JL's Columbia SC Real Estate Blog: You Didn't Really Lose Money. It Never Really Existed.

And if those people would have sold during the boom, they would have had to pay more for another home...

Great post JL.  We had a long discussion about this at a Women's Council of Realtors Luncheon a few months ago.  Agents were talking about how they counter this argument from a potential listing client.   Your explanation is great!

Same holds ture in the stock market.  It isn't real money until it is in your hands.  I also use a 3-5% return and figure what the home would be worth over the number of years owned.  That works really well.

JL...

I couldn't agree more. I would try but I think you wrapped it up nicely :)

TLW...ROAR!

Laura- They would have certainly had to pay more for the next one.

Rachelle- It can make for a good discussion can't it.

Bill- I know more people who think they lost money in stocks than real estate.

TLW- I try my best to get a point across.

I tell this to homeowners all the time. I have a few of my parents' friends tell me this and the own their home without any mortgages so after tell them and explaining this the appreciate that I put it up front. 

People always want to talk about what could've been.  It is what it is.  Can't spend something you don't have.  Oops, that statement might offend some banks!

I have always told my clients this very same thing.  People think they have lost money they never had in the first place.  I say be glad for what you DO have.

We as a society have to stop viewing our homes as investments and instead view them once again as homes.  William's assessment of 3-5% rate of appreciation is what people should expect.  Your not going to grow rich quick off of this type of return, but in the long run you'll do well.  And that's the key, long term outlook.  Great post and best of luck to you JL

Personally, I feel the exact same thing about the stock market.  People have been complaining about how much money they lost so they can't do this or that, but they didn't lose anything as it's all on paper.

People can sit and time a stock, time a  housing market, time an interest rate, but more than likely, they're all going to time it wrong to where they could have always gotten a better deal if they held out or moved quicker.

Great advice for people!  You can always say shoulda woulda coulda!  The future is the only thing that is real for a home.  Thanks!

For people staying in their homes for a long time market value doesn't mean anything.

The people hurt the worst were the ones who bought at the peak and then found themselves upside down when they needed to sell.

Greed is a terrible thing to see..... counting money you do NOT have as if you DID have it is just down right wrong in my opinion...

Greed is part of what got us into the market we have now.....

We need to be a nation of investors, NOT consumers.....

Don't look to get the profit NOW...wait a while....

I agree . . . but then there's the client in 2005 who refused to consider an offer of $750,000 for their run-down house that was being sold as land.  It's now worth about half that and they're still sitting on it!

JL - Laura Giannotta, Comment #1, is so correct!  It is all relative.

JL, in our area not being able to get back to the purchase price of a home after 6, 7, 8 years is common place from the 2001 and 2002 purchase timeframe. The other areas of the country it is new, but not around here. It is depressing sometime the slow appreciation or complete lack of recovery with prices, but it does come down to supply and demand, location, and the local economic conditions.

JL,

We have had those that wereforced to sell sooner thatn they had hoped and came in upsidedown  but then there were those that chose to re-finance and cash out.  HMMMMM

I agree with Donna's perspective...just like the stock market. It has been worth more and less...but it only matters what its worth when it is time to sell.

The problem is that some people made that phantom equity materialize by taking out a home equity loan.  It would be nice if that loan just disappeared now but they now have a real debt with the equity that no longer exists.

JL...

This is so simple and so brilliant! The same people probably bought new cars that are worth a fraction of what they paid for them but they don't care about that/ Congrats on the feature!

Quantifying loss in real estate is only realized when you sell it, or can't afford the pyments. Great feature post

JL - You couldn't have stated this any better!  Absolutely spot on! 

I agree with what Tim just said. Yes, they took out a home equity loan that banks were pushing to consumers like drug dealers.

I wish I thought that people have learned that their homes are not 401k plans, checking accounts or get rich quick schemes.  And you are absolutely right - it was all play money.

Does "buy and hold" apply to real estate too?  Houses are investments, and we all want them to go up (when we own them).  While it's true that investments go down, it still hurts.

They somehow don't get it was all on paper to begin with...

Featured @ Club Chaos

JL- You are correct.  Same with our commissions.  Sometimes I think I'll be making 1.5% but stuff happens and it ends up being .50%.  Unfortunately for these folks...perception is reality.  We oif course know that unless you can time the market perfectly the assessment that they lost money just isn't true!  Great topic

The reality of the so called lost equity in my home hit me a few months back.  I wanted to take out a home equity loan to fix the roof and to finally remodel my ancient kitchen and bathrooms.  I can easily make the payments but my house can't appraise for what it once did.  So it did translate into a real loss for me because I now can't borrow real money that I could have before.  I have to live in substandard housing even though I can afford higher payments.

I totally agree with you. You make your point very well. But, sadly, it still stings a little when you think about what you may have had.

The hard truth in our market though is that people have mortgages on homes that are only worth 1/3 to 1/2 of what they owe.  When you still have to pay for the mortgage its hard to tell someone, they aren't losing anything.

Hi JL -- Sometimes sellers inject artifical constraints into the marketplace when they aren't realistic.  Some can't, and that's another category, but an artifical constraint all the same if the market is at a different place today.  A savvy buyer and buyers agent will sniff these out and stay away from them.

Good point! Some times you just have to try to appreciate what you do have. The glass can be half empty or it can be half full. The choice is always yours to make.

JL, this is one cold hard fact that is terribly difficult to accept! This is where "The truth hurts" really applies!!

The reality is that the fluctuations in prices can have a disturbing affect on people.  Certainly it's normal to feel like you've lost money.  If you were to prepare a net worth statement, which everyone should do, at least with some frequency, you'd have to "mark to market" the value of every asset.  Home prices have tumbled and the reality  is that a net worth statement that includes real estate would be impacted.  It's a hard sell to say that the money never existed.  Yet I do believe in "money heaven," where much of this money has gone.

JL~  Great post that is catching some fire!!  People certainly do not like to think about the value of their home going backwards!  My new ?'s are...Do you like the home?  Can you see yourself living here? Is it affordable to you?  Just buy it for these reasons ALONE!!  Happy Holidays!

JL,

If you're selling and buying into the same market it doesn't matter, everything being equal.

Money on paper is NEVER money in the bank until you are holding a deposit slip that is endorsed by your bank! Yes equity was lost but just as many of my fellow AR Realtors state above...you sold low and bought low. Ideally you want to buy low and sell high.  Sometimes you just can't do that.  But yes it all evens at the end.

JL,

great post.. I couldnt' agree more. the glass is certainly half full!

We don't have money that we don't have  ...

The one that gets me the most:

The sellers way overprice their home.  They reduce it to just somewhat overpriced and get a fair market price offer.  They refuse to even consider it because "we've already lost $xx"  !!

I wish there were a way to convince sellers that when they sell their house for a fair price they did not "lose" the money between that and what they had overpriced it at!

I once had buyers who said they lost $200K on the sale of their home in another state. Come to find out, they would have made $200K more on the sale of their home if they had sold it 2 years sooner. They hadn't actually lost money on their sale.

With that attitude, I guess I could say that I've lost millions in the last 12 years of my real estate career because of all the properties that I could have bought that increased in value!

I agree. Money is not lost it just changes hands. It's a zero sum game.

My father always said "money not earned isn't money lost, and money saved isn't money made." It's very true, and surprising how many people get confused.

Julie

Under certain conditions you are correct. However, I know people who did buy with real money and a large chunk of it is gone. It would have been gone had they invested in the stock market, too. But, they did not buy to flip or trade up. Their money is gone and it is in someone else's pocket. The paradigm shift of economics.

I get this all the time. Not a realistic view on things. Because, when you sell in the boom, you have to buy in the boom. You can't have your cake and eat it to.

JL..What a wonderful post and well worth a star..Thanks

Hannah

JL, I had a friend lose their home in foreclosure because they had 'withdrawn' the money from their home. So the money to them was real...but they didn't realize the had already taken it, spent it and it was gone!!  When it came to sell,  the money they had already pulled out wasn't enough, they wanted more...call it greed, call it whatever, they could have sold it for what was owed and walked away with the loans paid, but they stuck to their guns (I stuck to mine) and after they convinced another agent to try and sell it for more, more, more....couldn't get a buyer and eventually couldn't even get a short sale approved in time and lost it to foreclosure.

JL...Agreed!  And with the above comments.  It is all in our attitude.  If we can find things to be grateful for, the wold is a much happier place!

great blog - and very factual too!!

JL:  Very well said.  Thank you for writing such a good post.

I agree that whatever your home was worth at the peak is irrelavent unless you actually sold and capatalized. However, I work in an area of California where home prices, as an example, jumped from $350,000 to $1,100,000 over a 10 year period of time. That same home is probably worth $750,000 now. So, there are many out here who feel that their ship has sailed without them on it in spite of the fact that their home more than doubled in 10 years. In many cases these homeowners have mortgages, and if you assume a 20% down payment when they purchased they have realized at 900% return on their money over 10 years.

That crazy market was just an anomaly - had the market continued in a normal percentage with a more normal gain in equity most folks (who didn't buy high tide) would post likely still be ahead and have some equity.  I attempt to chart this out to sellers for their area and home. On paper it makes sense.  Besides like another gal/guy said - if they would have sold high they would have bought high.

You can't loose money you never had. It's funny money kids!

Plus - we're talking about our homes as homes (not ATM machines)!!!!

Hi JL:

You are absolutely right!

Last night a talked to a couple who owns "free and clear" their 3 level colonial on an acre about 35 miles west of Washington DC.

They were "disappointed" that they could not get what they could have at the "height of the market".

Now bear in mind, they do not have any lien's on the property, and bought the home over 30 years ago.  They probably bought the home for about $50,000, and could easily get $300,000 for it according to the comps, maybe even more.

And yet the couple still complained about "the market", and said they will not put it "on the market" until they can get top dollar.

It is getting very difficult to deal with some of the people that just seem to be ungrateful.  Both seller's that assume their house is worth a million dollars, or the buyer's, who seem to think that the owner "owes them" because they are buying when some others are not.

Well, here in Northern Virginia, the housing market has picked up considerably, and if it hasn't in your neck of the woods, it will soon.  And when it turns around, it's like a switch that goes off and there is no turning back.

That's why I think it is more important then ever, to work with people that really appreciate our services.  Life is too short to waste on the haters.

Johnny "Culdesac" Yankoviak

www.johnnyculdesac.com

But JL its much easier to think of how much I could have made on my home and blame others. :-)

JL ---- congrats on your feature -- I'm away from AR a couple of days and look what I missed -- this is a great post -- and you are so right -- many of these folks did not really lose any money.

                            Happy Holidays
                                                                                                                                                      
                                 

This is a conversation my sister and I had a few years ago.  She kept telling me I was "rich" because of my house.  I kept saying it didn't matter unless I sold it.  She recommended selling and moving to Texas with the proceeds.  It would have paid for a nice house out there, but it's now "funny" money and money I have "lost".

I agree with you JL.  There's no sense living in the past, we have to live with what is before us today.

Its called cycles we all go through them in life!!!