Revisiting Real Estate as Part of Your Portfolio Review
Zillow.com just reported the combined purchase price of every home in America is more than $25 trillion. While your investment in that figure is probably limited to one or two homes, market trends affect all homeowners. Each month, housing is the largest expense for most Americans, so large losses or gains can significantly affect long term plans.
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Changes to the market, your finances or your personal situation can create a need to revisit this topic with your advisor. While the transactional side of any sale or purchase is often handled by a real estate professional, your advisor can offer advice on the financial implications of several scenarios including:
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How should you handle the proceeds from the sale of a home? If you are downsizing and purchasing something smaller and more manageable, you can create a plan for any difference in cost. If you are purchasing a more expensive home, discuss the effects that will have.
Is now the time to pay off your home? Your advisor can review the option of eliminating your mortgage from your expenses or keeping those funds available for other expenses.
What are some implications of purchasing a vacation property? A review of your assets and goals can show if you are prepared for taking on this additional expense, including unseen costs such as insurance, repairs and home owner’s association fees.
The past few years are a reminder the real estate market can become profitable or volatile with little notice. Now is a great time to contact your financial advisor and discuss how your home figures into your overall financial picture.
FINANCIAL FACTS
Slowdown? – Medicare expenditures doubled over the past decade (i.e., from FY 2003 to FY 2013), increasing 7.2 percent annually to $498 billion. However for the first two months of FY 2014, Medicare expenditures are down 1.8 percent over the same two months in FY 2013 (source: Treasury Department, BTN Research).
About The Same – The size of the U.S. economy was $16.9 trillion as of Sept. 30, 2013, an all-time record. The size of the national debt was $16.7 trillion as of Sept. 30, 2013 (source: Commerce Department, Treasury Department, BTN Research).
And In The Following Year – The S&P 500 was up 31.9 percent YTD (total return) through Friday, Dec. 27, 2013. The last time the index gained at least 30 percent in a calendar year was 1997 (gain of 33.4 percent). The S&P 500 then gained 28.6 percent in 1998 (source: BTN Research).
