We are no longer underwater on our mortgage, but it is no thanks to increasing property values. Even though everyone is talking about how home values are on the rise, our house is still valued at $119,000 or just $8,000 above the lowest value reported by Zillow. The value is $64,000 below our purchase price of $183,000. I've noticed home values in general are rising, but the housing recovery seems to have skipped over our Florida subdivision.
According to a recent CNBC article, home prices have been posting double digit gains in the past 6 months. The article pointed out the median existing home sale price in the nation was more than 15 percent higher in May than one year ago. I'm not upset because it means lower property taxes. But, I am confused about why our home isn't participating in the uptick in home values.
Comparing resale to new homes
I recently toured model homes similar to our house which we bought in 2005. We'd have to pay $230,000 today for a new home that is comparable to our 8-year-old house. Although I know most people pay a premium for a new home, it seems odd that a new home would cost $111,000 more than the current value of our house. Put another way, a person could buy two homes like ours for the cost of one new home of similar size, layout and quality.
Looking at nearby neighborhoods
I also compared the value of our home to houses located in other neighborhoods in my town. I discovered that the value of a condo I purchased and later sold has recovered in value since housing hit bottom. My condo was located in a nearby town within the same county. It appears that homes purchased before the housing bubble are now back to the original value or higher. Essentially, we had bad timing when it came to our home purchase.
Dealing with stagnation
We are dealing with the stagnation in home value by staying put for the long term. It's a lot less expensive to pay our mortgage than to pay rent in our area. Even though we don't have any equity in our home other than what we created by paying down our mortgage, we don't need equity right now. Some of our friends and relatives who paid cash to buy property in Florida during the housing bottom have enjoyed a rapid return on their investments. Hopefully, we won't be that "lucky" in the future since it will sock us with higher property taxes.
People who finally have a little equity in their homes may be anxious to sell. Selling now, in my opinion, would be like selling at the very beginning of the housing recovery. I can't imagine the value of my home will never recover. By researching Zillow, I discovered the reason our home value is so low is because of the foreclosures and short sales in my neighborhood. Eventually, I expect that so-called "shadow inventory" will vanish. Eventually, our home will appreciate in value. In the meantime, I'm content to live in a neighborhood that has remained immune to the housing recovery.
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