An Appraiser's View

Home prices are cooling, does this mean values are declining? No, it does not. Home price cooling can mean many things, the list price vs. sell price to be dropping, the percentage increase in values to be slowing, the median home price is lower than it was, or, in some cases, homes selling for less than comparable homes sold for recently (a.k.a. "declining values"). Typically when you hear in the media that home prices are cooling only one or two of the above circumstances are happening in your specific market, verses when market values are actually declining all four are present. 

The issue with broad statements of increasing, declining, or stable values is they are not specific to individual properties. The data the media, home owners, government agencies, etc. presented is based on National, State, county, and city wide market data and may vary significantly from what individual neighborhoods are experiencing. And even within neighborhoods fixer homes, move up homes, move down homes, etc. can experience significant differences in percentage of increase or decline.  Even when all housing markets are headed in the same direction, the percentage of increase or decrease differences between individual markets can be as much as 50%!      

Given the lack of information on all of these indicators specific to your market, how can you find out if your homes value is going up or down? The answer depends on the reason for the question.
If you need to know because you are considering selling, interview 2-3 experienced real estate agents. They are your best resource for the direction of market price. If you have a unique property, find an agent who deals in those properties. If you do end up selling, they provide the most likely route to top dollar for your property.
If you are planning on selling the property yourself, considering buying a property to flip, or considering building on vacant land to sell, hire an experienced real estate appraiser, one that has experience in the type of property you are needing the data on. You might even ask for a prospective opinion of value, but make sure you fully understand what it is based on before doing so. 
And if you want to know before taking out a loan against your home for some home improvement projects, why? You can either afford to make the payments or not, what your home is worth only matters for your LTV, and that will determined by the appraiser the bank hires, not your loan officer, a real estate agent, or even another appraiser you hired. For more on my opinion of home values for reasons other than buying or selling, subscribe to my blog.               

The rhetoric most commonly seen on social media regarding home buying today is that it is harder to buy a house today than ever. While that may be true when comparing those who are in the higher income brackets or when comparing the ease of homebuying today vs. 3 years ago, in most cases it's the expectation of the home that has changed, not the affordability. Before you cry foul and stop following my blog, let me explain. I was raised in a lower middle class family, what most refer to as "the working poor". Even then people thought home ownership was out of reach for those in my parents income bracket. But not my parents. They were dreamers willing to sacrifice to reach their goals. When I was 10 my parents bought land in an unpopular rural area, and we lived in tents while our house was built. We couldn't afford a contractor so my Dad built our house himself, with the help of his children, ages 3, 10, 12, and 13, and a couple family friends with whom he was able to trade labor. It took more than a year. In case you missed it, in order to reach the dream of homeownership, my parents had to move to an area with lower values, then have us all live in tents, no stove, no running water, no indoor toilets, etc. while my dad built our house with his own 2 hands on the weekends and after work. Because this is what he could afford to do. My path to homeownership was easier. I was fortunate enough to find a foreclosure during a market downturn and by working two jobs, one full time and one part time, I was able to make the payments. My point is, when thinking about how difficult it is to buy a home vs. how you think or the "data" indicates it used to be, understand it has always been difficult for the lower middle class, but your issue may be an unwillingness to sacrifice as much as your parents and grandparents had to. Maybe it's because you have kids and don't want to subject them to having to go new schools, make new friends, or do without things. FYI. That sacrifice has shaped my entire life. Not the struggles, heck, I was 10 years old and got to camp for more than a year, it was amazing! No, the lesson is what stuck. I learned the basic principle of this country, which is if you truly want something, with hard work and sacrifice you can attain it. Life is simple. "When your dreams and goals are bigger than the obstacles that come before you, you will overcome those obstacles and achieve your dream and goals. " If you want to buy a house, figure out what you are willing to give up to get it. Happy house hunting!

Posted by Jeff Pickerel on July 9th, 2022 5:15 AMLeave a Comment

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