So you bought a home in 2007, eh?
Don’t worry as you are not alone. Many others bought in at or near the top of the market, just like you did, only to watch the value crumble by anywhere from 20% to as much as 50% in only a few short years.
No one was immune.
Pricing is Back — Mostly
But we are here to deliver good news — the time to sell may be now.
One of the takeaways from the post crash recovery is that each sub-market in the Richmond area has recovered differently.
Shifting demographics, shifting preferences, and the ability to add new inventory have all dramatically impacted the speed of the recovery in each of the regions of Richmond.
Take a look at below — the average ‘per foot’ price broken down by county — and you will a trend that shows the market has largely recovered in most of the areas of Richmond.
The Loss of Equity
Just because property values drop, the money owed on the properties does not. So when the market shifted and values fell, many owners found the mortgage debt on their property to be higher than the actual values.
When the debt is greater than the value on a home that is sold, an owner has to make up the difference — in cash — to pay off the mortgage. And in the darkest economic days post-crash, few were willing to part with any of their savings. What happened was that most underwater homeowners simply stayed put and waited it out.
But now that pricing has retuned (or seems to be close to 2008 levels), owners can walk away with cash when they sell — and use it to move to the next home.
The Mortgage Market Shift
When equity took a nose dive, the loan products that offered higher leverage (i.e. lower down payments) also went away. Very few 5% down payment loans were available during the collapse and thus, even if you could sell your home, you needed a tremendous amount of cash to be able to buy the next one.
And again, people tended to stay put in lieu of sinking cash into large down payments.
As 2008 – 2011 gets further and further into the rearview mirror, more and more low down payment loans are becoming available again. And while the merits of buying a home with 5% down probably deserves an entire post on its own, it does tend to make housing within reach of the first time buyer — and that is not all bad.
Pricing is Rising
So the takeaway is this — if you bought in 2008 and have been holding out until you could get out, remember that the pricing of the housing you are looking to buy is also rising; and in many cases at a faster rate. Stated differently, if you bought a newer home in the far suburbs in 2007 and you are looking to downsize back into the City, do it now. The pricing in the city is rising faster than in the ‘burbs and everyday that you wait just makes the next home that much more expensive.
In almost every case, selling a home means buying another one. Make sure you are not holding onto a home that is appreciating at 2% per year to buy one appreciating at 5% per year. The longer you do, the further you fall behind.
A good agent can help you determine not only the price of your home, but also give you a sense of how the market conditions of where you want to go. The best way to make back your money is by owning the asset that is appreciating the fastest.