Risky IMO.

As long as the Fed keep rates reasonable I am not sure economic cycles apply.

We may not see another recession for a long time yet and if we do it is very unlikely we would see anything even close to what we saw last time with foreclosures etc…

2007-8 was an extreme outlier event IMO.

IMO inflation may outstrip your ability to save or keep up with supply/Demand price hikes.

But just my opinion

one other item to consider about selling,… is there an adverse tax consequence

[quote=23109VC] I know people who timed this perfectly in the last downward cycle …

[/quote]

jm2c:

The last peak was so massive and so obviously unsustainable that it was a lot easier to profit from than this one might be.

This was the picture in 2005:

Risks of a Serious Home Price Decline

It doesn’t look quite like that now.

If I understand your strategy correctly, then for your strategy to work (to work well, anyway), nominal prices must drop. There is, in my maybe-better-informed-than-average-but-no-expert opinion, a decent chance that the downside of this peak (whenever it peaks, whether that’s now or in a year or more) will result in a drop in real prices but not nominal prices. Or maybe a small drop in nominal prices.

There’s also a decent chance it will result in a significant enough nominal price drop that your strategy will work. All I’m saying is that, while prices are higher than their historical means (by most or all measures), and they will almost certainly revert to historical means, that doesn’t necessarily mean that there will be significant nominal price drops. And even if there are, timing them can be tricky.

On the other hand, if you want to move to San Diego, then the importance of how much money you make or lose should be weighed against the importance of moving to San Diego. As a person who thinks San Diego is the best place in the world to live (if I had billions of dollars, I wouldn’t move more than a couple of miles), I say it’s worth the risk and worth the money.

If you’re going to take that risk, now seems (in my opinion) like as good a time as any.

[quote=The-Shoveler]IMO even 2007-8 housing crash may have been very very different and may not have even occurred if the fed had handled the bailouts differently.

Australia has gone 27 years without a recession.

Maybe we are getting a little better at managing the economy too.[/quote]

That’s what Alan Greenspan said. The great moderation.

Housing is dropping in Australia. People are starting to cry.
Australia is a small economy that rode the Chinese economy. Without China, Australia would have underperformed. The Chinese are buying natural resources and English education. And Australian education is shit. My friend at NU Singapore said they don’t hire Australian graduates because they don’t meet high world standards.

I’m not a big believer in selling a primary home to “make money” unless you already have another home lined up to move into that you bought at a discount or you already have other plans to move out of the area.

So even though you get the $200k capital gains tax benefit….

Why? So you can

..pay about 5-8% closing costs/commission to sell
..pay monthly rent which is probably the same or more than your current mortgage payments (if any), and not have any tax benefits for the rent payments you make (unlike mortgage interest)
..and possibly buy back with a mortgage with a much higher rate and possibly pay higher property taxes

For you to come out ahead, you’re assuming that property values will fall more than all those other things above (an other things I didn’t list) that are additional cost items you will incur just to break even. My crystal ball isn’t so clear and can’t say with a high probability that is the case… Doomsayers will say otherwise. But it’s certainly not something I would personally do only for a $200k gain….. unless you are totally cash strapped and/or plan on moving to a much lower cost area like Mexico.

I talked about this conundrum with many folks. Yes, when home prices go up, you’re really happy because the property value of your primary goes up. You’re initial response is “wow, I can sell this place”, make a lot of money, and “do something with the extra money”… And then reality hits. Shit, I still need a place to live…. And then reality sucks… Well, shit, that place that I really like now costs a heck of a lot more…And crap, if I buy it now, I need to pay a heck of a lot more in property taxes than I did before….So my exit strategy was… Take advantage of either a low mortgage OR a very awesome equities market so that you can pay off your mortgage…and rent your primary house at the ridiculous high prices the current market conditions allow you to… to maximize your rental income while the going is good….Your rental income across your properties just might more than cover the new mortgage payments of the new home you are thinking about.

Kidd’s/Family?

Sell and Wait, Riskily unlikely to pay off as much may you think.

I would not do it unless you just have move out of Temecula.

I did it back in 2005 but I had a second house to move into that I bought in 2002, have upgraded since then.

I would add I did it knowing full well even as extreme as the housing bubble was, it could have turned out VERY different had the fed acted differently.

Like some others, I wouldn’t sell me primary residence unless we experience something like 2008 again. Back then, something that rent $1700 was selling for ~$550k. Today, that $550k house is now about $600k, but the rent of that house is about $2600. So, assuming similar rent to price ratio, price would have to get to at least $760k to even be in the same ball park. That’s before we’re talking about rent to mortgage payment ratio. In 2008, mortgage rate was ~5% and today, it’s <4%. So, if we're talking about mortgage payment to rent, we'd have to get to well over $800k to be in the same ballpark. Because of this, I don't see any major crash. At least nothing that would make it worth the risk in selling and rent.

Supply is still very low. If you want to sell, rent, and hope to buy at a lower price, I would keep an eye on supply. In order for this strategy to work, you have to be pretty sure that price would have to drop enough and in a short period of time. Else, rent would eat away at your lower price saving. Not to mention time and retirement. In 2008, supply spike before price start to fall. That would be what I'd keep my eye on to guess as to when price might fall.