Updated: Wednesday, 03 Jun 2009, 6:42 PM EDT
Published : Wednesday, 03 Jun 2009, 4:50 PM EDT
GRAND RAPIDS, Mich. (WOOD) - It's a rule of thumb in the housing industry: with inflation and normal population growth, the value of your house is supposed to go up 6% every year.
But these are unusual times, and many local homeowners are taking huge losses to sell their homes.
Still, there are ways you can tell if your house is going to be a winner or a loser if you're in the market.
24 Hour News 8 looked at four different homes in Grand Rapids, Kentwood, Rockford and Forest Hills. Each home sold in 1999, and is on the market now.
If the rule of thumb applied, the Grand Rapids house ($118,500 in 1999) would sell for $212,215. The Kentwood house ($115,400) should command $206,664; Rockford ($125,000) should be on sale for $223,856, and Forest Hills ($165,000) should bring $295,490.
But each home is listed for much less. The Grand Rapids house is listed at $164,900, Kentwood at $152,900, Rockford at $159,900 and Forest Hills for $175,000.
What happened? The population dropped between 2000 - 2007.
That's all it takes, according to GVSU economist Paul Isely.
There are fewer people in the market to buy a home.
Worse, the 2% population decline happened during a building boom prompted by all the loose credit during that time.
Isely put together a local housing price index. His analysis shows that prices today are back to where they were in 1995.
It's no big deal if you sell your home and stay in the same area, You'll lose on the sale but gain on the buy.
It hurts if you have to leave the area. Michigan never had the price "boomlet" the rest of the the country saw. Now everyone's values are down, but Michigan still has a lot of catching up to do. If you leave the state, you're going to need a whole bunch of extra change.
Unless of course you were smart about your home purchase at the start.
Part of it has to do with when you purchased your home. The worst time to buy is during a price peak, and that happened in the local market between 2004 - 2007.
Selling now could cost you thousands of dollars, but there's still some hope.
"We also know there are characteristics about a house that can improve the value of that house," Isely told 24 Hour News 8.
Isely has set up computer models and can actually tell how much your house would be worth in one neighborhood compared to another.
The difference can be outstanding as he shows in one analysis of the same house within a few blocks, in this case, East Grand Rapids.
"A house would be worth, by this regression, $45,000 less, where being in this neighborhood would add $239,000," he said. One neighborhood is near a lake, the other is not.
Living close to woods can also boost your house value. "Being near a forested area can increase the value of your house by $7,000 - $10,000 in West Michigan," he said.
Being assigned to a school with high MEAP scores, proximity to stores also helps.
Other reasons, though, can be value busters. A house near 30 years old, a shared driveway, or sidewalks. Isely said shared driveway "can knock down the price $7,000 - $8,000," and sidewalks drive down price, too, "unless people really need them, like in a city."
He added "that heavier traffic decreases the value of the house and can decrease it by as much as 10%."
By the same token, these value busters can work to your advantage.
"If you have no children, do you have to be in the best school district? You might be able to buy a cheaper without the taxes and things that go with a better school system," he said.
"So everything is a trade off. You really have to analyze your personal situation. You have decide what you want, how long you're going to be in the house and know somethng about the community you're moving into."
Houses can be like stocks. The longer you hold, the safer you are from the ups and downs of the market. Your best bet is to shop for a house that you think you'll be in for a very long time.