Mortgage and Real Estate Blog

(Source) According to Zillow Q2 Homeowner Confidence Survey 62% of homeowners believe their home’s value has increased or stayed the same in the past year yet 77% of U.S. homes actually declined in value

Short-Term Outlook: More optimism for own home vs. neighbors’ homes in next six months although 70% say they are concerned foreclosures will decrease home values in their market within next year; 56% planning home improvements

Isn’t it human nature to be overconfident? If this data is true then most homeowners believe the value of their own home is safe while the value of their neighbor’s home is not. Uh, sorry, but that’s almost impossible.

While it is technically possible for real estate values in the same neighborhood to go up and down simultaneously, that phenomenon has more to do with the uniqueness of the two properties in the same neighborhood. One property owner could make improvements that increase the value of their home while another homeowner may let their home atrophy and lose value. But if real estate values decrease overall then all the homes in a neighborhood will decrease at nearly the same rate. The same is true of home value appreciation.

If you have not done so, you might consider having your home appraised to assess its value and pay closer attention to real estate prices in your neighborhood before you decide to sell. If you must sell, better do it sooner than later because prices will likely continue to decline for some time. If you don’t need to sell, then you might be better off holding on to your depreciating property until prices bounce back.

Falling prices and slowing sales may be leading to a more difficult appraisal climate in local real estate markets all across the country. Since real estate agents base current prices on comparable homes sold in the last 6-9 months, slowing sales and falling prices make that more difficult to judge. Or does it?

Should agents start using a 5% or 10% fudge factor the way investors do when figuring future home values for resale purposes? When a real estate investor buys a home that he hopes to sell in two or three years, he typically looks at today’s values and adds 5% per year for resell value. That’s a good measure. But now that home values are declining, or correcting if you prefer, then a 5% measurement in the other direction may be in good order to determine resale values. Agents can use that as an incentive to sell your home now before you end up losing more money. If you know that you’re going to sell anyway, sooner rather than later could be the new catchphrase.

Until the market changes, appraisals for real estate will be more difficult to judge. But not impossible. The bright side is that oil prices are going up, which tends to increase the value of everything else. Otherwise, what would real estate prices be doing?