I’m not sure what to make of the value of our home is right now. A house in our neighborhood recently went up for sale – with a lot of square footage & high finish quality – but with a relatively low asking price. I really would have expected it would be priced 10% higher.
We’re not thinking about selling anytime soon, but I still like to keep my eye on what houses are going for in our area. Nationally, the headlines are filled with articles about an explosion in home prices. The Case-Schiller National Home Price index shows that prices have been on the rise since 2012. They shot up an amazing 11% in the last 12 months (+8% in our zip code, according to Zillow).
Despite the incredibly positive national trend, I don’t think we’ve made a penny on our house since we built it 11 years ago. Our current Zillow price estimate is about the same as what we originally paid for it. Relative to our neighbors’ house now for sale, even that seems high.
In terms of investment return, it certainly takes the cake as our biggest ‘Financial Failure’. We built at the bottom of the market in 2009, so we hoped we would see some upside as the housing market recovered. We understood it could take some time since new custom homes come with a premium of ~10-15% to the builder.
Still, after a decade, I expected that premium to be covered by now. Especially given that we’ve added 350 finished square feet, screened our deck into a covered, three-season porch, and added a lot of built-in cabinetry.
Of course our home is much more than a financial investment to us. We’re on a nice lot, in a terrific neighborhood, and both Money magazine and US News & World Report have ranked our city as a “Best City To Live” (#9) and “Best Small City” (#23) in America. Everything in our house is designed exactly as we wanted it and even our new puppy seems to like the digs. 🙂
Still, many of the houses in our neighborhood have those same benefits and the market isn’t rewarding them when they go up for sale.
Here’s hoping our neighbors are soon receiving multiple offers on their house and it goes for way over asking price! (With a nice family and a cute dog!)
How are home values doing in your immediate neighborhood?
Image Credit: Pixabay
MrFireStation 
House prices are nose bleed high in our area and prices just keep going up. In theory our house is a huge asset that we could make a ton of profit on if we sold. However, with the high prices we would end up just turning around and paying even more for a place to live unless we were willing to down size or move to a lower cost of living area.
I think there are many who are flipping houses and making a killing in our area. The low interest rates, high costs of materials, and covid delays in building new homes will keep the prices inflated.
LikeLiked by 2 people
Tech’s point is exactly why I’ve never really considered our home as an “investment” and don’t count its value toward my “net worth” from a retirement portfolio point-of-view. Even though our home in CA is worth more than 2.5x what we purchased it for (20 years ago), ALL homes in the area have appreciated the same relative amount. Since we’re not looking to leave the area, it means we’ve effectively just been keeping up with inflation.
If, in MN, the home price inflation is essentially 0%, then you’re in no worse shape than we are even if your home hasn’t appreciated at all (with the exception that we have a “parachute” that we could use if we ever were so desperate to need that cash and made the move to a lower-cost area). Hopefully, that’s never the case and certainly not something we would depend on as part of our financial strategy.
LikeLiked by 1 person
Housing has actually been very ‘hot’ here in MN, just not in our neighborhood for some puzzling reason. Our zip code is up 8% in the last year. I’m thinking that it is only the entry-level houses & new construction (condos & townhomes) that are pushing the market. The luxury homes in our neighborhood (>5K sqft) seem stone cold.
LikeLike
Hopefully that appreciation isn’t driving your taxes up with it. Our taxes actually went down.
LikeLike
Our home in CT nosedived in value after 2005, due to dismal all-blue government deficits, always increasing taxes while underfunding cushy public pensions. Lethal combo. In 2020, values skyrocketed as Manhattanites fled the rotten Big Apple. As bad as CT deficits remain, NY is worse. So my home is now again worth what it was in 2005. And 10 times what we paid for it in 1978. We bought small, stayed small, and live small. The long-term is my horizon.
LikeLiked by 1 person
It sounds like that 1978 to 2005 stretch was pretty lucrative! At least through the stagnation, you still had that in your proverbial pocket. We’ve moved up a few times, but never stretched as far as we could have and never bought a cabin, boat, or vacation home.
LikeLike
Prices in the mid-Atlantic are definitely up. It’s a supply thing in our area. There just aren’t enough sellers, and lumber and material costs are through the roof. Our son-in-law is a custom builder and they have 14 houses under construction this year. They just can’t build them fast enough. OSB lumber was $6-$8 per sheet just three years ago. It’s now $45-$48 per sheet. It’s just crazy time here.
Our personal home was always meant to be our final home, so we worried little about construction costs in 2008 when we built. We built to our preferences, and our place is so unusual from a land and water setting, that I could likely sell it in the worst market because of its unique property and setting. We built in the middle of 18 pristine acres with a half mile of continuous lake waterfront, so it was always about being the only property like it within a two hour drive of our market, so from my perspective I never worried about tying up the capital. My kids call it the family compound! Hopefully my daughters make a fortune on it some day, when we are gone and they finally decide to sell it.
LikeLiked by 1 person
That sounds like a fantastic set up, Thom. The ‘family compound’ – just like the Kennedy’s on Nantucket! 🙂
LikeLike
Lol! Far from to Kennedy compound level! FYI, I read another article today explaining the rise in construction material costs. It pointed to increased assets due to COVID (stimulus) and DIY-er making renovations as a result, thus driving up costs as the demand-side took over. Interesting perspective.
LikeLiked by 1 person
I’m afraid all that demand is going to inevitably wind up as scary levels of inflation!
LikeLike