In this current economic market, it’s not just the trust fund and the 401(k) that’s been reduced. If you’re a homeowner, and you’ve gotten your evaluation from the state on the price of your home, you may be in for a shock this year. In our area, home prices have depreciated significantly, sometimes as much as $20,000. While this is great in one respect (lower tax rates for the coming year), it’s not so great in that your home is now worth significantly less than what you purchased it for.
It’s worthwhile to take a few minutes to think on what’s happened to the homes we’ve invested in, and to decide based on our circumstances what to do next. The following are some ideas to ponder:
Did you buy your house as a home, or as an investment?
We all want our homes to appreciate and grow in value, no matter the reason we bought it in the first place. Homes are generally very stable investments; however, the lion’s share of homebuyers mean for their homes to be their primary place of residence.
If this is your situation, the best thing to do is to stay put. Continue living in your home. When it comes time to consider changes to the home or upgrades, it may not be the best time for knocking down walls and adding anything. Cosmetic repairs or needed functional repairs will keep the house livable. Anything more than that, and you’ll be priced out of a tight market, and only lose more money.
If your home is primarily an investment, and your investment is losing value, it’s time to sit down and take a hard look at where this investment is going. If the neighborhood around your house is still sound, and you’ve got the time and space to allow your investment to grow, then by all means, stay in house. However, if you’re reading ominous signs that depreciation will continue because of factors beyond your control, consider whether selling houses in the current market and cutting your losses now would be wise.
If it’s time to sell your home, the amount of time you have is a factor. To sell quickly, you have to drop price. If your house has already depreciated significantly, this can be painful. Sometimes it pays to get creative in order to sell at your original listing price. You could include appliances or other items that would make the home more attractive to a potential buyer. Study the market to see who’s buying in your area. Are they primarily singles, young families, retirees? Tailor your house to attract that demographic that is currently buying in your area.
Losing value in any investment is difficult, but it happens. Depending on your circumstances, you can cut your losses and move on, or hang on and wait for the market to change. The bottom line of any market is that things change.