Sell now and rent or stay put?

[one_muggle]

As bad as things might get, market timing is a tough business and generally not recommended with your primary residence.

Anecdotal story: The most risk tolerant person I know suggested to someone that they do the sell/wait/buy tactic for a vacation rental (Myrtle Beach, I think), when the prospective seller mentioned doing the same with his hugely appreciated NYC co-op the comment from Mr Risk Tolerant “You gotta be f–kin nuts!” (That’s NY-speak for “I think that is a bad idea, my friend.”

-one muggle

[NotCranky]

On the other hand banking more than a couple of grand looks pretty good.
Meant to say couple hundred grand.

[NotCranky]

On the other hand banking more than a couple of grand looks pretty good.
Meant to say couple hundred grand.

[NotCranky]

On the other hand banking more than a couple of grand looks pretty good.
Meant to say couple hundred grand.

[patientrenter]

For you, selling now is like going to a poker game with acquaintances you think you might beat. You figure you have a 75% chance of walking away with more money than you bring. So you bring $300. Maybe you’ll bring back $600, maybe $100. You’re not too worried.

Now multiply the numbers by $1000. Do you feel just as unworried, and as ready to play the hands and make the bets and enjoy the game?

You have to think about your own tolerance for risk.

Patient renter in OC

[patientrenter]

For you, selling now is like going to a poker game with acquaintances you think you might beat. You figure you have a 75% chance of walking away with more money than you bring. So you bring $300. Maybe you’ll bring back $600, maybe $100. You’re not too worried.

Now multiply the numbers by $1000. Do you feel just as unworried, and as ready to play the hands and make the bets and enjoy the game?

You have to think about your own tolerance for risk.

Patient renter in OC

[patientrenter]

For you, selling now is like going to a poker game with acquaintances you think you might beat. You figure you have a 75% chance of walking away with more money than you bring. So you bring $300. Maybe you’ll bring back $600, maybe $100. You’re not too worried.

Now multiply the numbers by $1000. Do you feel just as unworried, and as ready to play the hands and make the bets and enjoy the game?

You have to think about your own tolerance for risk.

Patient renter in OC

[Ex-SD]

Let me propose another scenario:

I suspect that you think your present house is worth around $450k because you say you have $270k in equity and your payments are only $2k per month including PITI and the kitchen sink.
If you hold on to your present house while the $700k dream house falls to the $420-$490k range over the next 3 to 4 years, your present home will then be worth $270k- $310k and your equity will be down to $100k-$125k.

If you can truly get $270k in clear equity out of your present home, I would run, not walk, to the nearest computer and get in touch with Redfin and aggressively price your house to move ASAP, even if you have to go $15-$20k under the competition in the neighborhood to do it, you will be far ahead in the long run. You can put that money in a CD and earn some safe interest while you’re waiting to see how low the housing market will fall. One thing is for sure: Housing is NOT going back UP in SoCal anytime soon (with the possible exception of super-luxury homes that are bought by the very, very rich). When all of this finally settles, cash will be king and you will have a large amount of $$$$ to purchase that dream home.
BTW: I did part of this in 2005 when I was convinced that what is happening now……would happen. The only difference is that since I retired at the age of 54, I didn’t have a job to keep me in CA so we moved to South Carolina where we’re sitting comfortably and watching the mess unravel itself. When we’re convinced it’s done, we will sell our home here and move back. South Carolina and the majority of the south did not get caught in the high-house price frenzy like San Diego and the other bubble markets did so houses are relatively inexpensive and appreciate at a rate of 2-3% per year.

[Ex-SD]

Let me propose another scenario:

I suspect that you think your present house is worth around $450k because you say you have $270k in equity and your payments are only $2k per month including PITI and the kitchen sink.
If you hold on to your present house while the $700k dream house falls to the $420-$490k range over the next 3 to 4 years, your present home will then be worth $270k- $310k and your equity will be down to $100k-$125k.

If you can truly get $270k in clear equity out of your present home, I would run, not walk, to the nearest computer and get in touch with Redfin and aggressively price your house to move ASAP, even if you have to go $15-$20k under the competition in the neighborhood to do it, you will be far ahead in the long run. You can put that money in a CD and earn some safe interest while you’re waiting to see how low the housing market will fall. One thing is for sure: Housing is NOT going back UP in SoCal anytime soon (with the possible exception of super-luxury homes that are bought by the very, very rich). When all of this finally settles, cash will be king and you will have a large amount of $$$$ to purchase that dream home.
BTW: I did part of this in 2005 when I was convinced that what is happening now……would happen. The only difference is that since I retired at the age of 54, I didn’t have a job to keep me in CA so we moved to South Carolina where we’re sitting comfortably and watching the mess unravel itself. When we’re convinced it’s done, we will sell our home here and move back. South Carolina and the majority of the south did not get caught in the high-house price frenzy like San Diego and the other bubble markets did so houses are relatively inexpensive and appreciate at a rate of 2-3% per year.

[Ex-SD]

Let me propose another scenario:

I suspect that you think your present house is worth around $450k because you say you have $270k in equity and your payments are only $2k per month including PITI and the kitchen sink.
If you hold on to your present house while the $700k dream house falls to the $420-$490k range over the next 3 to 4 years, your present home will then be worth $270k- $310k and your equity will be down to $100k-$125k.

If you can truly get $270k in clear equity out of your present home, I would run, not walk, to the nearest computer and get in touch with Redfin and aggressively price your house to move ASAP, even if you have to go $15-$20k under the competition in the neighborhood to do it, you will be far ahead in the long run. You can put that money in a CD and earn some safe interest while you’re waiting to see how low the housing market will fall. One thing is for sure: Housing is NOT going back UP in SoCal anytime soon (with the possible exception of super-luxury homes that are bought by the very, very rich). When all of this finally settles, cash will be king and you will have a large amount of $$$$ to purchase that dream home.
BTW: I did part of this in 2005 when I was convinced that what is happening now……would happen. The only difference is that since I retired at the age of 54, I didn’t have a job to keep me in CA so we moved to South Carolina where we’re sitting comfortably and watching the mess unravel itself. When we’re convinced it’s done, we will sell our home here and move back. South Carolina and the majority of the south did not get caught in the high-house price frenzy like San Diego and the other bubble markets did so houses are relatively inexpensive and appreciate at a rate of 2-3% per year.

[SD Realtor]

I think the prudent move would be as follows:

– Run your numbers through a rent vs buy calculator. Factor in EVERYTHING, your tax benefits by staying, other benefits like not having to pay HOA and additional homeowners insurance if you rent… etc…

– If you do plan to sell, be very REALISTIC about your sale. Your net will be sales price – commissions (listing side and buyers agent side) – sellers side closing costs (typically 1% of the sales price – additional credits or concessions the buyer may ask for (these are negotiable but as the market continues to tilt, buyers are asking for more) – prorated mortgage and property tax. Also the 1% estimate I gave on the sellers side are “typical” sellers side expenses such as splitting escrow 50/50, purchasing title insurance for the buyer, paying for the home warranty, paying for county transfer tax $1.10 for every $1000 of the sales price, paying for HOA doc prep, paying for natural hazard and zone disclosure… etc. You may incur more if you have major repair work or major termite damage or any sort of prepayment penalty on your loan.

The commissions you pay are all negotiable and up to you. You can go full service or you can do a for sale by owner or you can use a discount or selected service broker. I would suggest that the commission you offer to the buyers side be competitive with all of your competition in the area.

– If you do sell then take the proceeds and put them in a safe haven or at least a good portion of them. If you are POSITIVE you can make a better return then so bit it. I have a relatively large (by my standards but not by others here) sum of cash I have busted my butt for and 90% of it is in money market and cds… the other 10% is in the market. I don’t get a sparkling return but I sleep at night regardless of the tilt of the market.

– I would encourage homeowners, especially young homeowners to do what Rustico said which is try to hold as many properties as you can as you move through life. Think about it. If you can do it 3 times then by the time you are 50 or 60 you have 3 rentals and they are paid off or close to it… Talk about an instant pension. Just make sure that although you will stay in the home, get to work and start saving money in as prudent as a manner as you can.

– The converse of that is that these are going to be different times. We could indeed have a dip the likes that we or I have never seen. Additionally we may be in a credit crunch situation such that leveraging your home you have lots of equity in (that is presently that you have equity in) may be difficult in the future. We don’t know the lending climate and we don’t know how much equity you will have in a few years.

– On a personal note I did indeed sell one of my rentals (condo in mission vallyey) a few months ago and put the cash away. In that short time the prices have moved down a few percentage points while the proceeds of the sale went into a cd.

Sorry if this post doesn’t help you to decide. Just trying to throw in my two cents.

SD Realtor

[SD Realtor]

I think the prudent move would be as follows:

– Run your numbers through a rent vs buy calculator. Factor in EVERYTHING, your tax benefits by staying, other benefits like not having to pay HOA and additional homeowners insurance if you rent… etc…

– If you do plan to sell, be very REALISTIC about your sale. Your net will be sales price – commissions (listing side and buyers agent side) – sellers side closing costs (typically 1% of the sales price – additional credits or concessions the buyer may ask for (these are negotiable but as the market continues to tilt, buyers are asking for more) – prorated mortgage and property tax. Also the 1% estimate I gave on the sellers side are “typical” sellers side expenses such as splitting escrow 50/50, purchasing title insurance for the buyer, paying for the home warranty, paying for county transfer tax $1.10 for every $1000 of the sales price, paying for HOA doc prep, paying for natural hazard and zone disclosure… etc. You may incur more if you have major repair work or major termite damage or any sort of prepayment penalty on your loan.

The commissions you pay are all negotiable and up to you. You can go full service or you can do a for sale by owner or you can use a discount or selected service broker. I would suggest that the commission you offer to the buyers side be competitive with all of your competition in the area.

– If you do sell then take the proceeds and put them in a safe haven or at least a good portion of them. If you are POSITIVE you can make a better return then so bit it. I have a relatively large (by my standards but not by others here) sum of cash I have busted my butt for and 90% of it is in money market and cds… the other 10% is in the market. I don’t get a sparkling return but I sleep at night regardless of the tilt of the market.

– I would encourage homeowners, especially young homeowners to do what Rustico said which is try to hold as many properties as you can as you move through life. Think about it. If you can do it 3 times then by the time you are 50 or 60 you have 3 rentals and they are paid off or close to it… Talk about an instant pension. Just make sure that although you will stay in the home, get to work and start saving money in as prudent as a manner as you can.

– The converse of that is that these are going to be different times. We could indeed have a dip the likes that we or I have never seen. Additionally we may be in a credit crunch situation such that leveraging your home you have lots of equity in (that is presently that you have equity in) may be difficult in the future. We don’t know the lending climate and we don’t know how much equity you will have in a few years.

– On a personal note I did indeed sell one of my rentals (condo in mission vallyey) a few months ago and put the cash away. In that short time the prices have moved down a few percentage points while the proceeds of the sale went into a cd.

Sorry if this post doesn’t help you to decide. Just trying to throw in my two cents.

SD Realtor

[SD Realtor]

I think the prudent move would be as follows:

– Run your numbers through a rent vs buy calculator. Factor in EVERYTHING, your tax benefits by staying, other benefits like not having to pay HOA and additional homeowners insurance if you rent… etc…

– If you do plan to sell, be very REALISTIC about your sale. Your net will be sales price – commissions (listing side and buyers agent side) – sellers side closing costs (typically 1% of the sales price – additional credits or concessions the buyer may ask for (these are negotiable but as the market continues to tilt, buyers are asking for more) – prorated mortgage and property tax. Also the 1% estimate I gave on the sellers side are “typical” sellers side expenses such as splitting escrow 50/50, purchasing title insurance for the buyer, paying for the home warranty, paying for county transfer tax $1.10 for every $1000 of the sales price, paying for HOA doc prep, paying for natural hazard and zone disclosure… etc. You may incur more if you have major repair work or major termite damage or any sort of prepayment penalty on your loan.

The commissions you pay are all negotiable and up to you. You can go full service or you can do a for sale by owner or you can use a discount or selected service broker. I would suggest that the commission you offer to the buyers side be competitive with all of your competition in the area.

– If you do sell then take the proceeds and put them in a safe haven or at least a good portion of them. If you are POSITIVE you can make a better return then so bit it. I have a relatively large (by my standards but not by others here) sum of cash I have busted my butt for and 90% of it is in money market and cds… the other 10% is in the market. I don’t get a sparkling return but I sleep at night regardless of the tilt of the market.

– I would encourage homeowners, especially young homeowners to do what Rustico said which is try to hold as many properties as you can as you move through life. Think about it. If you can do it 3 times then by the time you are 50 or 60 you have 3 rentals and they are paid off or close to it… Talk about an instant pension. Just make sure that although you will stay in the home, get to work and start saving money in as prudent as a manner as you can.

– The converse of that is that these are going to be different times. We could indeed have a dip the likes that we or I have never seen. Additionally we may be in a credit crunch situation such that leveraging your home you have lots of equity in (that is presently that you have equity in) may be difficult in the future. We don’t know the lending climate and we don’t know how much equity you will have in a few years.

– On a personal note I did indeed sell one of my rentals (condo in mission vallyey) a few months ago and put the cash away. In that short time the prices have moved down a few percentage points while the proceeds of the sale went into a cd.

Sorry if this post doesn’t help you to decide. Just trying to throw in my two cents.

SD Realtor

[Chris Scoreboard Johnston]

I think you are too late to time the market, you had to sell itleast a year ago. Now you will just chase prices downward, and when you add that to the 6% it costs to sell including closing costs, I do not think you will be much ahead unless the biggest depression of all time hits. It could, but I am betting against it. Especially if you like your place and where you live.

Do not read those scare tactic articles from newspapers, most of those people have never made a dime, so why would you listen to their advice? I have made a nice living for awhile fading those people, as they are wrong a high percentage of the time.

Prices are coming down, there is no denying that, but for your scenario at this point you need a crash for it to pay off, larger than the early 90’s one. I think we are already down 10 to 15% at this point, you will probably take a 5% hit now from where you think you can sell, to where you would actually sell. Add that to the 6% cost of doing so, and now you are more or less the equivalent of anywhere from 21 to 26% off the top. We may go further, but remember, prices are rigged upwards not downwards, so you are really betting against a very strong long term upward trend, and hoping for a greater than 25% pullback against it. Odds do not favor that happening.

Many in here think it is different this time, and they may be right, but I am not one of them.

[Chris Scoreboard Johnston]

I think you are too late to time the market, you had to sell itleast a year ago. Now you will just chase prices downward, and when you add that to the 6% it costs to sell including closing costs, I do not think you will be much ahead unless the biggest depression of all time hits. It could, but I am betting against it. Especially if you like your place and where you live.

Do not read those scare tactic articles from newspapers, most of those people have never made a dime, so why would you listen to their advice? I have made a nice living for awhile fading those people, as they are wrong a high percentage of the time.

Prices are coming down, there is no denying that, but for your scenario at this point you need a crash for it to pay off, larger than the early 90’s one. I think we are already down 10 to 15% at this point, you will probably take a 5% hit now from where you think you can sell, to where you would actually sell. Add that to the 6% cost of doing so, and now you are more or less the equivalent of anywhere from 21 to 26% off the top. We may go further, but remember, prices are rigged upwards not downwards, so you are really betting against a very strong long term upward trend, and hoping for a greater than 25% pullback against it. Odds do not favor that happening.

Many in here think it is different this time, and they may be right, but I am not one of them.

[Author]

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