Home ownership is a joy, a challenge, and a major financial decision. But what happens when the unexpected strikes, and your home insurance falls short in the face of escalating home values? The past few years have seen an unprecedented increase in home values. But while this might seem like a financial boon, it comes with some hidden surprises. Your home is more than just a property: it's an investment, and understanding its true worth in today's dynamic market is crucial.
Over the past 5 years, home values have increased more rapidly than inflation. While conventional wisdom has always held that real property is a stable long-term investment, the last several years have proven that point. Looking back 5 years to June 2018, the median home sold in Chester County for $355,000. When we look at May 2022, the median sale price was $465,000. This May, the average home sold in Chester County for $502,500, an increase of 64% since 2018 and 8% since this time last year. So, regardless of how we look at it, real estate is worth more now than a few years ago.
Rising home prices impact a large portion of our economy, though a full breakdown of how interconnected everything is, well, that’s beyond the scope of this article. There are 3 impacts that are important to you, however, and I can speak to them. First, and most importantly to me, is relating to insurance. Second, there are tax considerations for all real estate owners. And finally, knowing where you stand helps inform where you can go.
Remember that example of being metaphorically kicked while you’re down by finding out your insurance coverage wasn’t enough to rebuild, let alone replace? Unfortunately, that has become all too common recently. Even the insurance companies recognize that rebuilding has become too costly, with many pulling service from areas deemed too risky. Typing “Insurance companies pull” into Google, the auto-completion suggestions pop up with Florida, California, Louisiana, and Texas as states multiple insurance companies are leaving.
Fear not: though insurance is becoming increasingly problematic in certain areas, home ownership is still a sound way to grow wealth. The rising values could even passively benefit homeowners, as rising values means rising tax breaks. What those tax breaks are is a question for an accountant, not me, but I can arm you with data for when you have that conversation. Having the right paperwork and an accurate home valuation makes for happy accountants and a smooth tax season.
With increased values, there’s also an increased opportunity to sell for a tidy profit. Before speculating on entering the market, having a professional assessment of your home’s equity position allows you to strategize proactively. If your life’s timing and the numbers show that now is the time to sell, having that solid starting point better positions you for success.
With so many ways home prices directly impact their owners, it’s clear that having an accurate picture of that value is vital to decision making. In today’s world of high-tech options for nearly everything, it can be tempting to hop online and get a churned-out valuation that may or may not accurately reflect what your home is worth. While these impersonal valuations are fine for fantasizing and dreaming, when it comes to making a decision regarding the largest financial asset in my life, I’m going with a professional every time.
In real estate, I am your professional. As your real estate agent, I’m here for all your real estate needs, including home revaluations. I don’t have some magic tool that cranks out numbers at the push of a button. What I do have is 35+ years of experience as an agent in and around Chester County. Please reach out for any of your real estate questions or needs, including getting a better understanding of your equity position. After all, I’m not your agent just during the transaction, but through the whole cycle of your homeownership.
Thank you for reading to the end! All my blog articles are about topics that are important to me, this one especially so. Please do make sure you have enough insurance to cover any catastrophe. It's better to have it and not need it than need it and not have it. Remember that if you're not covered, it's coming out of your pocket.
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