Let us know what you think.....