According to a recent report from CoreLogic, 1.3 million underwater borrowers have been pushed up into positive equity since the beginning of the year. If national prices increase 5%, 2 million more underwater borrowers will join them. If inventory continues to shrink, we may see just that. But, more importantly, this news brings to light an important topic – What do you do if you’ve been underwater and suddenly aren’t?
For some Wilmington, NC, homeowners, this may be an easy question, but for many people who have felt shackled to their home, suddenly being in positive equity may spur some bad choices. So, what shouldn’t you do if you’re no longer underwater? Here are some suggestions:
- Don’t Sell. Sounds strange coming from a real estate team, right? Some homeowners may see this as an opportunity to sell their current home and move into something larger or more expensive, just to take advantage of current rates. We understand that growing families require bigger homes and you’ve always dreamt of living on the beach, but what this recession has shown many people is that we need to live with less…and we can!Staying in your current home will give you the opportunity to become more financially stable and take advantage of appreciating values. Down the road, you could make more money off of the sale than rushing to do it now. So, unless you need to sell to move to a new area or downsize, try to stay put.
- Don’t Get an Equity Line. You may have extra money in your home now, but don’t be tempted to use it. It’s still too risky a move at this point. The only exception would be to use the money for much needed home repairs, like a new roof, new windows, or structural repairs. Otherwise, there’s a chance you won’t get that money back. So, play it smart and just enjoy the fact that the equity is there.
- Don’t Do Unnecessary Home Improvements. Like I said in number 2, be very careful with the home improvements you choose to do. We usually advise that you thoroughly research the return of investment on a home project according to your neighborhood (give us a call for help!) before buying any materials, because you don’t want to over-renovate or put money in that you won’t get back. This is especially true if your home is or was underwater. Until the market has improved some more, try to stick to only the necessary improvements, like the roof, windows, and paint.
- Don’t Invest. This relates to number 2. Don’t use your extra money to invest in another home. It doesn’t matter if you’re planning to flip it or use it as a rental, investing is only lucrative right now if you have an abundance of assets to work with. That’s why many small time investors have gone bankrupt or had to short sale their homes. So, unless you have plenty to fall back on, wait until the market improves some more.
When you’ve spent years praying for the market to improve, it’s easy to jump the gun when you feel the relief of positive equity. But think back to when it all started. It’s important to remain reserved, so you aren’t hit that hard again.
If you have any questions about these suggestions or would like to know how homes are selling in your Wilmington area neighborhood, please give us a call at 910.202.2546 or visit our Contact page.