Home / Money Blog

Making the Pain Stop

10bii icon
Note: You can use any financial calculator to do this problem, but if you want the BEST, you can get our 10bii Financial Calculator for iOS, Android, Mac, and Windows!

THE SCENARIO Back before The Crash, I bought my first house. I really loved living there, the space was great for parties or just lounging about, the neighborhood was quiet but still close to everything, and it was just overall a fine abode. It was not bought as an investment, and it has not performed well as one since I moved out nearly a decade ago. Moreover, it was hit hard in The Crash, losing around 60% of its peak value. I was reticent to walk away from it or to do a short sale (selling it for less than I owed, forcing the bank to take a loss) because I'd committed to paying and I could continue to do so, even though it was significantly uncomfortable for a long time. The market has finally (mostly) recovered, and I'm selling it. What I want to know is what its average annual appreciation has been over the time I've owned it. The question: I bought in December of 2004, and expect to have it sold in July of 2018. I bought it for $450,000, and expect to sell it for $478,000. What's the average annualized appreciation of the house during that time?
THE SOLUTION This is a pretty straightforward problem, but I need to know how long I've owned the house. December 2004 to December 2017 is 13 years. December 2017 to July 2018 is 7 months. So I've owned the house for 13 years and 7 months, or 13 x 12 + 7 = 163 months. First things first, make sure the calculator is using 12 Payments per Year. N: 163 (I've owned the house for 163 months) I/YR: (This is what I'm trying to find) PV: -450,000 (I bought the house for $450,000) PMT: 0 (Appreciation calculations like this one don't have monthly income or outflow) FV: 478,000 (I'm selling the house for $478,000)

Taking into account the precipitous drop in value back during The Crash, the average annual appreciation of my house has been 0.44%.

After all of this, you may wonder 'why is he selling this house, which has appreciated almost not at all over the past 13+ years, and why is this post titled "making the pain stop"?' Those are good questions. The reason for selling is primarily that I've been feeding the property, coming out-of-pocket each month to continue owning it, even after figuring in rental income. I didn't want to lose money through the sale (though it's likely that I still will, after sales costs), but I'm more interested in reclaiming the month-to-month money than I am in seeing how much farther the value will rise in the next few years.

What do you think? Would you ride it out, or would you sell the house? Or would you do something else that I haven't considered? Let us know in the comments!