If you owned a diamond, for which you paid $50,000, then suddenly a new mine was discovered which could yield untold millions of comparable quality diamonds, the value of your already-owned diamond would become whatever is the going rate for the brand new diamonds. Without respect to what you paid, your property is actually worth only what a buyer would have to pay for a comparable item. It’s why mortgage lenders depend on recent sales of comparable properties when determining the reasonableness of your offer to buy. So even if you own your home outright, most of your neighbors likely do not. So as the fire-sale persists among your neighbors, the value of your property declines.
So even if you own your home outright, most of your neighbors likely do not. So as the fire-sale persists among your neighbors, the value of your property declines.
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Appreciate the reply. I understand the scenario you posed, but it doesn’t apply in my situation. I just don’t see an increased interest rate having an impact on my equity.
In my case, it’s a small neighborhood of homes built in the mid-’80s and most are owned outright. Only about 4 of about a hundred sell each year (quickly) when owners choose to move elsewhere. About 1/2 of the homes are more pricey than mine. It’s a mature neighborhood, in that all kids from the ‘80s are now grown and the area is crime free and quiet. Prices probably range from $230-520K now.