Home Prices Continue Modest Rise
Nationally, we have seen between 2% to 7% rise in home prices over the past year. Big California cities have seen the biggest increases. The latest news is based on the increase in prices and reduction in time on market between February 2013 and February 2014. “Black Knight Financial Services released its Home Price Index (HPI), noting that home prices in the U.S. rose 0.7 percent for the month of February to an average of $233,000. The slight increase for the month reflects an overall yearly increase of 7.6 percent, according to the financial company.”
Most crystal ball readers do not believe that the economy can sustain the 7% figure. It is inflated in part by a brutal winter that “chilled” interest in homebuying until the end of January. But as long as there are no major blows to the economy such as interest rate inflation, most experts believe we can sustain a 4% increase in home values. “Shadow Inventory”, the homes people or banks want and need to list but want or need to delay listing for sale, is shrinking. Congratulations if you are one of the people who “gutted it out” and managed to hold onto your home long enough that it is no longer under water but could actually be sold as a breakeven proposition. If you are still suffering “negative equity”, or are “under water” or “Upside Down”, you can put the 4% algebra to good use to project how long you would have to wait to recover to the point of having equity again.
The harder to calculate issue is summed up in the question – “What is the real cost” of holding onto a red ink home. Is it depleting your retirement accounts and savings? Are you able to payoff your credit cards? If you are going to have to pay for a place to live anyway, what are your realistic alternatives for a new rental even if you do successfully short sell your existing home? The answers are never easy. But even now, over five years into the great bubble burst of 2008, many people still labor to their own hurt to hang onto a house for reasons that no longer make sense: (1) Credit damage (missing payments, never curtailing credit cards, and other consequences of upside down living will hurt your credit much worse than a clean short sale!); (2) security clearance for your job ( most creditors have capitulated to the necessity if not the nobility of short sales as a way to relieve financial pressure and a clean short sale alone has not cost one of our clients their job!); (3) sentimental value (if holding onto a property is killing you and slowly “sucking out my soul” as one of my clients described it, what good is this sentiment and how much of your attention does it allow you to devote to your loved ones?).
If you just need to talk it through, call us and ask for a free consultation and let’s evaluate the big picture for you, including your alternatives and how your current debt affects your quality of life. We can discuss what you have to gain by holding onto your home versus short selling your home and how long will it be before you could sell it and pay 100% of what you owe to your lender.