Rising Property Values: What Do They Mean?

Since the housing bubble burst in 2008 home prices have been going up, although the rate of increase does change from year-to-year. Either way, it’s exciting to finally have home property values at or above where they were when the market crashed, but some may have questions about what rising property values mean in terms of the economy and for individual homebuyers and sellers.

What is property value?

Before you can fully understand why rising property values are a good or bad thing, you must first learn what property value means as there are many ways in which your home is “valued”. When talking in terms of the economy, the “value” of your home is calculated either by its appreciation or depreciation.

This simply means the value of your home is calculated by, and changes according to, market conditions. So either your home increased in value, appreciated, or decreased in value, depreciated, based on the market. Luckily for you, home prices have risen over the past few years, so your home’s value likely appreciated, but what does that mean for you and for the economy?

The benefit for home sellers

If you’ve been interested in selling your home for a while, now may be the right time to place your home on the market. Rising property values mean you may be able to sell your home for the new appreciated value which may be more than, perhaps significantly more than, the price you initially paid.

The benefits for homeowners

Cash-out refinance

If you’re not looking to change locations, rising property values can still be advantageous to you. If your home’s value has gone up you could consider the option of doing a cash-out refinance. This type of refinance gives you the option to refinance into a new mortgage for more than what you owe which means you can use the money you get in any way you want.

Eliminate private mortgage insurance

If the value of your home has risen, and you currently pay for private mortgage insurance (PMI), you may be able to eliminate the PMI to incur extra savings. Basically if your home’s value has gone up your loan-to-value (LTV) ratio may have also changed. You can check with your lender or servicer about whether your LTV has reached the 80% ratio needed to cancel.

The benefit for homebuyers

If you’re looking to buy, even you can reap the rewards of the rising property values. As long as you jump on the prices before they get too high and interest rates rise, you can score a good deal. If you buy soon enough you can get a house at a decent price then see the value of the home appreciate with the market.

The benefit for the economy

As the housing market slowly bounces back it means other areas of the economy will strengthen as well. You may see “For Sale” signs being snatched up more quickly and in those same neighborhoods businesses will begin or continue to boom which is a good sign the neighborhood is a good place to be.

Fluctuation happens

In general, rising property values are a good sign. However, there will always be fluctuation within the housing market and the economy. As prices rise be sure to jump on the opportunity if you’re looking to sell, refinance, or buy.

How are you taking advantage of the rising property values?