August 16th, 2013 1:39 PM by Joan Rusco
We love hearing the almost daily news reports that there's a Minnesota housing recovery. That's good news for current homeowners and good news for Veterans hoping to see some investment return from their real estate. However it's going to take more recovery to recoup the value lost since the peak years almost a decade ago. Let us explain as we crawl into the weeds surrounding home values in our state.
A leading real estate data company says the price of an average home in the Twin Cities area declined about 30% since those price peak years of 2005-2006. Honestly, don't we all want our homes to appreciate in value? What if we want to move up or move on? Wouldn't we rather see some cash money come back to us for all those house payments we've made? Of course we would. Let's get back to that average home price declining since the peak years and let's also say your home followed that trend and is worth 30% less today than it was when you bought it (or refinanced) in 2005-2006. The unfortunate truth is your house is going to have to appreciate not 30% but 40% to get back where you were. I'll explain this simple truth so read on.
The explanation can be illustrated with a simple example. Let's say you have $175 cash in your pocket. Somehow $50 of that cash is lost. You now have $125 in your pocket or about 71% of your $175. You decide that you want to invest the $125 so it will grow back to the original $175. How much growth would you need? The answer is your $125 would have to grow 40% to become $175. $50 is 40% of $125. Now just add three zeros to all these numbers and you would have an average home price in 2005 and 2006, the amount of decline since ($50,000) and the average price today $125,000. That illustrates the decline of about 30% and why you would have to see an appreciation of 40% to recoup your loss.
While we rejoice for homeowners on the news that we're seeing some recovery we want you to understand that it may be a slow road back from where we were because 40% is a lot of appreciation. We were with you then and we're sticking with you through this recovery. Be patient; enjoy the benefits of owning your own property and we hope you are taking advantage of the benefits you've earned as a Veteran or active duty Military person. One huge advantage you have is the possible qualification to have financed (or refinanced) your home with a VA Loan from VALoansMN. We'd be glad to go over these benefits with you at your convenience. Just give us a call 612=240-9922.