If you own a home, chances are your net worth has shot up in the last year. According to a new report, skyrocketing home prices caused by a pandemic-fueled real estate frenzy have led to a scenario where homeowners in the U.S. are sitting on a record $22.7 trillion worth of home equity, according to Real Estate Equity Exchange.
Seeing the estimated value of your home increase on real estate sites can be exciting, especially if you’re counting on that money to one day help fund your lifestyle in retirement. But it’s important to remember that real estate is a more complicated asset than cash. Keep these factors in mind as you consider how the value of your home may be used to bankroll your retirement.
1. You need somewhere to live. Whether it is in your current house or somewhere else, you need a roof over your head, and that usually comes with a sizeable cost. Many people who downsize their homes underestimate how much they’ll end up spending on a smaller condo or to live in a retirement community. In fact, some come to realize that their new accommodations are on par with or even more expensive than their previous homes – especially considering that they may end up spending two or three decades there in retirement. Regardless of your situation, do the math so you know what you’re getting yourself into financially and how it will factor into your plans for retiring.
2. Selling your home might not be as easy as you think. Given the strong demand and short supply of houses on the market, you may be seeing homes sell at lightning speed in your local community — but it’s important to remember there are no guarantees. In some areas of the country, hot housing markets are beginning to cool. As a result, you might be disappointed in the price you are able to generate when you sell your property. Many people have been disappointed to discover that their home is not as valuable as they might have expected. It’s important to keep a pulse on the housing market in your area to help determine what you may be able to get for your home.