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Equity Only Matters If You’re Selling

There's certainly no shortage of negative press coverage of the current home prices and mortgage situation.  We hear every day about the high percentage of homeowners "under water" in their mortgage, owing more than the current value of their homes.  But, let's look at things realistically.  Can you buy the materials and hire the contractors to build your home again right now for what it's worth?  Probably not.   So, while we have a temporary situation of low valuations, it's driven in large part by the lack of demand fueled by fear.  A great many people, very happy in their homes just three years ago, are lamenting the decrease in the paper-value of their properties.  But, when asked, a large percentage of those same homeowners would say that they had not been considering selling their homes three years ago, and really weren't now either.  They just don't like the fact that they can't sell right now and realize the equity they had on paper in 2007.While a home isn't a liquid investment, and it requires significant costs to sell, we can compare the situation in some ways to the many stock market "crashes" or really bad days in the past.  Those who bailed at the low points were usually unhappy to see that their stocks retraced a large part of their losses in the next six to twelve months.  No, it's unlikely that your home will see any significant equity increase in the next year, it's a longer timeline situation.  If you can't build them for today's selling prices, then the eventual increase in demand must bring about higher home prices in the future.So, if you weren't even considering selling three years ago, and didn't have it in your plans for right now, just continue to enjoy your home and wait for better days.  Equity isn't spendable until you sell it.

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