desmond, good move! What was your thought process in selling? Last October, when you closed… that means you listed in September? At that time, the median was all over the “real estate only goes up” stories. Selling to cash out was relatively rare. I did the same thing, listing in October 05. I also was nervous during escrow, because I thought my buyers would figure out we are in a housing bubble that was just starting to leak air.

So, where did you get your information to decide it was a bubble, and that the peak was here?

Considering the lack of information you were working with that was a pretty gutsy move. Most people wouldn’t do what you did based on a hunch. I sure wouldn’t.

That said, I’ll bet you never make another real estate purchase without researching it to death before you do it.

desmond, it is worth it to sell for people who have a fraction of the equity you had, if:

1) they have an ARM, I/O, or other resetting type of mortgage, and they won’t be able to afford the adjustedpayments.

2) their job is in the real estate related industries (construction, loan officer, appraiser, realtor, title officer, home inspector, termite inspector, escrow officer, home improvement, selling home materials such as shutters and carpets and wood floors, architects, interior designers). Only a fraction of people in these industries will have a job left by 2008. I would include jobs in retail and restaurants in this category. Government income will dip by 40%, so many government positions will be gone.

3) there is a possibility of them wanting to downsize, leave the area, divorce, or other reasons for selling in the next 10 years.

4) anyone counting on their home equity for retirement, college for kids. In 2008, you won’t get a HELOC to fund that college tuition, because the home value won’t be there, and bank lending will become conservative again. If you try to sell in 2010 to fund your retirement, you’ll be very disappointed.

All the above ought to sell now, while prices are high. The longer they wait, the more paper profits will evaporate.

The only group that ought to stay put is those who’ve paid off their homes, or those who are very confident their job is secure *and* they can service their mortgage through the down cycle *and* they will not care if their house loses 50% of value. Everyone else, sell now.

This downturn will financially devastate millions of households. Americans have counted on rising home equity to finance their everyday living expenses, increase consumption, and build dreams of a secure retirement. This is about to be shattered. How will Americans pay their daily living expenses without rising home equities? I realize that each person that is helped comes at the expense of one person’s loss…Each person that is convinced to hold off buying means that one seller is stuck with his overpriced home.

Wow! Why isn’t your mom speaking to you? Did your brother sell his condo? Did your mom sell her house?

That’s one of the earliest investment lessons I learned.. there is no protection in cashing out, if you end up putting your profits right back into the same overinflated assett… 🙁

I have some issues with my parents real estate choices too… it’s a really hard topic, because as a child it’s sorta hard for some parents to accept you might know more about certain things…

Desomond,

Congratulations, I believe you’ve made a wise move, and I understand what you experienced. My wife and I also went through what you went through when we sold our home, stressing during the escrow period, worrying that the buyer might ask themselves why they were buying our home for such an outrageous price, and then change their mind (we had already fallen out of escrow once, when our first buyer lost their job 1 week into escrow).

We sold in July of 2004. At the time, the market was in a frenzy. Inventory was near all time lows. We immediately had multiple offers, the first day the house went on the market, at prices that suprised us and our realtor. Everyone we knew told us we were crazy to sell our home and then rent, that we’d be priced out and never be able to afford to buy a home again.

Believe me, it was not an easy choice to make, as we were very much in the minority of people who believed that San Diego was going to see a big correction. There were no housing blogs at the time, and virtually no talk about the bubble. I found maybe one mention per week, and rarely was it in the mainstream media. But I did lots of research, especially looking at the last correction we had in San Diego in the early 90’s, and saw many similarities to this cycle. I found Prof. Pigginton’s site in October of 2004, and was relieved to find that I wasn’t the only one who thought that San Diego was headed for eventual disaster.

Did we sell at the top? Probably not, we were probably a little early, but that’s fine. Could we have waited and maybe sold the home for more? Maybe, but not much more. I have followed the market in my old neighborhood since we sold, and can tell you that I’ve seen only one other comparable home sell for more than ours did, and it only sold for about 3% more.

Even more interesting, the buyers of our home in 2004 are now trying to sell it. They put in an estimated $25,000 of improvements, and are asking about 10% more than they bought it from us for. If they sell at their asking price, after closing costs, commissions and the improvements they made, they would see no gain, and would actually take about a $15,000 loss. The home has been on the market now for about 7 weeks.