Sell now and rent or stay put?

[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.

[sd_resident]

Thanks all for your inputs.

Here are some points missing from my original post.

The equity estimate is based on most recent comps. In the past 2 months, three houses with exactly the same floorplan were sold for $550K, $555K and $567K (larger backyard). MLS shows 1 house pending (asking price $575K). Based on these comps, our home seems to be worth $550K (I am taking lowest of these comps although we have put in some upgrades).
Prices in my neighborhood have come down by 10% from the peak (summer 2005). I’ve considered 8% of selling price as costs (6% for agents, 1% closing costs, 1% for misc).

We have a 30yr fixed loan, so the $2K monthly cost is pretty much guaranteed for next 30 yrs if we stay put in current house (exceptions: small increments in PTax, Ins & HOA).

If we don’t sell now, our concern is we might loose a big opportunity to cash out and invest it somewhere else rather than loosing equity.

[sd_resident]

Thanks all for your inputs.

Here are some points missing from my original post.

The equity estimate is based on most recent comps. In the past 2 months, three houses with exactly the same floorplan were sold for $550K, $555K and $567K (larger backyard). MLS shows 1 house pending (asking price $575K). Based on these comps, our home seems to be worth $550K (I am taking lowest of these comps although we have put in some upgrades).
Prices in my neighborhood have come down by 10% from the peak (summer 2005). I’ve considered 8% of selling price as costs (6% for agents, 1% closing costs, 1% for misc).

We have a 30yr fixed loan, so the $2K monthly cost is pretty much guaranteed for next 30 yrs if we stay put in current house (exceptions: small increments in PTax, Ins & HOA).

If we don’t sell now, our concern is we might loose a big opportunity to cash out and invest it somewhere else rather than loosing equity.

[sd_resident]

Thanks all for your inputs.

Here are some points missing from my original post.

The equity estimate is based on most recent comps. In the past 2 months, three houses with exactly the same floorplan were sold for $550K, $555K and $567K (larger backyard). MLS shows 1 house pending (asking price $575K). Based on these comps, our home seems to be worth $550K (I am taking lowest of these comps although we have put in some upgrades).
Prices in my neighborhood have come down by 10% from the peak (summer 2005). I’ve considered 8% of selling price as costs (6% for agents, 1% closing costs, 1% for misc).

We have a 30yr fixed loan, so the $2K monthly cost is pretty much guaranteed for next 30 yrs if we stay put in current house (exceptions: small increments in PTax, Ins & HOA).

If we don’t sell now, our concern is we might loose a big opportunity to cash out and invest it somewhere else rather than loosing equity.

[sd_resident]

Accidentally replied twice..

[sd_resident]

Accidentally replied twice..

[sd_resident]

Accidentally replied twice..

[PerryChase]

” If you can truly get $270k in clear equity out of your present home, I would run, not walk. ”

I agree with ex-sd. Rent for a while then buy your dream house.

Your holding costs are still higher than comparable rent, so you would save money by renting PLUS you’ll have a growing downpayment to put towards your “forever” home which you’ll acquire at great discount, perhaps close to the selling price of your current home.

The only reason for owning is if your holding costs are subtantially LOWER than comparable rent making it a savings to own.

I did the calculation myself, that’s the simple answer to that question. You want to preserve your standard of living while saving money. Think of it as “how can I have the same standard of living for the lowest cash outflow.”

[PerryChase]

” If you can truly get $270k in clear equity out of your present home, I would run, not walk. ”

I agree with ex-sd. Rent for a while then buy your dream house.

Your holding costs are still higher than comparable rent, so you would save money by renting PLUS you’ll have a growing downpayment to put towards your “forever” home which you’ll acquire at great discount, perhaps close to the selling price of your current home.

The only reason for owning is if your holding costs are subtantially LOWER than comparable rent making it a savings to own.

I did the calculation myself, that’s the simple answer to that question. You want to preserve your standard of living while saving money. Think of it as “how can I have the same standard of living for the lowest cash outflow.”

[PerryChase]

” If you can truly get $270k in clear equity out of your present home, I would run, not walk. ”

I agree with ex-sd. Rent for a while then buy your dream house.

Your holding costs are still higher than comparable rent, so you would save money by renting PLUS you’ll have a growing downpayment to put towards your “forever” home which you’ll acquire at great discount, perhaps close to the selling price of your current home.

The only reason for owning is if your holding costs are subtantially LOWER than comparable rent making it a savings to own.

I did the calculation myself, that’s the simple answer to that question. You want to preserve your standard of living while saving money. Think of it as “how can I have the same standard of living for the lowest cash outflow.”

[JWM in SD]

“If we don’t sell now, our concern is we might loose a big opportunity to cash out and invest it somewhere else rather than loosing equity.”

I think you just answered your own question no???

Also, watch the Lose Loose thing…undermines credibility.

[JWM in SD]

“If we don’t sell now, our concern is we might loose a big opportunity to cash out and invest it somewhere else rather than loosing equity.”

I think you just answered your own question no???

Also, watch the Lose Loose thing…undermines credibility.

[JWM in SD]

“If we don’t sell now, our concern is we might loose a big opportunity to cash out and invest it somewhere else rather than loosing equity.”

I think you just answered your own question no???

Also, watch the Lose Loose thing…undermines credibility.

[SD Realtor]

sd_resident, it sounds like your analysis is conservative which is good. If you want it may be wise to built in more margin to your estimates given the fact that the lending climate is substantially more difficult now then it was 2 months ago. Also the fact that these closings occurred in the past two months indicates the homes were on the market in the spring or at least late spring. Are there any actives on the market currently?

Do you mind if I ask what part of town and if you are in a condo or a home? (Don’t answer this part if you don’t want to)

Chris made a valid point about chasing the market down. So you have to ask yourself what side of the downturn we are in, the beginning, middle or end. Also that question will vary (at least in my opinion) on where you live and what type of home you have. Also how fast has the neighborhood appreciated? Do you think many people around you are susceptible to distress (risky loan vehicles) etc? Another thing to remember is that there is time you need to account for to recover after the market bottoms out. So that time is also opportunity cost with respect to your investment. One thing you may want to do is run out some scenarios. Say over the next 3 years plot out a 7-10% depreciation and then a 4% appreciation to see how long it takes to get back to where you are. Play with the numbers (maybe 2 years instead of 3 and maybe 4 instead of 3. Also vary the depreciation rates) and see where you end up. Also compare that to say a very conservative investment of say 5% and then vary that investment… 3% to be ultra conservative and go up if you want to be risky…

It is one thing to ask opinions but when you run the numbers and have it in front of you sometimes that makes the decision easier.

We all have varying points of view here as you know. Is it conceivable for homes to go back to 2002 or 2001 prices? It could happen. Again it depends on where you are and what you have. I have seen 2003 prices in some areas already. In others I have seen much stronger resistance to the depreciation cycle.

[SD Realtor]

sd_resident, it sounds like your analysis is conservative which is good. If you want it may be wise to built in more margin to your estimates given the fact that the lending climate is substantially more difficult now then it was 2 months ago. Also the fact that these closings occurred in the past two months indicates the homes were on the market in the spring or at least late spring. Are there any actives on the market currently?

Do you mind if I ask what part of town and if you are in a condo or a home? (Don’t answer this part if you don’t want to)

Chris made a valid point about chasing the market down. So you have to ask yourself what side of the downturn we are in, the beginning, middle or end. Also that question will vary (at least in my opinion) on where you live and what type of home you have. Also how fast has the neighborhood appreciated? Do you think many people around you are susceptible to distress (risky loan vehicles) etc? Another thing to remember is that there is time you need to account for to recover after the market bottoms out. So that time is also opportunity cost with respect to your investment. One thing you may want to do is run out some scenarios. Say over the next 3 years plot out a 7-10% depreciation and then a 4% appreciation to see how long it takes to get back to where you are. Play with the numbers (maybe 2 years instead of 3 and maybe 4 instead of 3. Also vary the depreciation rates) and see where you end up. Also compare that to say a very conservative investment of say 5% and then vary that investment… 3% to be ultra conservative and go up if you want to be risky…

It is one thing to ask opinions but when you run the numbers and have it in front of you sometimes that makes the decision easier.

We all have varying points of view here as you know. Is it conceivable for homes to go back to 2002 or 2001 prices? It could happen. Again it depends on where you are and what you have. I have seen 2003 prices in some areas already. In others I have seen much stronger resistance to the depreciation cycle.

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