by Mike Colpitts 
The truth about being house rich has its good sides but it also has it’s down sides.- Feeling like your rich because your home’s value has gone up may have its pluses but there’s little you can do to get the cash out except to sell…. or is there?
- Refinancing is an option but that has its price. Selling also has its benefits.
Feeling like your rich because the value of your home has gone up exponentially is one of the best things about being a homeowner. A home that’s worth more makes homeowners feel better about their financial stability and way of life.
However, like most things in life there’s a catch. Here’s the truth about being house rich: If you live in the home as a primary residence to keep a roof over your head there’s little you can do other than sell the place to reap the big rewards of the higher home value. A refinance allows owners to pull money out of the property but that comes with fees and an increase in your monthly mortgage payment.
The biggest upside to being equity rich is a stronger financial profile and higher net worth. That’s all on paper. A home that’s worth more in the marketplace allows homeowners to feel better about their financial stability and way of life. Feeling house rich may be a wonderful feeling but there is a catch. As a homeowner, if you sold your home tomorrow you’d be able to pocket more of the profits.
As homeowners we typically think are homes are worth more than they actually are. As home values rose when interest rates were at their historic lows everything else also went up, including property taxes, insurance costs and maintenance costs. Everything from paint to kitchen cabinets skyrocketed, especially during the pandemic.
States with the highest home prices had the highest demand, and they also tend to have the highest cost of living. Living in a place where it costs more to live usually means you can save less. Living outside an area that has a higher cost of living may be a consideration but places like that are hard to find.
So if your home is worth more, it costs more to keep it up. Home values change but the housing market generally moves slowly when it comes to values coming down. Home prices generally go up faster than they come down because many homeowners won’t list their homes for a lower price or at market until they are motivated to do so. There are two reasons people sell their homes: An opportunity or a problem.
It’s no surprise. Most of us have been there. Being house rich doesn’t mean staying house rich. Home prices go up and down and the truth about being equity rich changes over time. It’s no fun to be house poor, which is when you are overleveraged on a property. The loan-to-value on homes in which their owners are overleveraged can be painful. In the past some homeowners were upside down on their mortgages or owed more on their homes than current market value.
Home values in the Fort Myers area these days are coming down, and they have been for about three years. In order to sell your home for the highest price it takes strong marketing. If you are interested in selling contact me so we can talk. That way you might be able to keep some of the equity you built up as a homeowner.
Thinking about selling your home? Contact Mike Colpitts.