Homeowners frustrated about discussion of their home’s valuation

Fifteen years ago, in 2007, I bought my house in Florida from a trust, as the owners had both died. I offered $700,000 on the property, which was listed at $800,000, so I do not feel I overpaid. The trust accepted my offer.

For many, many years, the property valued below $500,000. Earlier this year was the first time in more than a decade that the Zillow estimate exceeded what I paid for it in 2007.

Today the Zillow estimate for the property is about $925,000. I assumed I would get a 3% annual increase in value, on average. So, over 15 years my home should be worth more than $1 million. (Actually, I’ve calculated it should be worth $1.09 million.)

The way I see it, my house is still way down in value to where it should be. Are others in this same boat or is everyone just euphoric over home values going up? Thanks for letting me vent to you; and help me understand if I am lucky or lost.

A: Well, you’re not lost. You know where you live, but you’re not quite happy with how the housing market has treated you. There are plenty of people holding a particular company stock, or perhaps crypto, that bought the asset at exactly the wrong moment, only to watch the market collapse the next day.

You’re not alone in your unfortunate timing. Just ask anyone who lives in Chicago or Detroit.

To get a bigger picture of whether you’re experiencing a timing issue or something else, we spot-checked Zillow’s Home Value Index. Since 2012, Zillow has published housing market data on the typical value of a home in what Zillow terms as the “middle tier.” This is, according to the website, a “smoothed, seasonally adjusted measure of the typical home value and market changes across a given region and housing type. It reflects the typical value for homes in the 35th to 65th percentile range” of pricing.

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’d 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 middle-tier homes, so the high- 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 nearly tripled in 10 years, which would put the rate of growth around 7%, well above the rate of inflation -— until last year.

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

Looking around at your neighborhood, what are homes selling for? Are there any homes for sale? Florida has experienced huge price growth, but it also had a significant bubble that popped during the housing crisis, starting just after you purchased your home.

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

Since 2008, inflation has rarely been 2%, hitting 3% only once, in 2011. If you put $700,000 in April 2007 into the U.S. Bureau of Labor Statistics CPI Inflation Calculator, you’ll see 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 believe your home is worth.

Still, we agree: It’s annoying to have other people count your money. Especially if you don’t believe it’s real. Or, you wish it were higher. Sam has worked with many sellers in Chicago who wish they were in your shoes. Recently, he represented several home sellers who sold their properties for less than they paid 25 years ago. You have to feel for home sellers who have to end up losing money on their home after 25 years of homeownership.

So, no. You’re not lost. If you’re happily ensconced in a home you love, that’s affordable, with neighbors you like, we’d say you’re lucky. Enjoy it!

(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through their website, bestmoneymoves.com.)