The Real Value of Real Estate
What is your home’s real value? No, we don’t mean the amount of your home appraisal - we mean the actual value, emotionally and personally, to you and your family.
This is the topic broached by Mark Pothier, the senior assistant business editor of the Boston Globe, in a recent column in the newspaper’s Sunday magazine. For all the talk of Massachusetts mortgage rates, market trends, asking prices and the like, we may be overlooking a more important view - one that previous generations embraced when it comes to home ownership.
After his in-laws died in 2005, Pothier writes that his family listed their house with an agent. Someone would eventually buy the place, and the deed would change hands. But the sense of home they nurtured for four decades would stay in the family.
The standard ads were sent to local newspapers and real estate flyers, their wording slashing 40 years of character to blurbs. Great in-town property. Near everything! Four bedrooms, heated sunroom, and large walk-in closet. Living room with fireplace!
A local real estate agent soon brought people to look around. They asked if the carpeting covered hardwood and wondered about the origin of a stain on the dining room ceiling. There was a lot of talk about “potential.”
In the following months, family and friends began to ask questions. Many of them sounded worried. “How many people have been through?” “Anyone make an offer yet?”
Some dispensed advice. Ask the agent to schedule more open houses. Think about renting it out for a year. Housing analysts already were poking at the bubble that lifted the Massachusetts housing market to new highs.
“For sale” signs were putting down roots on front lawns. Inventory across the state began collecting dust, the broker said, and buyers were not in a hurry to make decisions.
In early 2006, as winter wore into spring, they dropped the listing price once, twice, and then a third time. That’s when the hard reality of the real estate market: Almost no one outside of immediate family associated the parents with the house anymore. While they still treasured it, water stain and all, others saw a commodity in danger of becoming a liability.
These days, people tend to think of houses as places to stay while waiting to go somewhere else. They anticipate corporate headquarters moving jobs out of state or fear layoffs will arrive with the next quarterly report.
Perhaps they covet a bigger house with more amenities. Everyone seems to require gleaming appliances, new counters, huge bathrooms. But to previous generations, the attachment to where they lived was as secure as a foundation.
Houses were not acquired primarily for investment purposes or seen as banks to tap for a debt consolidation mortgage or a new car. They would not have considered buying one with the idea of “flipping” it for profit.
But they also bought during a time when prices were modest, job security was the norm, pensions were still intact, and marriages usually lasted longer than the mortgage. Home ownership was less complicated then.
Today’s first-time home buyers are 32 years old and earn about $58,000 each, according to a recent National Association of Realtors survey. They spend $165,000 on a house - clearly not in Massachusetts - and plan to stay six years.
The typical repeat buyer is 47, makes almost $82,000 (still not enough for a huge home mortgage loan) and hangs on to the house for nine years. But the emotions associated with a real estate purchase can’t be quantified so easily. And it feels as if we’re more clinical about obtaining a deed than our parents were.
Truth be told, most of us are acutely aware of our home’s market value and obsess about whether it is worth more or less than last month.
Some bookmark websites like zillow.com, which tracks estimated house prices as if the housing market were the stock market. The house in question finally sold in November, for about $80,000 less than we originally anticipated. But the lights are on again when you drive by, and that’s worth something.
A young family is making it their new home. I hope that they have the time to truly settle in, no matter what direction real estate charts travel in the coming years. Because that is a fair market value often overlooked.
SOURCE: Boston Globe Magazine