How much is your real estate appreciating?

Posted under How to buy a house

An increase in region’s median price is not the best indicator

The southern California housing market is hot. So hot, that in January 2004, the median home price in Malibu was up 106.7 percent from a year ago. Did Malibu homeowners actually see the price of their homes double in just one year?

For years, first-time home buyers who typically buy less-expensive homes, dominated the home-sale market. When the sale of less-expensive homes outpaces the sale of more-expensive homes, the median home price stays relatively low. In 2003, trade-up buyers accounted for 70 percent of the home sales in California, according to the California Association of Realtors. Trade-up buyers purchase more-expensive homes. When there is an increase in the sales of more-expensive homes relative to the sales of less-expensive homes, the median price increases. A 10 percent increase in the median price doesn’t necessarily mean that your home appreciated 10 percent. It could have appreciated more or less than that. It’s difficult to measure absolute home-price appreciation. For one thing, you can find different rates of appreciation within one market. For example, from 2000 through 2002, the low end of the market appreciated in most places, while the upper-end market prices actually dropped in some areas during that time. One measure of home-price appreciation uses refinances to gauge price increases and decreases. This measure is inaccurate at best.

Refinance appraisals are notorious for being either high or low relative to current market value. The appraiser is merely attempting to justify the home value for the lender. So, if the borrower is taking out a small loan relative to the value of the home, the appraisal tends to come in low. HOMEOWNER’S TIP: The only accurate gauge of your home’s current value is the market.

Here’s an idea - keep an eye on sales of similar homes in your neighborhood. Visiting Sunday open houses, and then following up to find out the ultimate sale price is one way to gather useful pricing information. Another way is to ask me, Holly Leano, your local real estate agent to prepare a comparative market evaluation. In active markets where the inventory of homes for sale is very low, multiple offers can result in a sale at an astronomically high price. A Piedmont, Calif., home buyer recently paid approximately $400,000 over the asking price in a multiple-offer competition. This buyer was desperate after having looked for a home for two years.

In today’s market it would be nice if all sellers had buyers like in the example above. However, it would be imprudent to base the value of your home on an isolated incidence like this. Fair market value is more accurately defined by the price a willing buyer will pay and the price a willing seller will accept, when neither is under duress

By Holly Leano, REALTOR and Sr Mortgage Loan Consultant with excerpts from original article written by Dian Hymer

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