Sacramento Real Estate Blog

Remember when we all thought our homes were all that and more? Back when all we had to do to feel good about our houses was to go to a website where they gave you free market analyses (and a virtual cookie to go!) just for showing up? And if we needed to feel really good, all we had to do was call an appraiser? This was back when people were pulling money out of their homes to buy cars and vacations with?

I don’t even have to mention that those days are long gone. They might be here again eventually - given enough time - because human beings have very short memories and economic cycles are cyclical. But for the short term anyway, that idyllic time is over. Virtual market analyses are just plain old depressing and the people that pulled money out of their homes to buy cars and now almost living in them! So how do you still love your home? How - knowing that the foreclosure next door has sold for a fraction of what you paid for your house - can you be satisfied and decide not to chuck it all up and leave?

Foreclosures & Short Sales have Serious Consequences

Remember when you were growing up and your friends asked you to do something silly and you did it, what did the adults around you say? So if he jumps off a bridge, you will, too? Of course not, you thought. Of course I wouldn’t. I’m not that silly. Well, unfortunately, jumping off bridges (metaphorically speaking of course) has become pretty common lately. This does not apply to those people that have seriously been duped by being given the wrong mortgage they didn’t understand and I’ve met them. There are those however that just want out of their home because it has lost value. Retirement funds and other funds including savings accounts intact. I’ve met these people as well. These are people who can make their mortgage payments, but just don’t want to. They didn’t buy a home, they bought a speculation and now that it’s lost value, they want out.

Foreclosures and short sales can leave serious blemishes on your credit history - results that can reverberate for years to come. And just because everyone else is doing it and it seems like times are tough economically, there is so much bad news out there and you seem to have a get out of jail free card, so to speak, doesn’t mean you should use it. You will still need somewhere to live. You still need credit. And decisions like short sales and letting a home get foreclosed on you can haunt you for a long time after this economy recovers. If you have other options, explore them first.

Mortgage Interest Deduction

Besides building long term wealth one mortgage payment at a time (especially if you are a landlord) your home helps you out financially at tax time with the mortgage interest deduction. Most homeowners can deduct their interest payments on their mortgage under itemized deductions. Property taxes are also deductible. Check with your individual tax planners but for most tax payers, the mortgage interest tax deduction is the largest single deduction on their income taxes. (There has lately been some talk at the California Association of Realtors® regarding this deduction and if there are changes, we will definitely mention them on this blog.)

Security Blanket

Perhaps the most overlooked part of a home in all this talk lately about falling home prices and so on is just the simple fact that your home is your security blanket. Most people don’t buy homes to invest in and while that may be a consideration it is not the premier reason for a house purchase. Most people buy homes to live in, a place to come to relax in after a hard day’s work, a place to have friends and family over and perhaps even a place to leave to their heirs.

And in this scheme of things, falling home prices don’t matter as much. It is important to remember the reasons for buying a home. Because unlike market values that can be measured every month with numbers that can turn someone blue in the face on the news, the personal value you have in a home can not be measured as easily and yet can rank higher in your mind.

So if you’re tired of seeing your house value fall, but are in it for the long term, turn off the television. Make those repairs, put in that baby gate at the top of the stairs, paint your bedroom a sunset pastel orange. You might not change its market value but you might just change how you feel about it and that might do. For now.