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Home ownership and market value forecasts |
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Updated 2012 Home Ownership and Market Value Forecasts For most of us, the money we have tied up in our home is one of our biggest investments. What happens there has a lot to do with whether we have enough to live on for the rest of our life. So, with the current economic crisis and drastic fall in home values, what do we do? Here you will see some current information and alternatives that may be worth considering. Real Estate Forecasts Many experts have produced a range of market forecasts, as you see here. Clearly, your neighborhood may follow a different recovery path than others in the world, country or state. The greatest value of this forecast is to clearly show the major options, so that you can watch for signs in your own neighborhood which indicate the path local home values are following. Lowest. In this forecast some form of disaster occurs, causing home values to go drastically lower, with uncertain recovery thereafter. No major source is making this forecast for the USA or the world as a whole, but it could happen in a local area due to business closures. Low. Home prices continue to fall through 2012 before leveling off in 2013, then start to rise slowly. Longer term, it could take up to fifteen years for prices to return to the previous peak levels. (Patrick Killelea's outlook is in this range: www.patrick.net) Moderate. Home prices are near bottom, and may be rising by the beginning of 2013. Longer term, gradual recovery of home prices to previous peak level in about ten years. (My outlook is in this range.) High. Home prices are at bottom and may begin rising by the end of 2012. Longer term, a possible 15 percent gain in prices by the end of 2013, and recovery to previous peak values in five years or less. (Markos Kaminis' outlook is in this range: www.wallstreetgreek.blogspot.com)
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Home Ownership Your focus is reasonably on protecting the investment you already made, then seeking to grow it in value, while keeping any risk to an acceptably low level. Ideally this could be a great contribution to your not-so-far-away retirement, and enable you to enjoy more of the good life. There are several different scenarios which could describe your current situation with respect to home ownership, investments, etc. There are also external pressures which, for better or worse, each of us face. Since there is not enough space here to go into every possible scenario, let me focus on a few which might give you some good ideas. For each of these, there are options or actions you might want to consider, which could improve or strengthen your position.
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Scenarios People who have considerable home equity and good job security do not have a lot to worry about, though they may be missing out on good opportunities to make profitable adjustments at this time. Other people who are "underwater," owing more on their house than it is worth, and also have unsteady or no employment have very little latitude, with either a bailout package saving them or a foreclosure notice being nailed on their front door in the near future. Less clear are the decisions that face those of us in the middle of these two extremes. This last group will be our focus here. If you have very little equity in your home due to falling real estate prices, you are in this difficult middle group. There are basically three different kinds of situations you could find yourself in, and each has its own outcomes. With a steady, good-paying job, and no major medical or college expenses in front of you, it should be possible for you to ride out the economic storm without having to do anything now. Almost all the forecasts above show home prices starting back up in the future, which means your equity would eventually begin to rise. On the other hand, if your job is not that secure or you have major medical or college expenses coming up, your position is more precarious. Even so, it may well be possible to ride out the rest of the economic crisis until things get better. Some careful budgeting and planning are needed to see if you can hold out until things get better. If you were to lose that job, it would be necessary to consider the next option. In the event you are without a job, and do not have immediate prospects for another one -- or if the new one is likely to be at significantly less than you were making before -- this is a difficult situation. You do not want to lose the benefit which comes when home values eventually recover, but you also do not want to fall deeply into debt. The cautious approach would be to sell your home and pay off the mortgage, which keeps your credit in good shape, and move into a less expensive rental. The alternative is to stay in your home, hope you find a job soon, hope home values do not go down more, and weather the storm. If that alternative works, the payoff will be that you probably get to sell your home in the future at a nice profit. If that alternative does not work and home prices fall further, you may end up walking away from your home and taking a hit on your credit rating. A saving grace would be if one of the homeowner bailout programs would work for you, which is something you might want to look into first, before making your decision. Home for sale
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Remember, this information is only provided to help you see and consider the options available to you. The factors shown here shoud be considered in light of your own life and circumstances. At the end of the day, when it comes time to make and implement your decisions, I recommend going to see a financial professional. Realtors, CPAs, financial planners, and lawyers are there for a reason. Their job is to focus on you, and get the best possible deal or transaction which fits your financial and personal circumstances. So use them. You have a lot to protect.
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The
financial assessments and recommenda- tions considered here are a composite drawn from many experienced experts in
the field. Even so, I suggest you have a professional sit down with
you to go over your personal situation before committing your hard-earned
money. The following is simply a compass to help you get oriented. Which
direction you go is up to you.
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