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I don’t know how much my house is worth and I don’t care

By: 16 April 2011 One Comment

Some perceptions that have sprung up over the past decade or so about buying a house seem more than a bit out of sync with what they’ve been in the past.

Consider this. Let’s say you visit with a parent or grandparent that has been in the same house for the past few decades. When asked about their homes, they might talk about raising a family there or how glad they were to get it paid off before retirement so they could live without the bother of house payments. They might point out the trees they planted when their children were small and marvel at how big those trees – and kids – have gotten over the years.

Rarely will they talk about how happy they are that their homes increased in value by a certain amount of money over 40 years or so.

However, that’s exactly what a lot of potential home buyers focus on when considering buying houses these days. It’s not hard to understand why that is. During the “boom” years through 2006, much was made of how much homes appreciated in value from year to year.

Obsessing over value is a fine thing if you’re talking about a stock, a bond or anything else that is used in traditional investment portfolios. It’s also a fine thing for people who invest in real estate with the intent of buying homes at one price and selling them for considerably more in a short period of time.

But the average buyer typically approaches purchasing a home very differently. It’s not a stock, bond, IRA or retirement plan – it’s a place to live. That being the case, does it really matter if that house appreciates – or depreciates – 2 percent in value over a year or two?

Frankly, I don’t know the current market value of my home and I don’t care what it is, either. If my family is ready to sell our home and move elsewhere, we’ll worry about value then. However, I’m confident my house will appreciate in value in the longterm as that’s par for the course in Arkansas.

Sure, there’s the argument that people want to see home values appreciate in value because they might want to sell them at some point and earn a profit. In the longterm, some appreciation will typically occur – if a house drops in value a bit one year, there’s a good chance that will reverse given time.

Why is any of this discussion relevant to market conditions today? Because there’s a question that’s been asked time and time again over the past few years – when is a good time to buy a home?

That question is fairly easy to answer – the ideal time to buy occurs when an individual is in a good position to purchase a house. If a buyer is secure in his or her job, has a credit score high enough to convince a mortgage banker to approve a loan, has enough money to advance a down payment (or qualifies for some form of down payment assistance) and is ready to put down roots in a community, then that is a good time to buy.

If someone is ready to buy in the current market, there’s a bonus attached – interest rates are still low and there is – like it or not – downward pressure on home prices. Look at it this way. Would you rather purchase a house when interest rates are rising and sellers don’t feel the need to negotiate or in times like these when rates are low and sellers are competing for buyers? The answer to that question ought to be obvious.

We’ve seen a lot of charts, graphs and housing stats floated around over the past few years with various groups interpreting them in different ways. The truth of the matter, however, is this – no one can tell you when it is the right time to buy a house. That’s a decision each individual has to make. If the time is right, the chances are good you’ll know it.

Home Sweet Home is written by Ethan C. Nobles and is sent weekly to publications throughout the Natural State on behalf of the Mortgage Bankers Association of Arkansas.

About: Ethan C. Nobles:
Benton resident. Rogue journalist. Recovering attorney. Email = Ethan@FirstArkansasNews.net.

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