I recently saw an article which stated that for homeowners “their houses are like piggy banks.” But if you own your house, an increase in its value doesn’t seem to help you in any real way, since to realize that gain you’d have to sell it. But then you’d have to buy or rent another place to live, which would also cost more. It seems like the only concrete effect of a rising housing market for most homeowners is an increase in their insurance costs. Am I missing something?
In: 1833
Pros:
More equity in house if you need to borrow
More value of house if selling
Some people talk about taking off PMI but it doesn’t work with many mortgages and not something simple.
Cons:
High property tax. This is the biggest downside if you’re not planning to sell.
Higher insurance cost.
I’m on the negative side. Not planning to sell my house soon and the house is costing me more every year.
One way it helps is that your mortgage is a hedge against inflation. The size of your mortgage in dollars doesn’t increase but your ability to pay it off improves over time as your salary increases more or less with inflation. Meanwhile the value of your house is increasing, giving you options. True, you can’t easily convert it to cash. But, when you are ready to downsize or move somewhere cheaper, you can extract the lifetime of appreciation.
This is why I shrug at my value going up. I’m not moving or selling for a long time.
I agreed to a price and if the value goes down i’ll feel the same way.
It is nice to see an asset appreciate though. It just depends on if you think this is the new normal or we’re in a bubble. I think the answer is a little bit of both but the days of 150k houses in any desirable city are gone forever.
The housing prices literally saved my house this year. I had what I thought was winter storm damage to my gutters and soffits. Had a contractor out and found out that it was way worse than I thought. No drip edge had ever been installed on the roof way before I ever bought the house. It wasn’t caught on any inspection. So water had been destroying the fascia boards. I need a new roof, fascia and gutters. I’ve only had my house 6 years. I didn’t have enough equity to pay for a $13,000 roof. My home owners insurance would have dropped me and I wouldn’t be able to get insurance which means that my mortgage would default since I’m required to carry home owners. I would have lost my house. I called my mortgage company and they had it reappraised. My house in 2015 appraised for $55,000. This year it appraised for $102,000. I was able to refinance for $72,000, pay for the whole roof and pay off some credit cards and other bills. My mortgage went up less than the amount of bills I paid off were every month so I came out ahead. I got incredibly lucky that the storm revealed the damage when it did. It could have happened two years ago before housing went up and I would have been screwed. The problem was going to reveal itself eventually, no matter what. If it had happened later, it would have been more costly, with damage in the walls or ceilings. I got so lucky and I never get lucky like that. I’m so grateful it happened right now.
You’re completely right. The house you’re living in isn’t really an asset. Even the government recognizes this and doesn’t exact a gains tax when you sell it. The rising price of your house also increases your property taxes even though you gain no benefit from the theoretical value. You can get lucky if your house is in an area with inflated prices and you plan to move to an area with lower prices. But that’s a difficult situation to plan for.
Also inflation makes your loan cheaper (if you have a fixed interest rate). Which is a good thing.
the limiting factor in homebuying for a lot of people is not the house payment that they can afford, but the down payment needed to secure financing. when you sell high, you extract a sum of cash that can be used to leverage a larger loan.
consider that when someone bought their home, they may have had 10% to put down. if their home doubled in value (for the sake of simplicity), and then they buy a new home for the same price as the one they’re selling, that appreciated value turns into a 50% down payment. that can give folks a lot more choice in their next home, and depending on their particular circumstances, they might not even have to use all of it while the house payment stays basically the same.
Increase in property tax, increase in HOA costs, increase in utility costs, decrease in home accessibility… it benefits the old and corners the young into renting. Rising rent, just makes it not worth it
As a homeowner with no mortgage and no desire to put my home under a mortgage it doesn’t help. If anything it sucks because more property taxes and higher insurance costs.
The average person is probably in debt on their home so I guess it opens some freedom to refinance at a lower interest rate maybe. Other than that when you die and your kids get your home they can sell it for more money.
For a lot of people it’s just a status thing I think tbh lol
It’s a generational money grab. Banks like it because they make more money on higher value loans. The media narrative is more influenced by those groups.
If I hear one more story from some old guy about how cheaply he bought his $million house I’ll barf.
Latest Answers