Nov 21 2008
What is my home really worth?
Many homeowners evaluate the market and focus on "my house has depreciated $100,000 in the last year." This is a misleading mindset. The house is only worth what it can be sold for in the present market, and real estate is a commodity that fluctuates.
If you sell in a seller's market you also buy in a seller's market. Sell in a buyer's market, buy in a buyer's market. You trade apples for apples.
If Apple 1 costs $10, Apple 2 costs $10. If Apple 1 depreciates to $1, then Apple 2 is also $1. So you could sell your home for $900,000 last year and you downsized and purchased a $500,000 home. Maybe your house sells for $700,000 this year, but you can downsize to a $300,000 home. What is your net profit?
Every so often you can sell in a seller's market, rent a year or two, then buy in a buyer's market. Usually though, even if you sell and buy within a four- or six-month period, you will have a similar value baseline.
