Home is where the wealth is. Advisors discuss home prices and financial planning
They say home is where the heart is, but it’s also where the wealth is since a home’s equity is often the largest asset for US households.
U.S. single-family home prices stayed unchanged in May and the annual increase was the least in nearly a year due to higher mortgage rates and increased supply, according to a Tuesday report from the Federal Housing Finance Agency. The average rate on a 30-year fixed mortgage reached a six-month high of 7.22 percent in early May.
The unchanged reading in home prices followed a 0.3 percent month-on-month rise in April. Going back over the 12 months through May, house prices rose 5.7 percent which was the smallest year-on-year advance since July 2023 and well below the 6.5 percent gain in April, the report said.
So what is a financial advisor to do when home prices cease to go up? Or at least not go up as quickly as they used to?
When it comes to financial planning, Josh Strange, president of Good Life NOVA, says he looks at a person’s primary home as more of a “use asset” than a financial asset until a decision has been made to sell it, or a definitive sale date has been established. After that, he treats it as an income inflow and plans accordingly.
“We do, of course, account for it on a balance sheet and make sure rising or falling values are reflected accordingly,” said Strange.
He also closely watches the home’s value for estate tax planning purposes, especially in light of the upcoming TCJA sunset at the end of 2025.
“One thing I tell clients though is never bank on a real estate windfall and always plan very conservatively on return rates on their primary home. That way if we get a surprise, it is usually on the upside,” said Strange.
Similarly, Roshan Weeramantry, partner at
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