Yesterday while talking to a prospective client the discussion turned to the “equity” they had in their home. They had purchased their current home in Northern Virginia in 2002 and over the five years the value of their home has of course appreciated from their original purchase price.
They were however distraught that they had not sold their house last year when they could have walked away with $250,000 but now the best they could hope for might be $175,000. Since they are interested in buying a larger home the prospects of a higher mortgage due to the loss of equity was worrisome for this young family.
This isn’t the first time this conversation has happened over the last few months. With the value of homes in Northern Virginia having decreased over the last year there are many families thinking the same thing about their equity. It is interesting to listen to the rationalization of how much money they have lost by waiting to make the decision to move.
Of course the equity that they have “lost” isn’t real. It is the same concept that follows traders in the stock market. When you see the stock price is up you think of all of the money you have and when it is down you think of all the money you have lost. However until you sell you haven’t done either. It is all imaginary.
The good news for homeowners in Northern Virginia is that even though you may not have the same amount of equity that you had a year ago the price of the home you want to buy has also come down. As a result most likely the deal is a wash. Today’s equity will go as far as it did a year ago and in some cases it might even go farther depending on the neighborhood where you want to buy.
So don’t let the idea that you have lost money keep you from making the decision to sell your home. If it is the right time to make a move then let’s get to work to get your house on the market and SOLD. If it isn’t time to make a move don’t spend your days fretting over the latest housing reports. They don’t mean anything to you until you actually sell your home and are holding your HUD-1 in your hand.