Home values

If you’re a recent home buyer, you may have been looking at the recent real estate news with a great deal of concern. Home values are dropping; it is a national trend, and a lot of homeowners are feeling a pinch. The most important thing to remember, however, is not to panic.

A house is the largest purchase that the average American makes, and it’s only natural for a homeowner to be concerned at a drop in home values. However, unless you’ve entered the market recently, as a short-term investment, it’s important to remember that, as long as you don’t sell or refinance, you are somewhat insulated, as an owner, from the drop in value.

To begin with, if you’ve been in your home for at least 8 to 10 years, you most likely have a fixed rate mortgage. This means that your house payment is stable; it won’t change, even if the value of your house changes. That works for increases as well as decreases, and it is why long term home ownership is a good investment for the average family. All you need to do to weather the current drop in the real estate market is wait; home values will turn back up, and any loss you take now will disappear.

Homeowners at risk form the slump in home values are those with little or no equity in their homes, and those whose incomes are not high enough to sustain their house payments. Unfortunately, due to the rise in sub-prime home loans in the last 5 years, this group is makes up as much as 20% of homeowners.