First Person: Foreclosures Are Still Dragging Down My Property Value

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I am not worried about another housing bubble forming in my Florida neighborhood. I'm more worried about the fact that I might never get back my initial investment, not including the mortgage interest I paid over the length of my loan.

A recent article by Fox Business poses the question of whether the housing market rebound is real or mirage. Home prices, according to the S&P/Case-Shiller index have risen in 20 housing markets by about 8 percent compared to one year ago. In fact, home prices have risen at the quickest annual pace since 2006 before the housing bubble burst.

Watching house values move

Observing the value of my home on sites such as Zillow reminds me of watching the rise and fall of stocks. While the values in my neighborhood seemed to be on an upward swing a few months ago, distressed properties drag down the values. The home we purchased for $183,000 hit a low point of $108,000 about a year ago. Now the value stands at $120,000, which is still significantly lower than I would have expected if we were in the middle of a housing rebound. I noticed foreclosure in my subdivision recently sold for about $110,000.

Waiting for the inventory to dwindle

Although experts say there is a housing inventory shortage, I haven't noticed the problem. If anything, there seems to be an endless supply of foreclosures in Florida. In my neighborhood, only one or two foreclosures appear on the market at one time. A few months later, a few new foreclosures magically appear. When I consulted a Realtor, I found out we couldn't ask more than $130,000 because people still expect deals.

Refinancing instead of moving

Because we would have to sell our home for $50,000 less than we purchased it for in 2005, we decided to refinance. Experts say the current interest rates are due to an artificial rate environment. The federal government keeps rates low by buying mortgage-backed securities. Instead of becoming too upset about the value of our home, we tried to balance out the problem by achieving a historically-low interest rate of 2.75 percent. I know some people who have been able to nab rates as low as 2.6 percent.

Although experts say there is a pent up demand for housing, I'm not expecting housing prices to recover to the highs of the housing bubble. As interest rates eventually skyrocket, I rather expect housing prices to remain low. It seems to me, the best move my children could make would be to save up cash so they can purchase a home with cash if mortgage rates go up to double digits. Baby boomers might create a slight demand for homes in my area for the next 10 years, but as they pass away I expect prices will plummet due to a surplus of homes and less demand. Even if the value of my Florida home recovers, we don't plan to sell because we have invested too much into it.

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