What if Real Estate Prices stopped going up?

What if Real Estate prices stopped going up?

In many markets sellers are faced with the realty that their home is worth no more, indeed sometimes less, than they paid for the home.  Last week I sold a home in Pelican Preserve for $515,000. The sellers paid $531,000 three years ago and put in window coverings, furniture and other improvements.  When they  started marketing it six months ago, they were like almost every other seller. They figured the house was worth more and started the sales process with a price at $559,000.    I’m working with a buyer for a home off McGregor this week. The home they want is now being offered for less that the current owner paid, and that owner has put other improvement in the house.

The above examples are not the exception. Prices have leveled off, and in some markets, decreased.  For the purposes of today’s discussion, I am not going to go into why this is the case but I want to discuss the ramifications of price deflation.

  • 1 .       If you are looking to buy a home, know that many sellers have their head in the sand regarding this deflationary pressure.  
  • 2 .       Ignore what someone has paid for the house you want to make an offer on.
  • 3 .       It is more important than ever to buy right.  Time and appreciation may not be there to help make up for a mistake of paying too much.
  • 4 .       Do not be to bashful to make a low offer.
  • 5 .       Do not count on appreciation to happen to your home without your involvement. Plan on spending money and time to improve your home every year.
  • 6 .       Do not count on appreciation to enable you to refinance your home in three to five years.
  • 7 .       If you are financing your home, accelerate the pay-off on your note. This will ensure increase in equity if your home value remains stagnant
  • 8 .       Understand functional obsolescence.
  • 9 .       If you are an investor, give more weight to income valuation than you do to asset appreciation.
  • 10.   If you are a seller, ignore what you paid for your home and be concerned with wat you are going to do with the money you get for your home.
  • 11.   Understand “Sunken Costs
  • 12.   As a buyer, buy “What Is”, not what is “Gonna Be”