looking for advice

[manu]

Hello everybody.
I just discovered this wonderful website few days ago and I really thank everybody for the information available on this website and other collateral ones.
That said, I have to admit that I have been very anxious after reading the predictions on what it is to happen in real estate.
My husband and I are both in the 30s. We have a very good combined income (almost 300000$ year) that is supposed to further increase in 2 years when I will become a certified physician and my salary should increase for 40000 to about 150000.
we bought the house we are currently living in at the end of 2003, before the peak of the market.
We paid 950000$ for the house (a 4200 sq/f house on over a acre of land in a upscale area of Ventura County), and we currently have a balance of about 600000 on our mortgage.
The house turned to be a so called “money pit” and really had a terrible influence on our relationship
because of the financial stressor and having to deal with contractors for so long.
My husband has had enough of this house and rather live in a condo at this point than have to deal with maintaining such a big house and property.
Unfortunately now that the house is close to be finished the marking is crushing and we are sort of stuck in here because of that so we were considering keeping the house and wait for the next rise in prices to sell since we are not having trouble making our monthly payments. On the other hand all our money is going into the house and we are not making any savings.
Our house is currently estimated at 1635000 on zillow although it doesn`t take in account the 500000 in improvements that I don`t expect to get back at this point but I hope should affect positively the house value.
Bottom line, my question is: should my husband and I try to rush to put the finishing touches on the house (which might require an additional mortgage of 15000 or so) and try to put the house on the market as soon as possible or should we hold on to it?
If the predictins are true and it is going to take long years before tha market value bounces back to were it was or even is right now, I am afraid we will be paying interests for nothing.
Sorry it took me so long.
Hope you can give me some suggestions.
Thank you for taking the time to read all this.

Manu

[patientrenter]

manu, you know most people on this blog think housing is going down more, and for a while. That said, many bloggers who already own homes plan to stay in them, either because they’re not 100% sure about the price decline, or because they are just too comfortable where they are to make a move.

You don’t sound comfortable, as a couple, where you are. So if I were in your shoes, I might move for family harmony, and possible financial gain. If prices rise in the future, well, you might have to set aside some of that extra income to pay for a bigger house, but it won’t kill you.

I wouldn’t trust Zillow. You’d be very lucky to get the Zillow price now.

By the way, you say you won’t get back the $500,000 you spent on improvements. That doesn’t look right to me, based on what you said:

Paid = $950,000 (purchase) + $500,000 (past improvements) + $15,000 (future improvements) = $1,465,000

Current Zillow value = $1,635,000.

Based on Zillow (a risky basis, as I said) you will not only get back every penny of your purchase and improvement money, you will get a tax-free gain of $170,000. If you got the Zillow price, that’s like getting your full physican paychecks starting today instead of 2 years from now. Which just goes to show that, even when the real estate money machine is spluttering it beats, for most people, returns for lucrative work. Something not right there.

Good luck!

Patient renter in OC

[patientrenter]

manu, you know most people on this blog think housing is going down more, and for a while. That said, many bloggers who already own homes plan to stay in them, either because they’re not 100% sure about the price decline, or because they are just too comfortable where they are to make a move.

You don’t sound comfortable, as a couple, where you are. So if I were in your shoes, I might move for family harmony, and possible financial gain. If prices rise in the future, well, you might have to set aside some of that extra income to pay for a bigger house, but it won’t kill you.

I wouldn’t trust Zillow. You’d be very lucky to get the Zillow price now.

By the way, you say you won’t get back the $500,000 you spent on improvements. That doesn’t look right to me, based on what you said:

Paid = $950,000 (purchase) + $500,000 (past improvements) + $15,000 (future improvements) = $1,465,000

Current Zillow value = $1,635,000.

Based on Zillow (a risky basis, as I said) you will not only get back every penny of your purchase and improvement money, you will get a tax-free gain of $170,000. If you got the Zillow price, that’s like getting your full physican paychecks starting today instead of 2 years from now. Which just goes to show that, even when the real estate money machine is spluttering it beats, for most people, returns for lucrative work. Something not right there.

Good luck!

Patient renter in OC

[patientrenter]

manu, you know most people on this blog think housing is going down more, and for a while. That said, many bloggers who already own homes plan to stay in them, either because they’re not 100% sure about the price decline, or because they are just too comfortable where they are to make a move.

You don’t sound comfortable, as a couple, where you are. So if I were in your shoes, I might move for family harmony, and possible financial gain. If prices rise in the future, well, you might have to set aside some of that extra income to pay for a bigger house, but it won’t kill you.

I wouldn’t trust Zillow. You’d be very lucky to get the Zillow price now.

By the way, you say you won’t get back the $500,000 you spent on improvements. That doesn’t look right to me, based on what you said:

Paid = $950,000 (purchase) + $500,000 (past improvements) + $15,000 (future improvements) = $1,465,000

Current Zillow value = $1,635,000.

Based on Zillow (a risky basis, as I said) you will not only get back every penny of your purchase and improvement money, you will get a tax-free gain of $170,000. If you got the Zillow price, that’s like getting your full physican paychecks starting today instead of 2 years from now. Which just goes to show that, even when the real estate money machine is spluttering it beats, for most people, returns for lucrative work. Something not right there.

Good luck!

Patient renter in OC

[Portlock]

I’d just like to try to summarize:

1) You bought close to the peak

2) You spent half the purchase price just to improve the property to Zillow estimates (which may now be inflated…)

3) You wonder if you should spend more to improve the property during a declining market, thinking that it should ‘affect positively the house value’.

Sounds like you want to break even, or better make some profit….

If you had purchased with the idea that your property was a long term investment, i.e, more than 4 years, why would you care if the ‘marking is crushing’?

As a buyer, I don’t care what influence your ‘money pit’ has had on your ‘relationship
because of the financial stressor.’ That is a consequence of your decision to overpay for the place to begin with.

Yes, I would appreciate it if you put 500,000 dollars more into your home, because I am the one who will be looking to buy your property when the market has regained some reasonability, and that figure will be much lower than what your vice is currently telling you.

If you want to put the finishing touches on your house thinking that will increase the value of the property, then you meet all the definitions of a flipper.

Sorry for the venom….I make a better than average wage, have no debt, have substantial savings and a great job and I’m still priced out of the market? WTF…

[Portlock]

I’d just like to try to summarize:

1) You bought close to the peak

2) You spent half the purchase price just to improve the property to Zillow estimates (which may now be inflated…)

3) You wonder if you should spend more to improve the property during a declining market, thinking that it should ‘affect positively the house value’.

Sounds like you want to break even, or better make some profit….

If you had purchased with the idea that your property was a long term investment, i.e, more than 4 years, why would you care if the ‘marking is crushing’?

As a buyer, I don’t care what influence your ‘money pit’ has had on your ‘relationship
because of the financial stressor.’ That is a consequence of your decision to overpay for the place to begin with.

Yes, I would appreciate it if you put 500,000 dollars more into your home, because I am the one who will be looking to buy your property when the market has regained some reasonability, and that figure will be much lower than what your vice is currently telling you.

If you want to put the finishing touches on your house thinking that will increase the value of the property, then you meet all the definitions of a flipper.

Sorry for the venom….I make a better than average wage, have no debt, have substantial savings and a great job and I’m still priced out of the market? WTF…

[Portlock]

I’d just like to try to summarize:

1) You bought close to the peak

2) You spent half the purchase price just to improve the property to Zillow estimates (which may now be inflated…)

3) You wonder if you should spend more to improve the property during a declining market, thinking that it should ‘affect positively the house value’.

Sounds like you want to break even, or better make some profit….

If you had purchased with the idea that your property was a long term investment, i.e, more than 4 years, why would you care if the ‘marking is crushing’?

As a buyer, I don’t care what influence your ‘money pit’ has had on your ‘relationship
because of the financial stressor.’ That is a consequence of your decision to overpay for the place to begin with.

Yes, I would appreciate it if you put 500,000 dollars more into your home, because I am the one who will be looking to buy your property when the market has regained some reasonability, and that figure will be much lower than what your vice is currently telling you.

If you want to put the finishing touches on your house thinking that will increase the value of the property, then you meet all the definitions of a flipper.

Sorry for the venom….I make a better than average wage, have no debt, have substantial savings and a great job and I’m still priced out of the market? WTF…

[Diego Mamani]

Manu,

To answer your question we need to know where you expect to be 5 and 10 years from now, proessionally, personally, and geographically. Also, why did you decide to buy such a huge house in the first place? (The answer to that question culd be illuminating). And wuld you pay near $1MM for a house that wasn’t in move-in condition?

That said, if you think that you’ll stay in the same area for the next 10 years, it may be best to stay put and work dilligently towards paying down your $600K mortgage. I know you said that all your money goes into the house. Is that really tru? For instance, how much are your car payments? If you bought a used Corolla and shared it among the two of you, and kept it for another 10 years, you could have some substantial savings. The same is true of eating out, giving to charity, travel, etc. You can find money to pay your debt.

If you work hard towards paying off your mortgage, and then you sell the house when the next boom peaks (not earlier than in the later part of the next decade IMO), you’ll have a huge nest egg to retire on.

Forget Zillow. My old house, which I sold at the top of the market in 2005, now it’s valued by Zillow at about 23% over what it could realistically sell for today.

D.M.

[Diego Mamani]

Manu,

To answer your question we need to know where you expect to be 5 and 10 years from now, proessionally, personally, and geographically. Also, why did you decide to buy such a huge house in the first place? (The answer to that question culd be illuminating). And wuld you pay near $1MM for a house that wasn’t in move-in condition?

That said, if you think that you’ll stay in the same area for the next 10 years, it may be best to stay put and work dilligently towards paying down your $600K mortgage. I know you said that all your money goes into the house. Is that really tru? For instance, how much are your car payments? If you bought a used Corolla and shared it among the two of you, and kept it for another 10 years, you could have some substantial savings. The same is true of eating out, giving to charity, travel, etc. You can find money to pay your debt.

If you work hard towards paying off your mortgage, and then you sell the house when the next boom peaks (not earlier than in the later part of the next decade IMO), you’ll have a huge nest egg to retire on.

Forget Zillow. My old house, which I sold at the top of the market in 2005, now it’s valued by Zillow at about 23% over what it could realistically sell for today.

D.M.

[Diego Mamani]

Manu,

To answer your question we need to know where you expect to be 5 and 10 years from now, proessionally, personally, and geographically. Also, why did you decide to buy such a huge house in the first place? (The answer to that question culd be illuminating). And wuld you pay near $1MM for a house that wasn’t in move-in condition?

That said, if you think that you’ll stay in the same area for the next 10 years, it may be best to stay put and work dilligently towards paying down your $600K mortgage. I know you said that all your money goes into the house. Is that really tru? For instance, how much are your car payments? If you bought a used Corolla and shared it among the two of you, and kept it for another 10 years, you could have some substantial savings. The same is true of eating out, giving to charity, travel, etc. You can find money to pay your debt.

If you work hard towards paying off your mortgage, and then you sell the house when the next boom peaks (not earlier than in the later part of the next decade IMO), you’ll have a huge nest egg to retire on.

Forget Zillow. My old house, which I sold at the top of the market in 2005, now it’s valued by Zillow at about 23% over what it could realistically sell for today.

D.M.

[4plexowner]

If you need to borrow $15K for finishing touches YOU CAN’T AFFORD THE HOUSE

Where is your six months of living expenses that you have tucked away in the bank for a rainy day? Why don’t you tap that money? Because it doesn’t exist?

Two people living in 4200 SQFT? $300K/year in income and you don’t have $15K liquid? Give me a f’ing break!

[4plexowner]

If you need to borrow $15K for finishing touches YOU CAN’T AFFORD THE HOUSE

Where is your six months of living expenses that you have tucked away in the bank for a rainy day? Why don’t you tap that money? Because it doesn’t exist?

Two people living in 4200 SQFT? $300K/year in income and you don’t have $15K liquid? Give me a f’ing break!

[4plexowner]

If you need to borrow $15K for finishing touches YOU CAN’T AFFORD THE HOUSE

Where is your six months of living expenses that you have tucked away in the bank for a rainy day? Why don’t you tap that money? Because it doesn’t exist?

Two people living in 4200 SQFT? $300K/year in income and you don’t have $15K liquid? Give me a f’ing break!

[bsrsharma]

Manu,

I am not sure I see a compelling reason for you to sell in this market. Much of the damage has been done and you will probably suffer a net cash loss if you sell. If you can continue to live there and not get too nervous about market gyrations, you will be OK. Just remember: a lot of people will be willing to do anything to be in your shoes and have your problems! Enjoy your life – there is more to living than crying over asset bubbles.

On a positive side, A good million $ home in a nice neighborhood in LA region is a good hedge against $ devaluation and inflation that is inevitable in the next 10 years. You will be a happier person by 2020.

[bsrsharma]

Manu,

I am not sure I see a compelling reason for you to sell in this market. Much of the damage has been done and you will probably suffer a net cash loss if you sell. If you can continue to live there and not get too nervous about market gyrations, you will be OK. Just remember: a lot of people will be willing to do anything to be in your shoes and have your problems! Enjoy your life – there is more to living than crying over asset bubbles.

On a positive side, A good million $ home in a nice neighborhood in LA region is a good hedge against $ devaluation and inflation that is inevitable in the next 10 years. You will be a happier person by 2020.

[Author]

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