It is natural for people to be concerned that they are buying a house when prices are at their peak, and people worry about that in almost any market. So when you start hearing news about the market shifting, and home prices coming down, you might wonder if your house is worth less than you paid for it (if you bought it in the past couple of years).
It can (and does) happen. Real estate values aren’t on a constant upward trend; they do take a dip here and there. But overall, the value of your house will appreciate over the years, despite some dips. So, unless you have to sell when prices are lower than you paid for your house, you can always just wait for the market to bounce back before selling.
The good news is that while prices have been adjusting down in some areas, they have not been falling drastically. In fact, home prices are only predicted to decline 4% in the coming year, as this Yahoo article states. Considering how much appreciation many homeowners gained in the past few years, that would mean many homes will still be worth more than when they were purchased.
So, for the most part, you don’t have to sweat the news that prices are coming down.
However, it can be an issue if you find yourself in a position where you are unable to pay your mortgage and your value has dropped. According to this article from First Journal Tuesday, mortgage delinquencies have been on the rise recently. They increased from the recent bottom of 2.75% homeowners (at least 30 days behind) back in May 2022, up to 3% in November.
That is not a huge increase, and it is still fairly low, but if you find yourself in that percentage of people, it can be scary and concerning.
When people find themselves behind on mortgage payments, there can be a tendency to wait until it is too late to deal with it. Just hoping things will get better and resolve themselves is not the best approach.
Here are some things you can do if you are having trouble making your payments:
Call and discuss your circumstances with your lender.
If it is a temporary issue and you can reasonably expect to get caught up and continue paying in a short period of time, they may be willing to work with you. They might give you a forbearance (a temporary hold on your payments) while you get back on your feet. Or they might be willing to give you a modified payment for a period of time. But if they are unwilling to help in any way, they may at least give you time to sell your house—or approve a short sale if necessary—rather than initiate the foreclosure process.
Consider selling your house.
If you are having trouble keeping up with payments, it may make sense to sell your house and buy a lower priced one, or rent for a while. Just because you are unable to make your payments doesn’t mean you can’t or won’t make money on the sale of your house. Speak to a local real estate agent and get a feel for how much your house is currently worth. Despite prices coming down in some areas, you might find that there is enough equity to sell and walk away with a profit, considering how much values have gone up in the past few years.
Whichever route you choose if you are struggling to pay your mortgage, the key is to do it sooner rather than later to avoid getting too far in the hole with your lender, or before prices potentially drop further than forecasted.
While there is a lot of news about home prices falling, the forecast of a 4% drop in the next year should not be an issue for most homeowners, even if they bought in the past couple of years.
But there is a slight uptick in the number of people who are at least 30 days behind on their mortgage payments. If you are one of the 3% of people who are delinquent on their mortgage, make sure to discuss the issue and potential resolutions with your lender. Or, if they are not willing to cooperate with you, consider selling your house. You might find that you could make a profit considering how much homes have appreciated in the past few years.
If you would like to discuss your specific situation with an experienced real estate advisors and/or lender, contact us or give us a call at 469-262-5411. We would be honored to assist you.