Dream Perspective

Any home, priced right, will sell.

A home's value is the price offered by the buyer and accepted by the seller, not what the broker suggests or what the owner wishes.

   Home ownership, the American Dream, has become a nightmare for many as values have plummeted and put households numerically "under water" -- the mortgage is higher than the home is worth.
   But consider this perspective. Those two numbers are relevant only if the house is for sale and the proceeds are needed to pay off the mortgage. If it's not for sale and you intend to stay in the house, it doesn't matter.
   We've heard this worry before, in the 1980s. Folks would buy a home for $50,000, and its value would soar to $100,000, then plummet to $80,000, leaving the owner to lament that they have "lost" $20,000. (The numbers are for example only. Actual prices differed.)
   But since the home was not for sale and the family had no plans to move, they were still ahead by $30,000. It was, in effect, a "paper loss," since the house was still home, and would remain so for some years to come.
   During the condo building boom, driven more by the availability of investment money than by housing demand, there were some who signed up to buy a condo while it was still under construction, hoping to sell it on completion for a quick, painless profit.
   These investors then got hurt when the market collapsed. They owned a condo they did not live in and did not want but could not sell. Like taking a stock market fling, they gambled and lost.
   Back then, owners were reminded that while they might not get as much for their home as they might have a year earlier, the property was not for sale a year earlier or at that time. Therefore, the numbers were not relevant. What was relevant was the original purchase price, which was often set 10 or 20 years earlier.


   Today's market, however, is complicated by the fact that some owners have lost their jobs, are unable to make the mortgage payments, and must sell. In addition, they may have credit card bills to pay off and need the sale proceeds for that. These are the ones who are, indeed, metaphorically "under water."
   In addition, there are those on the East Coast whose homes are in fact "under water" or swept away and destroyed by storm damage. The mortgage remains, but the home no longer exists.