Home Values Rising: Should You Buy Now?

Written by  //  2014/08/27  //  Home Values  //  No comments

Homeowners and prospective buyers have been watching with great interest the housing market’s continual upward trend, which began last summer. The Great Recession saw equity in U.S. real estate fall from almost $13.5 trillion in 2006 to under $5.3 trillion by 2009, according to a report by the New York Federal Reserve. Home values across the country rose 8.3 percent in December, according to property analysis company CoreLogic. The housing market has been brought back to life after five years of stagnation, and homeowners who hung in there during that time period might have some decisions to make.

These unnatural spikes have some worried about another artificial housing bubble, while others are using the market conditions to their advantage. Your individual situation will dictate what action, if any, you should take during the current economic climate.

Should You Sell?

The most important factor in deciding whether or not you should sell now is your home’s location. Cities like Phoenix have less inventory (available homes) because investors and hedge fund managers pounced when prices (apparently) bottomed out from 2010 to mid-2012. The less inventory there is, the higher the prices are because supply will not meet demand. New York, Minneapolis, Seattle, and Salt Lake City are other metropolitan areas with similar market conditions. Despite home values rising, you’ll only capitalize on the gains if you live in an area that attracts people. Thus, the short answer to whether or not to sell now is to test the market and determine interest levels. Keep in mind home values are expected to continue rising throughout 2013.

Should You Buy?

Buying a home requires a similar analysis as buying precious metals. The price of gold at the beginning of the housing bubble (circa 2002) was around $300 per ounce. Those who brought bullion from dealers like US Money Reserve cashed in by the time the housing bubble burst in 2008, to the tune of $900 per ounce, or a 200 percent net gain. The decision to buy a home depends on whether you are looking to buy and live in the home for the next 30 years, or invest in the property to rent or sell it for a profit in the short-term. Zillow recommends buying over renting right now because of high rent prices that are expected to continue on an upward trend. Though banks are extending credit more than they did two years ago, underwriters are still following strict guidelines. Your decision to buy may ultimately come down to whether or not you can obtain a mortgage.

Should You Stand Pat?

Some homeowners are simply looking to get their nose above the waterline, while others are in markets primed for profitability. There is a strong possibility, again, that home values will continue to rise, especially as long as the Federal Reserve continues its policy of quantitative easing. But just like life in general, there are no guarantees in the housing market. There is room for homeowners to wait a while and see if they can break even or even profit after losing 60 percent of their equity during the recession. Keep abreast on the Fed’s policies and the value of your home to make a decision from there.

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