We are back, with our special “Where we Stand.” In which we dig deep, into exactly what’s happening right now in today’s real estate market…and how it all affects you.
Now I’m sure you’ve heard that one of the biggest challenges in today’s market involves what Real Estate Pros call inventory. That is the number of homes for sale… And right now there just aren’t enough. There are far more buyers, than there are available homes.
So how does that affect you? Well it depends on whether you’re a homeowner, a home seller, or a home buyer. So let’s talk about it, starting with what low inventory means to you – if you are a homeowner.
In short? It’s good news.
The shortage of homes for sale is causing prices to rise. And as that happens, you are building more equity. And more household wealth. And that’s true whether you have a mortgage or not.
If you don’t have a mortgage, your investment is just worth more. And if you do have a home loan, the percentage of your equity in the house, grows, as your home’s value rises.
That’s good in a lot of ways.
With more equity in your house you’ll have a stronger position if you ever want to refinance the place. You will probably qualify for better rates if you have 22% equity, instead of say, 18%.
Also – if you put down less that 20% when you got that home loan, you might be paying private mortgage insurance. Well, as property values rise, you might rise above that 20% equity position much faster. And if you do, you might be able to cancel your mortgage insurance, saving you hundreds of dollars every month.
Also, that extra equity also provides a really good cushion for you in the unlikely event that property values fall at some point down the road. I mean if you build up some solid equity over a period of time because of the appreciating market, and then someday if property values fall say 5 or 10%, you’re still okay. You’re not underwater.
And speaking of being underwater, millions of Americans who owed more than their home is worth are pulling out of that situation, because property values are rising. So if you owed $200,000 on your house but it was only worth $190,000 well after a couple of years of rising property values chances are you’re no longer underwater. That’s a big plus.
Now let’s talk about sellers for a moment. If you’re selling your home of course, higher property values will most likely mean a bigger check at the closing table. And that bigger check means that you’ll be able to put more down on your next house, or you might possibly be able to afford a more expensive place. And so for all those reasons and more, Rising property values are a positive development for homeowners, and home sellers.
But of course there’s two sides to the closing table…and those rising home values represent challenges for buyers in today’s market.