NEGATIVE EQUITY, DOES IT SPELL DISASTER?

Yesterday the Nationwide building society reported more 'bad' news for home owners.

"House prices are falling at a record rate as the credit crunch continues to squeeze the property market, figures have shown."

- The average UK home lost 8.1% of its value during the past year

- House prices fell for the ninth month in a row during July

- The average home now costs £169,316, nearly £15,000 less than this time last year and the lowest since August 2006.

Doom, gloom and more gloom.

But is it really? One of the problems with this sort of news is that people are taught to view a home as an asset. The truth is that it isn't an asset but a liability. People who know how to succeed financially know that an asset is something that produces an income, something that costs you money is a liability. Robert Kiyosaki in his best selling book "Rich Dad, Poor Dad" upset many dyed in the wool accountants when he turned modern day thinking on its head and show how the real rich think.

A house is worth what people will pay for it but ultimately its value is the value to you. A house that you have made into a home for you and your family will never lose its true value. If you are paying £700 a month for your home you are getting the comfort, warmth and 'welcome home' feeling that a true family home can give you. That value is the same whether someone will pay you £200,000 or £150,000 for it.

The price is only relevant if you want to sell it. This is the point that most people miss.

If prices continue to fall there is really only one advice - HOLD ON. The price will recover. My parents home cost them £3,000 over 40 years ago. Over the years it has gone up and down, it is probably now worth less than it was a year ago and more than 5 years ago but it doesn't matter because they love their home and have no intention of selling so the 'price' of it is of interest only to other people.

Deep in the article by the Nationwide they said........ "prices were still nearly £11,000 higher than they were three years ago"!!!!!

Does it really matter? Close your curtains, put the kettle on and enjoy your house for what it is - your home for you and your family and not a figure on a balance sheet.