Are there homeowners who are in deep trouble because the market has tanked? Absolutely. One need only look at the foreclosure rates to realize as much. This article is obviously not targeted at such unfortunate homeowners. Instead, let’s focus on those of you who are in a near panic for no particular reason.
First off, why is a home a great investment? The answer has to do with it being “real” property. It has a physical, tangible use that many other investments don’t. You can live in a home. If the price drops, you can continue to live in it so long as you make the payments. If you invest in the stock market and prices fall, there isn’t much you can do with your stock certificates.
The current real estate market is a nightmarish mess. Many homeowners have seen the value of their homes drop dramatically. If you are in this position, you might be panicking. Don’t! Instead, stop and take a deep breath. Now ask yourself, “What have I really lost?” The answer is usually nothing tangible. Your bank account is not moving into the red. Your retirement savings aren’t dropping. You don’t have less cash to spend. You’ve only had an unrealized paper loss. If you are trying to refinance or sell your home right now, it is an issue. If you plan to live in the home for another five years or more, it isn’t.
Real estate is a good, solid long term investment. Just as huge value increases in the first part of this decade couldn’t possibly last, the current down turn will not be permanent either. The key is whether you can afford to ride it out. Make those monthly payments and you will see values arise again in the future. When they do, you’ll recover the paper losses and be a happy homeowner.
Raynor James writes about issues surrounding FSBO property for FSBOAmerica.org where you can list your land for sale by owner for free for 1 month.