It took almost a decade for our home to appreciate in value. Our new construction Florida home is currently worth $195,000, which is higher than the $183,000 we paid. I would have been fine if the value of our home had stagnated around the $175,000 to $200,000 price range. Instead, the value plummeted to as low as $109,000 at the bottom. For several years, we were underwater on our mortgage. According to a recent CNN article, 2.5 million homeowners are no longer underwater on their mortgages. Although we joined the ranks one year ago after paying down our mortgage, we are relieved by the appreciation in value.
Soaring home values
At first I didn't believe that the housing recovery was real. Similar homes in my neighborhood now sell for close to $200,000. Home prices jumped more than 12 percent in the past year, according to the national home price index. Values in my community are soaring due to low inventory. If I sold my home, I'm afraid I couldn't find a better home because of the low inventory.
Investing in my home
During the housing meltdown, I didn't feel as though my home was an investment. If it was an investment, it was a losing investment. According to CoreLogic, only 7.1 million or 14.5 percent of mortgage borrowers are underwater versus 9.6 million or 19.7 percent at the end of the first quarter. During the housing crash in 2009, 26 percent of borrowers including me were under on their mortgages. It felt terrible to owe more on my mortgage than my house was worth. It feels great to now own an asset instead of a liability.
Locking in our gains
Even though I'm excited about our home being worth more than we paid, I'm not going to "lock in the gains" by selling. However, I was able to take advantage of the surge in home equity by refinancing to a lower rate. I didn't have to pay PMI or private mortgage insurance because we had at least 20 percent equity in our house at the time.
Living in a volatile market
Even though I'm no longer underwater on my mortgage, many of my neighbors still have negative equity. According to CoreLogic, 31.5 percent of borrowers in Florida are underwater, but it's even worse in the Miami metro area at 36.5 percent and the Tampa area at 33.8 percent. As home homeowners put their houses up for sale it could create more inventory, pushing things toward a buyer's market again. However, it's just as possible high mortgage rates will have the opposite effect.
Even though my home is worth more than I paid for it, I won't come out ahead by selling. My family would still need a place to live. Rent is higher than my mortgage of $900 a month. If I tried to buy another home, I'd be competing with other buyers and dealing with higher mortgage rates. At this stage, it appears as though I'll just have to enjoy my home equity on paper because it's not going to translate into anything concrete other than higher property taxes.
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