Sell and rent until market drops?

[Hobie]

Don’t underestimate the liquid cash burn when getting a new place. ‘Fixing’ little things like: Paint, flooring, remodel, fixtures, landscape, etc.

[spdrun]

Unless the place is non-functional, you don’t have to do things like landscraping, paint, appliances, and flooring immediately. Live with what’s there and enjoy that you have a dry roof over your head. I grew up in a house with a basically original 1950s kitchen (+ newer stove and dishwasher) and it was perfectly usable.

[FlyerInHi]

I guess the consensus is no moving to San Diego.

Whatever happened to “you’re not getting any younger, do what makes you happy” ?

What I’m reading from for advise is
1. Don’t sell if you already own.
2. Buy if you want because rent vs buy is still favorable, or the difference is not that great.

At be top before the last recession people said buy before your kids her old, give them the right schools, lifetime memories, etc… Homeowners will never default, mortgages will always be paid before anything else.

[moneymaker]

The last housing drop was a sudden one, this time around I am expecting more of a slow fizzle starting this September. Financially it is easier to leave San Diego and go somewhere cheaper than the opposite. A lot of variables to consider, commute,how long before retirement,are you happy where you are. There are always deals to be had, but most of those are bought by the flippers. I’m happy where I am, but that doesn’t stop the wife from looking for the bigger better deal. What zip code are you in? Maybe a house swap?

[temeculaguy]

Sd was listed in some study as the 7th least affordable of the 50 largest metros. LA and SF being the worst. That still doesn’t mean the quote from Keynes from a century ago isn’t true today “the market can stay irrational longer than you can stay solvent.”

We saw this with the great recession, SD did not have the 50% declines experienced elsewhere so it probably wont next time either. It pains me to say but brian has a point, if it makes you happy and you can afford it, just sell there and buy where you want.

[an]

[quote=temeculaguy]Sd was listed in some study as the 7th least affordable of the 50 largest metros. LA and SF being the worst. That still doesn’t mean the quote from Keynes from a century ago isn’t true today “the market can stay irrational longer than you can stay solvent.”[/quote]
This is assuming that currently, what we have is irrational. I think it’s far from it. In my previous example, a 3/2 house in MM is going for about $600k today. Rent for such house would be about $2600-2800/month, depending on when you rent (summer vs winter). Assuming you have 20% down, mortgage of the house at 4% interest rate would be $2291/month (P&I). PITI would be $3386/month. But principal is you paying off your loan. So, we should compare ITI vs rent instead. Which would put you at $2695. Now, if you take in tax deduction, ITI – tax deduction = $2249/month. Which means, if you’re buying the house as a primary residence, it’s still cheaper to buy today than rent the same house.

In order for ITI – tax deduction to be about $2700/month, price would have to push to $800k at 4% rate or rate would have to be @ 6% with $600k price.

[The-Shoveler]

I would also argue that SD Job prospects seem to keep expanding with apple and amazon etc… expanding in the area.

Sell and buy what you want maybe makes sense, sell and wait, risky IMO.

[an]

[quote=The-Shoveler]I would also argue that SD Job prospects seem to keep expanding with apple and amazon etc… expanding in the area.

Sell and buy what you want maybe makes sense, sell and wait, risky IMO.[/quote]Exactly. Not to mention the many tech/biotech startups around town. All you need is a couple of them to blow up like Illumina did and it’ll surpass both Apple and Amazon in term of employment demand.

Apple might grab a lot of headline w/ their 1200 employees growth, but I’m sure Illumina have a lot more than that and keep on growing everyday.

[Coronita]

There is some slowdown in the higher proceed homes…Things aren’t moving as fast and there is so e wiggle room on price. But that might be because sellers are still asking a lot and maybe can still afford to keep it on the market longer…..

It feels like any sort of correction will be a long drawn out slow trickle…
.
I can’t speak for other industry, but tech still seems to be doing quite well. There has been some impact to H1B sponsorship and that has driven up wages for tech workers well qualified imho.

[FlyerInHi]

[quote=The-Shoveler]I would also argue that SD Job prospects seem to keep expanding with apple and amazon etc… expanding in the area.

Sell and buy what you want maybe makes sense, sell and wait, risky IMO.[/quote]

How does that answer the question of wanting to move from Temecula to San Diego?

Assuming that the OP must sell in order to buy, would you recommend selling in Temecula now and buying immediately in San Diego? Contigent offers are likely to be rejected, so one must sell first in order to buy, whenever that might be.

Let’s say somewhere were moving from the east coast to San Diego, and that person has to sell back there to have cash to buy in San Diego. When would you advise to buy? Obviously, that person would have to rent temporarily.

[The-Shoveler]

I don’t want to get stuck in endless respond loop here.

I am just saying IMO selling with the intent of waiting several years (or a good length of time) for the next large housing price drop probably won’t work out as well as you may be planning.

And you may end up chasing the market higher.

[Coronita]

I no longer a believer that most people have the financial acumen to time the market well, either buying stuff the low end or selling at the high. A lot of this is sheer damn luck.

As such, financial strategies meant to capitalize on single one time events, imho, are doomed to fail for most people for two reasons

1. You could predict wrong on the outcome of the one time Hail Mary event that may or may not happen the way you think, no matter how smart you think you are.

2. In waiting for that one time event and doing nothing in the meantime, you are giving up a lot of opportunity that could add up and cost you a fortune over time.

A good example of this was my stupid decision to sell a good percentage of my stocks right before Mr. Trump became President Trump thinking his election was going to crater the economy for a long long time. I was correct for about 1 week, and then the markets bounced right back as if it was a non event… Fortunately I got right back into it my investments and kept a consistent buy and hold for the long term and regular monthly drip drip drip contribution to index funds both pre and post tax contributions…and those long term, small decision that didn’t count on a big bang event ended up being some of the better decisions. Of course there were optimizations to those decisions that were made to take advantage of short term changes….For example, moving more money invested the damr index funds into 529 college savings plan when the administration changed the tax law for 529 plans and investing less in after tax investment plans into the same index funds to saving on capital gains taxes. But that was about it.

[thejq]

[quote=AN]In my previous example, a 3/2 house in MM is going for about $600k today. Rent for such house would be about $2600-2800/month, depending on when you rent (summer vs winter). Assuming you have 20% down, mortgage of the house at 4% interest rate would be $2291/month (P&I). PITI would be $3386/month. But principal is you paying off your loan. So, we should compare ITI vs rent instead. Which would put you at $2695. Now, if you take in tax deduction, ITI – tax deduction = $2249/month. Which means, if you’re buying the house as a primary residence, it’s still cheaper to buy today than rent the same house.

In order for ITI – tax deduction to be about $2700/month, price would have to push to $800k at 4% rate or rate would have to be @ 6% with $600k price.[/quote]

While I agree with your reasoning for owning a house, the logic behind your math is flawed. Right now you can deduct $24K as standard deduction, so only if your SALT + mortgage is more than that, you can use itemized deduction. Even if so, the benefit of that is the additional amount over $24K, when comparing to renting, not 100% as in your math.

If timing is hard, and you think the market maybe in a slow down trend, personally I think it’s better to wait for the market to drop before selling and buying. For example, if your equity today is $200K and house is $400K and you are looking to buy a $600K house, your loan will be $400K. If the whole market goes down 25% (hypothetically), your equity is halved at $100K, but the house you want to buy is now $450K, so your loan will be $350K. And you also pay less in tax/insurance and have accumulated some more $$$ while waiting.

[an]

[quote=thejq]
While I agree with your reasoning for owning a house, the logic behind your math is flawed. Right now you can deduct $24K as standard deduction, so only if your SALT + mortgage is more than that, you can use itemized deduction. Even if so, the benefit of that is the additional amount over $24K, when comparing to renting, not 100% as in your math.[/quote]
My bad, I forgot about the new tax law. My number was from my excel sheet I have that calculate this base on the older tax law. So, even if you take out the tax benefit, you’re still looking at ~$2700 for ITI vs $2600-2800 for rent. So, depending on your tax rate, the tax benefit would vary.

What make you think price would drop 25%? I think that would put ITI well below rent.

To put the numbers into perspective, at the bottom of the last crash, ITI for houses around my area were about the same as rent. So, for you to expect ITI to fall below rent, then you’re expecting price to fall below where it did at the last crash when comparing ITI vs rent. I just don’t see that happening.

[Coronita]

Side question: does anyone else think that in SD there is a lack of available housing to rent?

I’m asking because I recently listed a condo at what I thought was at market price , and I’ve gotten like 19 responses in the last 48 hours, all asking if they could go see the place in a hurry.

I don’t think my asking price is low or below market so it was kinda surprising. I asked a few folks why are they looking to move, and many of them said they have no choice…The homes they currently live in, the owners want to sell and are not planning to renew their leases. And the ones that are continuing to lease are raising rent prices by quite a bit. I’m wondering if there’s a shortage of rentals.

[Author]

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