Sell now and rent or stay put?

[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.

[one_muggle]

“So you have to ask yourself what side of the downturn we are in, the beginning, middle or end.” –SD R

Does anyone really believe this is anything but the beginning?
I know SD has been flat or negative (on some measures) since April 05(?), but the main body of the exploding souffle (aka the housing economy) has yet to arc over and succumb to the harsh mistress of gravity, let alone land with a satisfying splut. Me, I’m waiting for the splut.

(But I still worry about anyone gambling with their primary residence–especially people who need to ask for advice from a blog–no offense intended, but I know some fairly savvy people who still won’t gamble their own home. If you still want to do it, just make sure that you can survive, financially and personally, any downsides–then good luck to you.)

-one muggle

[one_muggle]

“So you have to ask yourself what side of the downturn we are in, the beginning, middle or end.” –SD R

Does anyone really believe this is anything but the beginning?
I know SD has been flat or negative (on some measures) since April 05(?), but the main body of the exploding souffle (aka the housing economy) has yet to arc over and succumb to the harsh mistress of gravity, let alone land with a satisfying splut. Me, I’m waiting for the splut.

(But I still worry about anyone gambling with their primary residence–especially people who need to ask for advice from a blog–no offense intended, but I know some fairly savvy people who still won’t gamble their own home. If you still want to do it, just make sure that you can survive, financially and personally, any downsides–then good luck to you.)

-one muggle

[one_muggle]

“So you have to ask yourself what side of the downturn we are in, the beginning, middle or end.” –SD R

Does anyone really believe this is anything but the beginning?
I know SD has been flat or negative (on some measures) since April 05(?), but the main body of the exploding souffle (aka the housing economy) has yet to arc over and succumb to the harsh mistress of gravity, let alone land with a satisfying splut. Me, I’m waiting for the splut.

(But I still worry about anyone gambling with their primary residence–especially people who need to ask for advice from a blog–no offense intended, but I know some fairly savvy people who still won’t gamble their own home. If you still want to do it, just make sure that you can survive, financially and personally, any downsides–then good luck to you.)

-one muggle

[Ex-SD]

In the end, only you & your wife can decide what is best for you but I think you already are aware that prices are going to fall. How much they will fall is up for debate. IMHO, the prices in SoCal will probably fall 30%+ in some areas like La Jolla, Del Mar and the other coastal towns……………. 40%+ in areas like Tierrasanta, Chula Vista, San Marcos…………and 50%+ in places like Temecula, Riverside/San Bernadino. I may be dead wrong but all the signs are there. Too many foreclosures that will eventually be sold to new buyers will set the standard for comps in the various areas and much tighter requirements for borrowers will weed out many people who “want” a home but simply can’t afford it. If you read the various blogs and statistics from some of the bubble markets, you will see the same problem that San Diego is experiencing:
*Rising inventory of unsold homes
*Rising foreclosures
*Lower sales each month

All of these will force prices lower and lower until they reach a level where people can qualify for a mortgage. That’s the way the market is supposed to work and it will eventually correct itself. The median priced house must be affordable by the median income or the market stops dead in it’s tracks. Presently, it is not. Prices must go down. If not, there will be a much larger problem due to the majority of households being priced out of buying or renting if the exaggerated prices were to remain in effect. The median income household won’t even be able to rent anything more than tiny hovel in Bonsall if prices had continued the way they were. And for the investor: The rent has to cover the mortgage, insurance, and taxes……………. AND show a profit.

BTW: You can sell your home in CA for a flat fee of only $4k + closing costs through Redfin. You don’t have to pay a realtor 6%. If they had been in SD when I sold in 2005, I would have used Redfin. Back then, houses were selling within days of listing (if you had a really nice property) so I negotiated with several realtors and listed mine for only 4%. Of course, things have changed now with a glut of inventory on the market so if you didn’t use Redfin, you would probably have to pay 6%. Good luck with your decision.

[Ex-SD]

In the end, only you & your wife can decide what is best for you but I think you already are aware that prices are going to fall. How much they will fall is up for debate. IMHO, the prices in SoCal will probably fall 30%+ in some areas like La Jolla, Del Mar and the other coastal towns……………. 40%+ in areas like Tierrasanta, Chula Vista, San Marcos…………and 50%+ in places like Temecula, Riverside/San Bernadino. I may be dead wrong but all the signs are there. Too many foreclosures that will eventually be sold to new buyers will set the standard for comps in the various areas and much tighter requirements for borrowers will weed out many people who “want” a home but simply can’t afford it. If you read the various blogs and statistics from some of the bubble markets, you will see the same problem that San Diego is experiencing:
*Rising inventory of unsold homes
*Rising foreclosures
*Lower sales each month

All of these will force prices lower and lower until they reach a level where people can qualify for a mortgage. That’s the way the market is supposed to work and it will eventually correct itself. The median priced house must be affordable by the median income or the market stops dead in it’s tracks. Presently, it is not. Prices must go down. If not, there will be a much larger problem due to the majority of households being priced out of buying or renting if the exaggerated prices were to remain in effect. The median income household won’t even be able to rent anything more than tiny hovel in Bonsall if prices had continued the way they were. And for the investor: The rent has to cover the mortgage, insurance, and taxes……………. AND show a profit.

BTW: You can sell your home in CA for a flat fee of only $4k + closing costs through Redfin. You don’t have to pay a realtor 6%. If they had been in SD when I sold in 2005, I would have used Redfin. Back then, houses were selling within days of listing (if you had a really nice property) so I negotiated with several realtors and listed mine for only 4%. Of course, things have changed now with a glut of inventory on the market so if you didn’t use Redfin, you would probably have to pay 6%. Good luck with your decision.

[Ex-SD]

In the end, only you & your wife can decide what is best for you but I think you already are aware that prices are going to fall. How much they will fall is up for debate. IMHO, the prices in SoCal will probably fall 30%+ in some areas like La Jolla, Del Mar and the other coastal towns……………. 40%+ in areas like Tierrasanta, Chula Vista, San Marcos…………and 50%+ in places like Temecula, Riverside/San Bernadino. I may be dead wrong but all the signs are there. Too many foreclosures that will eventually be sold to new buyers will set the standard for comps in the various areas and much tighter requirements for borrowers will weed out many people who “want” a home but simply can’t afford it. If you read the various blogs and statistics from some of the bubble markets, you will see the same problem that San Diego is experiencing:
*Rising inventory of unsold homes
*Rising foreclosures
*Lower sales each month

All of these will force prices lower and lower until they reach a level where people can qualify for a mortgage. That’s the way the market is supposed to work and it will eventually correct itself. The median priced house must be affordable by the median income or the market stops dead in it’s tracks. Presently, it is not. Prices must go down. If not, there will be a much larger problem due to the majority of households being priced out of buying or renting if the exaggerated prices were to remain in effect. The median income household won’t even be able to rent anything more than tiny hovel in Bonsall if prices had continued the way they were. And for the investor: The rent has to cover the mortgage, insurance, and taxes……………. AND show a profit.

BTW: You can sell your home in CA for a flat fee of only $4k + closing costs through Redfin. You don’t have to pay a realtor 6%. If they had been in SD when I sold in 2005, I would have used Redfin. Back then, houses were selling within days of listing (if you had a really nice property) so I negotiated with several realtors and listed mine for only 4%. Of course, things have changed now with a glut of inventory on the market so if you didn’t use Redfin, you would probably have to pay 6%. Good luck with your decision.

[(former)FormerSanDiegan]

I would stay.

I agree with temeculaguy and Rustico.

Your timing on purchase was good. You bought a house you will own 24 years from now for less than monthly rent. Whatever it is worth at that point is a great bonus. If you had to move, you could rent it out and cover the expenses.

If you wanted to sell and buy back cheaper you have to have good timing two more times. Unfortunately you already missed the first mark, and by the time you sold (assuming this fall) you could easily be down another 5%, making it 15% off the peak, plus 8% selling costs. If prices drop only 25% off the peak you will have gone through a lot of hassle AND would have to time the bottom correctly to make this pay off.

[(former)FormerSanDiegan]

I would stay.

I agree with temeculaguy and Rustico.

Your timing on purchase was good. You bought a house you will own 24 years from now for less than monthly rent. Whatever it is worth at that point is a great bonus. If you had to move, you could rent it out and cover the expenses.

If you wanted to sell and buy back cheaper you have to have good timing two more times. Unfortunately you already missed the first mark, and by the time you sold (assuming this fall) you could easily be down another 5%, making it 15% off the peak, plus 8% selling costs. If prices drop only 25% off the peak you will have gone through a lot of hassle AND would have to time the bottom correctly to make this pay off.

[(former)FormerSanDiegan]

I would stay.

I agree with temeculaguy and Rustico.

Your timing on purchase was good. You bought a house you will own 24 years from now for less than monthly rent. Whatever it is worth at that point is a great bonus. If you had to move, you could rent it out and cover the expenses.

If you wanted to sell and buy back cheaper you have to have good timing two more times. Unfortunately you already missed the first mark, and by the time you sold (assuming this fall) you could easily be down another 5%, making it 15% off the peak, plus 8% selling costs. If prices drop only 25% off the peak you will have gone through a lot of hassle AND would have to time the bottom correctly to make this pay off.

[JJGittes]

Or, just to posit a third (and likely unpopular on piggington) option, you could shop around and see if there is a house available right now that you would want, and that you could strike a decent deal on, and sell your place and simply buy the new one.

ie No market timing, the move is simply lateral at current market conditions for both the sell and the buy, for better or worse.

Of course, interest rates now are just a bit funky…..

[JJGittes]

Or, just to posit a third (and likely unpopular on piggington) option, you could shop around and see if there is a house available right now that you would want, and that you could strike a decent deal on, and sell your place and simply buy the new one.

ie No market timing, the move is simply lateral at current market conditions for both the sell and the buy, for better or worse.

Of course, interest rates now are just a bit funky…..

[JJGittes]

Or, just to posit a third (and likely unpopular on piggington) option, you could shop around and see if there is a house available right now that you would want, and that you could strike a decent deal on, and sell your place and simply buy the new one.

ie No market timing, the move is simply lateral at current market conditions for both the sell and the buy, for better or worse.

Of course, interest rates now are just a bit funky…..

[NotCranky]

I have noticed a trend. Many of us ,who have decided to keep at least one San Diego property, say “keep it”. Of course we have good arguments too:).
It’s is a tough one. All our opinions have some element of speculation.

You could list it to test the waters. I think you will find them to be quite cold, but who knows. There could be a renter in the area that has had enough and is just hoping your property would come up for sell . You could try to sell it yourself. Discount it,from comps, the price of commissions + another 3%-5%percent and pay someone to do the paper work for you.If that is not your thing, you could give a short listing period to an agent. Try it again in March if the market hasn’t collapsed.

[NotCranky]

I have noticed a trend. Many of us ,who have decided to keep at least one San Diego property, say “keep it”. Of course we have good arguments too:).
It’s is a tough one. All our opinions have some element of speculation.

You could list it to test the waters. I think you will find them to be quite cold, but who knows. There could be a renter in the area that has had enough and is just hoping your property would come up for sell . You could try to sell it yourself. Discount it,from comps, the price of commissions + another 3%-5%percent and pay someone to do the paper work for you.If that is not your thing, you could give a short listing period to an agent. Try it again in March if the market hasn’t collapsed.

[Author]

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