The Value of a Home in Today’s Market
Residential Specialist, Jordan King’s Thoughts on Today’s Housing Market
As a real estate agent in Louisville, KY, I feel like I can speak for everyone in saying that the current residential real estate market has thrown everyone for a loop. With prices continuing to climb, understanding the actual value of homes has become increasingly difficult. I would be wary of anyone who tells you that they know exactly what is happening and what will likely happen in the future. We used to consider asking prices to be the tip-top of what may be paid for a home but now it has become commonplace for homes to sell for thousands, tens of thousands, and even hundreds of thousands of dollars above asking prices.
As a real estate agent, I consider one of my biggest strengths to be accurately valuing a property and never letting my clients “overpay.” One of the tools I use for valuation is an analysis of comparable sales. Is there precedent for a particular sale price? Right now, it seems there is no precedent for many of the sales that we are seeing. Ultimately, the value of something is what the market is willing to bear. But will that same market be around in a few years? Nobody knows. Economies change, demographics change, supply and demand changes, development changes, and so on.
In grappling with this conflict, a basic concept has risen to the forefront of my mind. It highlights the very meaning of the word “real estate”. Real estate is defined as “property consisting of land or buildings.” Real estate is tangible – you can see, hear, feel, touch, and smell it. Real estate is there and exists for the use of its residents. So it occurs to me that whether or not a sale price goes up, down, or remains the same in the future, the property offers value to its residents all the same. Certain properties will inevitably offer more value to a particular group of individuals based on their age, taste, needs, wants, and lifestyle.
So, I urge people to consider this concept when contemplating purchasing a home and to consider what factors are most important and fit best in their particular lifestyle. Is there a certain neighborhood that is perfect for you or your children? Is there a specific feature of a home that is a “must-have” on the interior or exterior? Is there a yard that will ensure your enjoyment of the home? Do you need a quiet office where you can maximize your productivity while working from home? At the end of the day, if your intangible assets are in question, will you still have an amazing primary bedroom to retreat to and get your rest? These are the things that real estate has to offer that no other asset classes have.
If you buy a new car, it loses its value the minute you drive off the lot. Would you expect to trade a car in after using it for 5 years and get paid back the same amount that you originally bought it for? Of course not. The hope in real estate is that you can ultimately break even or possibly make money upon resale. But I again urge buyers to focus a bit more on the enjoyment, ease of life, and memories that a property may provide along the way. Don’t get me wrong…I still don’t want any of my clients to pay more than they should, but with the world quickly evolving and turning to the home, I do not want people to underestimate the value that a piece of real estate may hold for them.