We currently have a 2 year old house that we are thinking of selling now before the market drops. We have $400,000 worth of equity in it, and have an opportunity to rent a house through the family at a low cost. Do you think this is a good decision, and then buy another house once the market drops in a year or so?
I say at least 2 years and with that rental option you have (if stable), I would. Unless you don’t mind not living in your current house for very long time. Why not?
I know my story is repetitive for those who’ve been on these forums for a while, but I will tell it for you. We built a house, w/ a killer kitchen, ocean views to 18 miles away, and moved in Sept 05. After much prodding from my brother that the market was overvalued, I googled “San Diego housing bubble”, to see if he was right. I came across this site. I read the Bubble Primer, and realized we are in a huge real estate bubble. We listed our house, and had 2 offers, both were 5% below list price! My husband wanted to hold out for a higher offer. He figured that someone would come along who would appreciate our wonderful house. Thus, I understand the seller psychology, of holding out for an unrealistic price. We came to our senses, and had to take the 2nd offer. The 2nd offer was “firm and final”. When we countered, the buyer’s agent said, “We told you this was firm and final. If you counter, we walk. We have 2 other houses which interest us”. Aaaah, the effect of high inventory!
We closed in January 06, and moved into a rental house in Poway. A 4-bedroom. We have 3 kids, and plan to rent until prices drop to bottom, which will take 4-7 years. We love the rental house, and the neighborhood, and can easily enjoy it for the 4-7 years.
We took the equity, and invested in CDs earning 4.75%.
This is the easiest money we have ever made in our lifetime. And a very smart move.
The longer you wait, the less equity you will have. Prices are softening, and heading down. Sell now, before prices get even lower.
And be smart – price your house at market rate, so you don’t chase the market down. Too many sellers list at last summer’s prices, when the market is 5-10% less now. By the time the seller realizes they are overpriced, and lower by 5%, the market is 10-15% less. That’s called chasing down the market.
This is the easiest money we have ever made in our lifetime.
I’m curious how you were able to make the easy money. Did you buy the land pre-bubble? Was there that much money to be made from fall to winter 2005 as the market was beginning to roll over?
We bought the property in Spring 2000, just at the beginning of the bubble. Our house burned in the Cedar fire, and we rebuilt, from Oct 2004-Sept 2005.
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