Florida owner expected greater value now

Ilyce Glink and Samuel J. Tamkin

Q: I can’t wait to see so many people say, “Wow, your home has gone up in value so much,” without knowing the facts.

Fifteen years ago, in 2007, I bought my house in Florida from a trust because the owners were both deceased. I bid $700,000 on the property, which was listed at $800,000, so I don’t feel like I overpaid. The trust accepted my offer.

For many, many years, the property was worth less than $500,000. Earlier this year, it was the first time in over a decade that Zillow’s estimate exceeded what I paid in 2007.

Today, Zillow’s estimate for the property is around $925,000. I assumed I would get a 3% annual increase in value, on average. So over 15 years, my house should be worth over a million dollars. (In fact, I calculated it should be worth $1.09 million.)

The way I see it, my house still has a lot of value compared to what it should be. Are there other people in the same boat or is everyone just euphoric about rising home values? Thanks for letting me talk about you; and help me figure out if I’m lucky or lost.

A: Well, you’re not lost. You know where you live, but you’re not happy with how the housing market has treated you. There are a lot of people holding shares of a particular company, or perhaps a crypto, who bought the asset at exactly the wrong time, only to see the market crash the next day.

You are not alone in your unfortunate timing. Ask anyone who lives in Chicago or Detroit.

To get an overview of whether you’re having a sync issue or something else, we checked Zillow’s Property Value Index. Since 2012, Zillow has published housing market data on the typical value of a home in what Zillow calls the “middle tier.” It is, according to the website, a “smoothed, seasonally adjusted measure of typical home value and market changes in a given region and housing type. It reflects the typical value of homes in the 35th to 65th percentile price range.

According to Zillow, in 2012 a typical single-family home in Orlando cost $139,000, $173,000 in Boise, $14,514 in Detroit, $200,000 in Chicago, and $820,000 in San Francisco. Today you would pay $407,000 in Orlando, $586,000 in Boise, $75,316 in Detroit, $347,000 in Chicago, and $1.91 million in San Francisco.

These are mid-level homes, so high-end and low-end properties are excluded from the data. Still, that’s a lot of growth for some (like Boise, Detroit, and San Francisco) with much more moderate growth in places like Chicago. In Orlando, the price has almost tripled in 10 years, which would put the growth rate around 7%, well above the rate of inflation – until last year.

But, timing is everything. You bought your house in 2007, at the end of the housing boom, when prices were at their peak. And, despite everything, you believe that you got your property at a good price and that it is worth more than what you paid. That’s the good news – you think, because of course you don’t know what your house would be worth until you sell it.

Looking around in your neighborhood, how much are houses selling for? Are there any houses for sale? Florida had huge price growth, but it also had a major bubble that burst during the housing crisis, which started right after you bought your home.

According to the St. Louis Federal Reserve, home prices in the state of Florida have risen 540% since 1980. They are up about 67% from the third quarter of 2008, which was the official low for the housing crisis in Florida, in the third quarter of 2021, although prices may have come down a bit. If Zillow is right about your home’s value today, you’ve seen its value increase by about 32%.

Since 2008, inflation has rarely been 2%, only hitting 3% once, in 2011. If you put $700,000 in April 2007 into the States Bureau of Labor Statistics’ CPI Inflation Calculator States, you’ll see that the price you paid for your home has the same buying power as $979,148.56 in April 2022. That’s close to what you think your home is worth.

Still, we agree: it’s boring to have other people counting your money. Especially if you don’t believe it’s real. Or, you wish it was higher. Sam has worked with many salespeople in Chicago who would love to be in your shoes. Recently, he represented several home sellers who sold their properties for less than 25 years ago. You have to feel the home sellers who end up losing money on their home after 25 years of home ownership.

So no. You are not lost. If you’re happily settled in a home you love, that’s affordable, with neighbors you love, we’d say you’re in luck. Enjoy!

Contact Ilyce Glink and Samuel J. Tamkin through their website, BestMoneyMoves.com

Comments are closed.