Relax; your home will appreciate again
By Justin Hunter
This article is going to seem like an
obvious statement for many readers but
a lot of newer home
owners have been in a panic over the last
couple of months. Home owners need to
be reassured that their property will
continue to gain equity regardless of
what is currently going on in the real
estate market.
The article, “Staying Calm When
Home Values Drop,” posted on ezinearticles.com
and written by Raynor James on October
8, 2006, provides some reassuring news
for worried home owners who are just sitting
back and watching the real estate market
take a downfall.
Before you begin to stress out that your
new or old
home is losing value in a market that
is in a correction phase after years of
unaccounted inflation, understand how
professionals analyze market value.
The real estate market can be viewed or
scrutinized in two ways. “First,
you can look at the movements on a monthly
or annual basis. When doing so, you will
see moves up or down and perhaps stress
yourself out far more than necessary.
Alternatively, you can look at prices
on a long-term perspective of five years
or more and predict where they will go
based on historical trends in real estate.”
The latter is the most accurate and professional
way of determining the future value of
your home. No matter how much and how
fast a property appreciates, it will eventually
fall, at least a little. Remember, your
home can not continue to only appreciate
every day. If it did, a two bedroom, 1,000
square-feet home would cost about $10
million by now.
So, keep this in mind and do not lose
sight of the long-term investment. “Properties
in Las Vegas, for instance, were appreciating
at a staggering rate of twenty-five percent
or more a year. A YEAR! On paper, a lot
of people became millionaires because
of the equity gains in their home. As
always, such growth could not be sustained
inevitably.”
This information is also assuming that
you are not a “flipper,” meaning
that you do not purchase multiple properties
at once only to resell them within six
months or so for a modest yet quick profit.
Industry experts have always warned against
flipping and although they could have
made millions within just a couple of
years in the early 2000s, they are feeling
the hurt now with no immediate relief
in sight.
“Across the nation, we are seeing
a pull back on home values because of
a cooling real estate market. It is important
that you don’t overreact to this
pull back. The gains you have seen in
the last few years were paper gains, to
wit, they did not put money in your bank
account unless you pulled money out of
your home. As home values cool, it is
important to realize any loss of equity
is also a paper loss, to wit, you aren’t
paying
anything out.”
Your home will continue to gain equity
in the long run. There may be times, like
now, when the real estate market will
falter a little, but as mentioned earlier,
it is necessary to maintain a strong economy.
“The current pull back on property
values will pass and your home will start
appreciating again. It may take a year
or two, but it will happen. Relax!”
Be patient and do not sell
unless you absolutely have to and have
exhausted all other options.
