What is your home really worth?
In the midst of house hunting, a thought occurred to me: people put a lot of stock into their houses, their houses’ worth and even the municipal assessments… but all that goes out the door when you start trying to list your home for sale and no one is biting.
We’ve seen plenty of nice homes, (to us) worth about $400,000 given the location and how well-kept it is, going for $650,000.
The municipal assessments are at around $400,000 but in this market people think they can get $650,000.
Other things we’ve seen are people listing at the home’s municipal assessment (or that amount plus the realtor’s fee worked in), and even THEY aren’t moving off the market.
Because as it stands right now in this city, houses over $600,000 are dead in the water. No one is buying over $600,000, I daresay even over $500,000.
Everyone is in the $300 – $450,000 range and frankly, people who poured money into their houses thinking it was a sure bet to double in value, are sitting around, wringing their hands trying to get a bite, a nibble, ANYTHING that would even be remotely close to recouping their initial investments (never mind the loss of appreciation from inflation and how much you could have earned had you stuck it all in the market instead).
Some sellers we’ve met, are just damn desperate. They’re so anxious and desperate it is a little hard to take in, and those are the ones who already bought another home, are paying the mortgage on that one and are hoping to sell their current home for what they think it’s worth, totally unwilling to lose $100,000 in the process.
To put it another way, a house in a “good” area that supposedly keeps its value, is worth on paper $800,000 but I daresay in this market, if they truly had to sell it and get out, it’s not worth more than $450,000.
Is that worse or better than a house in a decent area that doesn’t appreciate quite as quickly as another area, which was worth $300,000 before and could sell in today’s market for $400,000?
I feel like it’s all net worth increases and happy rainbows on paper, but when push comes to shove to turn that asset into liquid cash, it is a whole other ballgame.
This is why, when we’re looking at houses, we are keeping these things in mind:
- It is a house for us to live in, not to flip and resell.
- It is not a starter home to upgrade from, it will be a home until we pass on.
- It is a house that will basically be our prepaid rent until we die with very minimal annual costs in terms of taxes, utilities, maintenance, etc, versus renting (this we’ve done the math of, and is true).
- It is a house we will not renovate and expect to get out more than we put into it save for inflationary increases (if any).
- It is not a house we cannot afford just because we want a lot of space or something fancy (neither of which is in line with our minimalist principles).
- Our budget is pretty much $450,000 all in. Taxes, notary fees, everything.
- I will not count the house as part of my net worth; I may use the municipal assessment as a way to keep track of my money (it is worth SOMETHING after all), but I will not try and think in any given market, I will get a return of 100%.