What you need to know about the housing market and appreciation.

Dated: August 9 2020

Views: 157

What you need to know about the housing market and appreciation.

I'd like to talk today about the housing market and what and what's going on locally. I have always said that all real estate is local and you cannot judge housing prices by a national newspaper and what's going on either nationally and certainly not globally. You know as well as I that housing prices on one side of a railroad or other geographic barrier can be different than one block away on the other side.  Indeed, in my neighborhood houses that are on the golf course will sell for more than houses off the golf course even though they can be across the street from each other. (By the way view is one of the things that is often ignored by the automated valuation models like Zillow, and this is why it is important to get a local real estate agent to get you a valuation).

First, a personal note: I normally write this column every Sunday but lately have been so swamped with buyers as well as sellers my attention has been diverted. My wife and I also picked up a house to flip and I've been spending the cooler mornings on the weekends working on that house to get it ready for resale. As is normally the case. on Sunday I write about something that inspired me or bothered me the week before I right. I like to share my experiences with my readers so they can become better buyers and sellers.

Today I will address two things:

1.       Appreciation of your real estate,  

2.       The deferred maintenance that I see on so many of today's homes being put on the market.

Of course these two things are related. The more you can physically and financially add value to a property the better the appreciation will be over the medium and long term.

For years I've been using 3 to 5% as the average appreciation single family homes have been appreciating. This is substantiated by studies done by Zillow, FHA, and FHFA.   Let me use 5% for discussion purposes to illustrate how important appreciation is for your real estate purchased. For a $200,000 home purchased at the beginning of year one the home will be valued at $210,000 one year later.  In ten years, the home will be worth $310,265. This works out to be ($900.19 per month for every year you buy own (and maintain) your home. (If we assume appreciation of only 3% annually the value will be $261,000 in ten years or about $508 month over that ten years.

If you want help figuring out your own situation, email me at Gregg@FousRealEstate.com. There is also an onlne calculator that gives you, by state, the appreciated value of your home.  Click here:

(Appreciation Calculator)


Here is a simple spread sheet you can plug your own numbers into:

Gregg Fous Appreciation Calculator

The bottom line folks, is that if your $200,000 home is appreciating at $900 a month, and even if you borrowed 100% of that $200,000 at 3%, your payments would be under $900 a month and only 500 of that is interest . So that means your equity is increasing by the $900 a month appreciation plus the $400 a month that you've been paying down your debt =$1300!   This is why homeownership has been such a wealth builder for even people of modest means. I would encourage you now if you are not a homeowner to buy a home,  and if you are a homeowner to a maintain your existing home and investigate purchasing a second, income property.

Now let's talk about maintenance. If you're a homeowner and you should be budgeting money every month, or certainly every quarter, to put back into this investment that you have . Anything you can do to increase the appreciation rate of your home will drop to your bottom line. I can't tell you how many times I go to list a home , or go to view home for purchase , when I find that there are serious issues that could have been avoided by minor maintenance . Don't treat your home like many people treat their car. Don't ride your home until it wears out and then go look for a new one. Spending money on your home on maintenance is indeed money in the bank

The local market is short on inventory, and prices are increasing certainly at higher than 5% per year, sometimes 5% in one month. Homes are not languishing on the market and buyers are out shopping with the ability to borrow mortgage money at under 3%.

One of the reasons inventories are low is that sellers are remaining as owners until the uncertainty of the outcome of the coronavirus and the domestic violence is settled. But supply and demand ultimately set the prices for your home. So many times I advise my clients that they make their money on their real estate investments when they buy, not when they sell.  You may want to wait to sell your home because it's going to be worth more six months from now, but the replacement for your home is going to cost you more in six months as well. This is a good time to sell and certainly I would not wait to buy .

As always if I can help you in any way you need only get in touch with me either by email text or phone.  

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Gregg Fous

Real estate has been my passion since I took my first Al Lowery class on real estate investing in the 1970’s. I vowed during that class that I would buy one property a year. Over the next five ....

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