- A recent GOBankingRates study estimated the value of an average home in 30 years by analyzing the cost of renting versus buying, as well as appreciation.
- Knowing your home’s value is generally considered crucial information for multiple reasons, including understanding property tax and insurance costs, and for preparing to put your home on the market.
- However, Wallet Hacks creator and homeowner Jim Wang has a different take on the matter: He doesn’t care.
When I graduated college in 2003, the housing market was only just starting to heat up. Fast-forward a few years, when I’d finally saved enough even to entertain the notion of buying a home — it was sheer madness.
My parents bought their home in the 1980s, offered slightly under asking price and their bid was accepted. Before we bought our first house, we routinely offered 10-15 percent over the asking price — and lost. We lost out on our first five bids, in fact.
Eventually, one of our bids was accepted, and we moved into a nice townhouse in Columbia, Maryland. When we owned the house, one of the biggest topics in our neighborhood was about home prices. Our neighbors and I would chat about how much this house sold for or that house sold for. We remarked about our property assessments going up, how to negotiate it down so we’d pay less in taxes and all that typical neighborly financial chatter.
But secretly, I never cared how much our house was worth. It was fun to talk about and important to know, but I didn’t really care. Here’s why.
It’s Not That Useful
There are only a few times when the value of your home matters — namely when you want to access it via a home equity loan and when you pay property taxes.
The biggest reason why we don’t care about our home’s value is that we can’t access it easily. When you buy your house, the only equity is whatever you paid in a down payment minus the laundry list of fees, taxes and other expenses on the property. That number is likely going to be very small.
If you want to access that equity, you’ll have to get a home equity loan or home equity line of credit. Since it’s such a small figure and because we don’t need the funds, we didn’t care much about how much equity there was.
Do You Know? Craziest Things That Kill Your Home’s Value
It’s Hard to Price Accurately
Here’s the kicker most people don’t enjoy talking about: Home prices fluctuate. They can go up just as easily as they can go down. But buying and selling a home takes a lot of time, has a lot of participants and doesn’t happen as publicly as stocks.
What this means is that your home value will change, but it’s difficult to know how much it is worth with much certainty. You could use some free services that will give you a home value appraisal, but they’re just guesses.
You could also look at GOBankingRates’ study that took the current national median home value of $220,100 as its starting point and then compared home values over the last decade to forecast 30 years into the future. Granted, the decade examined includes the fallout from the housing crash and does make GOBankingRate’s estimate more conservative, but it is still an estimate nevertheless and isn’t one-size-fits-all.
Like my mom used to say about my comic books, they’re only worth as much as someone else will pay for them.
More on Home Value: Here’s How Much a Home Is Worth in Every State
I Can’t Control It
There are a lot of factors that affect home prices: supply and demand, the local job market, the location, the school districts, the number of bedrooms and bathrooms — the list goes on and on. I can’t control a single one of them.
Besides ensuring we maintain our home, which we would do anyway since we’re living in it, there isn’t much we can do to increase the value. According to Remodeling magazine, there isn’t a single remodel that has a positive return on investment. The closest you can get is replacing your garage door; you can recoup 98.3 percent of the job cost when you sell the home. We can make improvements and enjoy those improvements, but it comes at a cost.
When Prices Go Down, I Don’t Feel Bad
If I’m not selling my home, I shouldn’t care how much my house is worth.
I track our net worth so we understand how we are doing financially. It’s like my weight. If my weight changes without explanation, that’s bad. If it goes up because I’ve been building muscle mass, that’s good.
If my home’s value goes up, my net worth should go up. But my financial situation hasn’t changed, and it could give me a false sense of confidence. This is known as the wealth effect. When the stock market is doing well, investors feel wealthy even if they haven’t realized any gains. When the housing market does well, homeowners feel wealthy and start trying to access their unrealized gains through home equity loans.
The opposite is also true. When the market goes down and home prices sag, people feel impoverished, even though their specific financial situation has gone largely unchanged.
I try to shield myself from those emotional reactions by thinking of my home as a place to sleep, rather than an investment (it isn’t one) that I should be tracking and monitoring on a regular basis. I don’t care about the value of our home because I can’t control it, I can’t use it and I don’t want it to keep me up at night.
Click through to read about major cities where home prices are plummeting.
More From Our Smart Money Squad
- Why I’m Happy Not Owning a Home Anymore
- Why I Will Never Own My Primary Residence Again
- How I Paid Zero Income Taxes on My New Rental Property
- Watch: Paying a Home Mortgage Is Actually Cheaper Than Renting in These Cities
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