I have read a lot of experts expressing concern about a housing bubble in San Diego yet none of them have said anything as to how to capitalize on it especially if you home free and clear. So I am going to give the common man a chance to cash in on an obvious opportunity.
Once you make that final payment to the bank you get the psychological value of ownership but you accept all the risk of a rising or falling market. So why not shift that risk. Sell your home back to the bank and get the biggest fixed rate interest only mortgage your Credit can support. That might initially sound risky but it is probably the least risky thing you can do. Why? Becasue the government rewards you fro debt by the fact that you can itemize the interest on the loan so an interest rate of 6 percent only nets out to 3.9%. Now that I have 600K in cash that the bank just lent to me for my overvalued home what I am I to do with it. I can simply invest it in an I bond that pays me a tax free rate of 6.71 percent and is reset each year. That nets out to a rate of return of 10.32%. Now if the house goes down in value it is on the banks books not your. Additioanlly if interest rates go up you are going to see a greater rate of return. If interest rates were to fall back to our post 9/11 envioronbment you can cash in the bonds and pay off the home. Either way you are in an arbitrage situation which if you play right can make out like a champ. Best of luck to those of you who put this on a spead sheet and begin to realize the ability of thinking outside the box.