Just two years ago many people were complaining that the values of homes were plummeting. Now, many experts have new fears about housing. Home prices, they claim, are rising too fast. According to a recent article by CNBC, there was a 22 percent drop in the number of homes listed for sale this past month compared to a year ago. Because of the low inventory, people are paying higher prices for the homes that are for sale.
However, I wish everyone would take a step back and look at the reality of the situation. It's impossible for housing prices to rise too fast considering many people are still underwater on their mortgages. It's not rapid appreciation for most people as much as it's closing the gap between what they paid for their homes and what it's now worth on the market.
Getting our home appraised
It seems to me the only people who are coming out ahead in the current housing market are people who purchased a home at a lower price point and currently need to relocate. In our case, we had our home appraised as a requirement for a refinance loan. The appraiser said our home that we purchased for $183,000 is now worth $130,000. We would not be coming out ahead even in this so-called seller's market because we of the low appraisal. I can understand why many buyers don't want to put their homes on the market. I wouldn't sell my house and lock in a $53,000 loss.
Avoiding the home flipping trap
I still remember my friends who were interested in flipping housing just before the housing market crashed. I also recall several rental apartment communities that transformed into condos that people could purchase due to the demand. Now the demand is swinging the other way. According to a recent article by CNBC, home builders are back to building multi-family rental units. However, I know better than to try to become a landlord. Most of the friends or family members who have become landlords complain of too many headaches. I rather invest my money in the stock market. As soon as too many people provide rental properties, the rent prices will go down. I don't try to chase after get-rich-quick ideas even if the trends even when I know supply and demand strategies usually win out.
Thinking of a home as an investment
I don't know how many people still think of their homes as investments. For me, it's disheartened to count the cost of my investment in my house. We spent $183,000 in terms of the actual purchase price. Over the course of our different mortgage loans, we can tack on another $100,000 spent on interest alone. When people complain that housing values are rising too quickly, I'm at a loss. In order to break even, I'd need someone to one day buy my home for $283,000. It's difficult to think of my home as a wise financial investment in that light.
As soon as everyone starts buying homes again, I think the cost of rental units will go back down again. In my opinion, it would be nice if home values and rental costs would reach a happy equilibrium for at least a decade or so. As for me, I'm going to start ignoring the value of my home on Zillow and just get back to living in it.
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