Home Values: Why You Should Stop Worrying About Yours

Why you should stop worrying about your home valueChecking your home's value on websites has become an almost weekly obsession with many. That obsession is being fed by stories like one from The New York Times declaring that owning a home is no longer a way to build wealth.

As long as you're not planning to move, you should stop worrying about the long-term value for your home. Yes, prices are down and may even go down a little bit further, but all signs seem to indicate that we're the near the bottom -- if not at the bottom. So let's look at five reasons to stop worrying about whether or not you should have bought your home and where it's price might be going.

Reason 1: Your House Is Your Home

As long as you plan to live in that house for 10 or 20 or more years, think of your house as a place to build family memories, not as an asset that you have to worry about selling. One thing is certain about the housing market: Prices will go up and down many times when you own a house for the long term. This current market may be more volatile than we've ever seen, but the worst is over. Instead of thinking about it as a housing asset, think about it as your family's home -- a place to live, not an asset to be sold.

Reason 2: Get Greedy When Others Are Fearful

Stock guru and multibillionaire Warren Buffett's attitude about buying and selling stocks works well for people who plan to hold on to their homes for the long term. He's said many times that he buys for the long term and doesn't watch the daily stock prices. His statement after the crash in 2001 also fits the current state of the housing market: "Occasional outbreaks of those two super-contagious diseases, fear and greed, will forever occur in the investment community. The timing of these epidemics is equally unpredictable both as to duration and degree. Therefore we never try to anticipate the arrival or departure of either. We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful."

That article in the New York Times clearly shows people are fearful and have given up on the housing market, which for Buffett and other value investors can be a clear sign that it may be time to get back into the market not time to get out of it.

Reason 3: You Can't Time the Bottom

While investors have tried for years to time the bottom on stocks, few have been successful and even those who have usually state afterward that it was purely luck. You have two choices when purchasing an asset, buy it on the way down, but near the bottom or buy it when it bounces back. Value investors have learned over the years buying an asset on the way down gives you much more control of the price you'll pay. Often if you wait to catch the bottom, you'll miss the boat completely because the bounce-back is usually quick when it happens. The Cleveland market is a good example of that quick bounce-back with prices jumping 53.8 percent in one year. You can expect that to happen in other hard-hit markets as the foreclosures work though the system. The big questions are when will that happen in your area, and will you miss the bottom?

Reason 4: Your Home as Part of Your Retirement Portfolio

A home that you own free and clear in retirement can be worth hundreds of thousands of dollars, even if the price of the home has fallen. For example, if your mortgage is paid off you will no longer have a monthly housing expense. Suppose the renter next door is paying $1,000 a month. How much do you need in retirement savings to pay $1,000 a month in rent or $12,000 a year? Since most investment counselors recommend that you take only about 4 percent of your portfolio out each year, to have $12,000 per year to take out of a retirement portfolio, that portfolio would need to be worth $300,000. So this person who owns their own home has an asset worth $300,000 to them in retirement, even if the market value of the home is less.

If you do fall short on cash in retirement you can even consider a reverse mortgage, which helps you get the equity out of your paid-off home to help with medical bills or other expenses. You get the cash and can stay in the home as long as you live. As a renter, you won't have that option.

Reason 5: Even Pessimists Urge Caution

Even Robert Shiller, who became famous with his book, "Irrational Exuberance," about the stock market crash, urges caution in how we react to the recent housing report. He calls that report "anomalous" in a Bloomberg interview. Everyone who understood the marketplace was expecting a drop after the homebuyer tax break ended. People rushed to close homes by the deadline of June 30 and pushed what likely would have been July closings into June. While Shiller does think house prices may drop further, he does not think the recent report indicates a reason to panic.

So as long as you're not planning to sell any time soon, stop worrying about housing prices and start enjoying your home.

Lita Epstein has written more than 25 books including "The Complete idiot's Guide to Value Investing and Working After Retirement for Dummies."

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