Does the value of my home matter?

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chrischris
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Does the value of my home matter?

Post by chrischris » Fri Mar 23, 2018 12:21 pm

It seems that many people these days place great importance on the value of their homes. I’m not so sure my own homes value affects me.

From my perspective, my home is a place to live and raise my family. I don’t see a primary residence as an investment. We purchased our first home 4 years ago and I’d like to pay it off early.

We have no plans to move and the value, according to Redfin, has increased moderately. But if we decide to move and remain in the same region, isn’t it true that other homes will increase in price as my own home increases in value? There is nothing specific or unique about my home that would cause it to increase in value over the average.

I don’t want to lose money if and when we decide to sell, but if we stay within the same relative housing market, does the value of my house matter all that much ?

I hope this makes sense....

MotoTrojan
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Re: Does the value of my home matter?

Post by MotoTrojan » Fri Mar 23, 2018 12:30 pm

chrischris wrote:
Fri Mar 23, 2018 12:21 pm
It seems that many people these days place great importance on the value of their homes. I’m not so sure my own homes value affects me.

From my perspective, my home is a place to live and raise my family. I don’t see a primary residence as an investment. We purchased our first home 4 years ago and I’d like to pay it off early.

We have no plans to move and the value, according to Redfin, has increased moderately. But if we decide to move and remain in the same region, isn’t it true that other homes will increase in price as my own home increases in value? There is nothing specific or unique about my home that would cause it to increase in value over the average.

I don’t want to lose money if and when we decide to sell, but if we stay within the same relative housing market, does the value of my house matter all that much ?

I hope this makes sense....
In your case I’d say consider it a safety net for serious life changing illness/jobless/disability as well as margin for retirement. I think it’s safe to assume less desirable areas are not growing at the same rate.

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tadamsmar
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Re: Does the value of my home matter?

Post by tadamsmar » Fri Mar 23, 2018 12:34 pm

You have a "value equals current or future market price" mindset.

When I think about the "value" my home, I think about the possible renovations that might be needed to make it more livable in old age. Like a downstairs laundry room.

Your home can end up, in some scenarios, adding to or subtracting from your retirement resources. But it does not matter much if you nest egg is large enough.

There are expenses associated with owning a house.

I have never seen a good easy to use analysis method, but there is a lot more to it than market price.

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tadamsmar
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Re: Does the value of my home matter?

Post by tadamsmar » Fri Mar 23, 2018 12:39 pm

Not moving can be an expensive option in some long-term care scenarios down the road perhaps.

JBTX
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Re: Does the value of my home matter?

Post by JBTX » Fri Mar 23, 2018 12:42 pm

chrischris wrote:
Fri Mar 23, 2018 12:21 pm
It seems that many people these days place great importance on the value of their homes. I’m not so sure my own homes value affects me.

From my perspective, my home is a place to live and raise my family. I don’t see a primary residence as an investment. We purchased our first home 4 years ago and I’d like to pay it off early.

We have no plans to move and the value, according to Redfin, has increased moderately. But if we decide to move and remain in the same region, isn’t it true that other homes will increase in price as my own home increases in value? There is nothing specific or unique about my home that would cause it to increase in value over the average.

I don’t want to lose money if and when we decide to sell, but if we stay within the same relative housing market, does the value of my house matter all that much ?

I hope this makes sense....
Only to an extent that you may choose to move to something cheaper, or change to renting, or you need to extract funds from it via mortgage, reverse mortgage etc.

To the extent you want to move to a comparable or larger home, chances are the one you will move to has appreciated too.

The only reason to pay off mortgage early is if you view it as the best return you can get on a risk adjusted basis. Paying off a 3.0% mortgage would seem questionable. Paying off a 5.0% mortgage probably makes sense.

dbr
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Re: Does the value of my home matter?

Post by dbr » Fri Mar 23, 2018 12:47 pm

chrischris wrote:
Fri Mar 23, 2018 12:21 pm

We have no plans to move and the value, according to Redfin, has increased moderately. But if we decide to move and remain in the same region, isn’t it true that other homes will increase in price as my own home increases in value? There is nothing specific or unique about my home that would cause it to increase in value over the average.

If your only plan is to die in the home or one replacing it, then you are probably not thinking far enough ahead.* Of course the value of the home matters in any number of conceivable, even highly likely, scenarios, sooner later. Whether or not a person says this is an investment based on some semantics about the meaning of the word investment is a red herring.

*Even if you die in your home its value to your heirs, including a spouse if you have one, is significant.

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Nate79
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Re: Does the value of my home matter?

Post by Nate79 » Fri Mar 23, 2018 2:00 pm

Your home is an asset. It has a value. No different than if you had a savings account or 401k that you never plan to touch, what you do with an asset can vary. Certainly the value of a home can be extracted in various ways (move and downgrade, move and rent, mortgage, HELOC, etc).

If you don't plan to use the value of an asset, any asset, then the value probably doesn't have any meaning to your budgeting for the future.

ianferrel
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Re: Does the value of my home matter?

Post by ianferrel » Fri Mar 23, 2018 2:05 pm

Even if you have no current plans to sell your house, the value of your home has option value. Plans and circumstances change. You might want or need to sell it in the future, and a high value house means you have more future flexibility.

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greg24
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Re: Does the value of my home matter?

Post by greg24 » Fri Mar 23, 2018 2:07 pm

Of course it has value. But it isn't an ATM.

adamthesmythe
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Re: Does the value of my home matter?

Post by adamthesmythe » Fri Mar 23, 2018 3:26 pm

> but if we stay within the same relative housing market, does the value of my house matter all that much ?

Thing is, you wouldn't do that, because churn is a killer.

But you MIGHT sell to move for a job, to retire, or for emergency spending. THEN it matters.

So watch the neighborhood and if it goes the wrong way move before you feel the need to put bars on the windows. Pay attention to the local school district. And don't wait on those roof repairs.

Kompass
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Re: Does the value of my home matter?

Post by Kompass » Fri Mar 23, 2018 5:16 pm

adamthesmythe wrote:
Fri Mar 23, 2018 3:26 pm
> but if we stay within the same relative housing market, does the value of my house matter all that much ?

Thing is, you wouldn't do that, because churn is a killer.

But you MIGHT sell to move for a job, to retire, or for emergency spending. THEN it matters.

So watch the neighborhood and if it goes the wrong way move before you feel the need to put bars on the windows. Pay attention to the local school district. And don't wait on those roof repairs.
I value my house in two ways:

Monetarily it's value is what I can get for it on the day that I want to sell it.

Practically it provides me with a place to live, store belongings, and gives me a psychological sense of security.

* I should note that I do not consider it to be an investment or part of my net worth.
The large print giveth and the fine print taketh away.

3funder
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Re: Does the value of my home matter?

Post by 3funder » Fri Mar 23, 2018 5:34 pm

I don't even think about the value of my home (honest to God, I don't). It's a place to live, and the mortgage is small.

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jabberwockOG
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Re: Does the value of my home matter?

Post by jabberwockOG » Fri Mar 23, 2018 5:38 pm

If you truly like and enjoy 1) the specific house/yard, 2) the neighborhood 3) the town/region, 4) climate that it is in; then the home has great subjective, emotional, as well as monetary value in multiple ways including ones most folks have already mentioned. A great home can be worth a lot more than its market value to the owner, or a lot less depending on how they feel about it.

In the end its monetary value is what the market will bring at the specific time of sale and this can vary a lot based on market conditions. As a group homes in desirable, very nice areas tend to go up in value and homes in bad undesirable areas tend to go down in value over time. Make the right choices, pick the right home(s), buy low and sell higher, and in old age there will most likely be very substantial $ value in that asset that can be passed on or utilized for long term care, great vacations when you downsize, nursing home, etc.

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BogleFanGal
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Re: Does the value of my home matter?

Post by BogleFanGal » Fri Mar 23, 2018 7:21 pm

As a group homes in desirable, very nice areas tend to go up in value and homes in bad undesirable areas tend to go down in value over time. Make the right choices, pick the right home(s),

Depending upon where one lives, making that right choice can be one part research/due diligence and 2 parts pure luck. I guess in most established regions of the country, neighborhoods don't change that much.

But I've seen many, many nice neighborhoods with well rated schools go bad. I've seen sketchy areas everyone avoided revitalized and skyrocket in value. Everything has changed so much in the past 10-20 years - from local politics to changing demographics to quality of schools, there was no real way to tell what areas would be "in" and which would be "out" if you were buying back then.
"Life would be infinitely happier if we could only be born at the age of eighty and gradually approach eighteen." Mark Twain

protagonist
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Re: Does the value of my home matter?

Post by protagonist » Fri Mar 23, 2018 10:45 pm

chrischris wrote:
Fri Mar 23, 2018 12:21 pm
It seems that many people these days place great importance on the value of their homes. I’m not so sure my own homes value affects me.

From my perspective, my home is a place to live and raise my family. I don’t see a primary residence as an investment. We purchased our first home 4 years ago and I’d like to pay it off early.

We have no plans to move and the value, according to Redfin, has increased moderately. But if we decide to move and remain in the same region, isn’t it true that other homes will increase in price as my own home increases in value? There is nothing specific or unique about my home that would cause it to increase in value over the average.

I don’t want to lose money if and when we decide to sell, but if we stay within the same relative housing market, does the value of my house matter all that much ?

I hope this makes sense....
I think it definitely matters. A lot.
The question is not whether you WANT to sell, it is that it is an asset that you COULD sell if you needed to do so.
Perhaps you have a large home and when you get older and the kids move away you will want to downsize. Perhaps it will become too much to manage due to health issues. Or maybe you will want to borrow on the equity.
Yes, I know you think your marriage is forever, but that is what everybody thinks yet the divorce rate is still around 50%....
And if you are a "buy-and-hold" stock and bond investor, you probably don't plan on selling those for a very long time either. But you CAN, and that knowledge gives you security.
Bottom line....the future is....well....the future. Not nearly as knowable as you might think. I am 65 y o. If a fortune teller told me what my life would be like now, say 30 or 40 or even 10 years ago, I would have laughed in his face.
Consider two people with $100K in stock and bond investments. One owns no real estate and pays rent. The other owns a $5M home free and clear. Do you really think the two of them should view their investments and their financial well-being equally? Yes, that is an extreme example, but I rest my case.

lightheir
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Re: Does the value of my home matter?

Post by lightheir » Fri Mar 23, 2018 11:15 pm

You definitely will want your home to not lose a lot of value after you buy it

A big reason - you will be locked out of refinancing your home loan if your house is worth less than your loan.

Also, more obviously, as mentioned above, it makes it harder to move/relocate if needed.

carolinaman
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Re: Does the value of my home matter?

Post by carolinaman » Sat Mar 24, 2018 8:08 am

First and foremost, your home should meet your family's needs. I think being in a safe and stable neighborhood is important and one that is convenient to good schools, shopping and other facilities you want and need. Long term, as you age, you want to be sure you have nearby access to good medical facilities.

I do not think you need to keep buying more expensive homes as your income increases, provided you are satisfied with what you have. We built our current home at age 29 and still live in it 44 years later. Fortunately, it is a ranch style which is more friendly to seniors. We could have afforded much bigger and more expensive homes later but never saw the need to do that. I have never seen a home as an investment. We paid our mortgage off in 18 years and have not had a mortgage payment for 25 years. That has always been a comforting thought. Instead, we have saved enough to have a comfortable retirement.

We have done a lot of remodeling to our home in the past 10 years. I am guessing our remodeling costs have exceeded $50k. We actually seriously considered buying another home before I retired but we never found anything we liked better than what we have. Our home is somewhat unique in that it has 2+ acres of wooded land and sits off the road 350'. It is very private which we value a lot.

In short, to answer your question: "if we stay within the same relative housing market, does the value of my house matter all that much ? ", IMO the answer is no. I think you have this figured out. Best wishes.

delamer
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Re: Does the value of my home matter?

Post by delamer » Sat Mar 24, 2018 9:21 am

The equity that you have in your home is what I’d focus on. Obviously, the equity is in part a reflection of its value.

Take two families who are neighbors. The houses that they each live in are worth $300,000. One family has 20% equity, or $60,000. The other family rents and so has $0 equity.

All other things being equal, the owning family has a higher net worth.

dbr
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Re: Does the value of my home matter?

Post by dbr » Sat Mar 24, 2018 9:34 am

carolinaman wrote:
Sat Mar 24, 2018 8:08 am

In short, to answer your question: "if we stay within the same relative housing market, does the value of my house matter all that much ? ", IMO the answer is no. I think you have this figured out. Best wishes.
That is true within the limits of the premise. A factor perhaps overlooked is how much you can lose and have to insure for in case of a lawsuit or a natural disaster.

The longer run point is that it is short sighted to plan only for when that premise is valid.

I am not sure what the logic is of trying to convince oneself that the value of one's house (net equity) "doesn't matter." I wonder if this is a question about how much one is justified in allocating to the cost of buying a home or some other hidden question here.

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Phineas J. Whoopee
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Re: Does the value of my home matter?

Post by Phineas J. Whoopee » Sat Mar 24, 2018 2:41 pm

There are two aspects of the value of an owned home:

1) On the principle that money not spent is equivalent to additional after-tax income that is spent, it saves you the rent you would have to pay to live in the same place if somebody else owned it; and

2) Unlike paying rent to somebody else the home has residual value to you and/or your heirs.

It certainly is an asset, and contributes positively to net worth except so many people seem to want to redefine the technical finance term.

I'm more and more convinced that those who say an owend home is not an asset are overly focused on their cash flow statement, when they also should consider their balance sheet.

PJW
Last edited by Phineas J. Whoopee on Sat Mar 24, 2018 3:03 pm, edited 2 times in total.

longinvest
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Re: Does the value of my home matter?

Post by longinvest » Sat Mar 24, 2018 2:48 pm

Phineas J. Whoopee wrote:
Sat Mar 24, 2018 2:41 pm
I'm more and more convinced that those who say a home is not an asset are overly focused on their cash flow statement, when they also should consider their balance sheet.
I agree that both the cash flow statement and the balance sheet are important.

As to whether the value of the home matters, I would say that if it didn't matter, one wouldn't need insurance for the home. Right? In other words, it matters but it's not liquid. It's part of the balance sheet, but its impact on the cash flow statement is complex*.

* I'll stop here, because this could easily fill an entire topic (or more) in itself. Interested readers can search for rent vs buy topics.
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Luke Duke
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Re: Does the value of my home matter?

Post by Luke Duke » Mon Mar 26, 2018 8:06 am

chrischris wrote:
Fri Mar 23, 2018 12:21 pm
Does the value of my home matter?
It matters to your taxing authority.

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