When will my home regain the value it has lost since 2006?
I get this question a lot and I answer it this way. If you purchased your home more than 5 years ago, you have
not lost any money. That may seem incredible, but consider this. Traditionally, real estate will appreciate about 4%–5% per year. This has been true as far back as records have been kept.
But, during the period from 2000–2006, real estate shot up a staggering 89%! That was the abnormality. If you had sold during this time, you would have made a lot of money… and if you bought during this time, you have lost a lot and it will be a long time, if ever, before you recover those losses.
So a home purchased before the "bubble" will continue to accrue value at the historic rate and if you didn’t sell, you missed an opportunity at a windfall... but you did not lose money.
We need to go back to the traditional way of thinking about real estate to a time when people thought of home–ownership as an integral part of their lives. A place to raise a family, celebrate occasions, improve upon and see as a long–term investment that would gain in value at a slow, steady rate. A home was part of the family, not a way to make a fast buck.
But during 2000–2006, real estate became regarded as a get–rich–quick investment vehicle in much the same way as a stock. Get in at any cost and make a lot of money fast because it was going to continue to escalate in value at a wild pace forever.
Lenders contributed to the problem by relaxing their requirements to enable virtually anybody to buy a home, whether they could afford it or not.
But, inevitably, what goes up must come down. But don’t think of the downtrend as a crash. It is a return to "normalcy" where once again real estate will take its rightful place in our society and once again become the slow, steady, reliable investment it has always been.
I welcome all your real estate questions and will do my best to answer them.
Joe@JoeBrant.com
