Should Equity Seller Even Be Listing Now?

[Adame99]

Long time reader of this blog. Love reading discussions by people who actually know what they are talking about, yet have diverse viewpoints.

Which leads me to a question for the forum:

A person who doesn’t need to sell, should they list in this market, or hold off?

Appraisals are lagging behind actual values by several months. Prices are gapping up, but appraisals will need several months to catch up. So maybe a person who wants to sell should wait for some other suckers, umm sellers, to fill in the gap and establish a new appraisal level in their neighborhood.

The impetus behind this posting is that I recently bought a place and just listed my old place. (Yes, I am a member of that endangered breed, the move-up buyer). One day on the market and multiple offers are already in. (One guy, supposedly representing a fund, sent a cash offer for full price without even seeing the property!). This is crazier than 2005!

And now I am having a massive case of seller’s remorse. I can comfortably carry the mortgages on both places even if I didn’t rent out the old pad, so I don’t need to sell. But keeping it sitting there seems stupid. And I don’t want to be a landlord. So selling seemed the natural path. Or it did until yesterday.

SD Realtor, I think you wrote that people who sell now when they don’t need to are nuts. Do you still have that opinion?

(And that, boys and girls, is why equity inventory is so low. Because you list and feel like a fool for doing it).

Thanks all. What says the forum?

[spdrun]

No guarantee that prices will keep climbing indefinitely. If anything, median asking prices seem to have flattened over the last month.

http://www.deptofnumbers.com/asking-prices/california/san-diego/

This may actually BE a good time to sell, since inventory is still tight, so you have less competition from other sellers.

As far as being a landlord, if you cash-flow, what’s wrong with being one? Let some other dumbkopf pay part of your mortgage on your new pad.

[Adame99]

This is where the statistics get interesting.

In your link to Department Of Numbers, it shows asking prices up 0.9% month-on-month.

Meanwhile, Redfin’s graph at the bottom right of this page shows an 8% increase month-on-month in asking prices.

Both are for San Diego, so it should be an apples to apples comparison. So how can two reputable sources come to such hugely different conclusions. (A 0.9% m-o-m increase is a normal market. An 8% m-o-m increase is a boom. Very different animals).

I don’t know enough to know which one is right. Anecdotally, I don’t see a slow-down.

[Adame99]

Your other point is very valid and logical. Let someone else pay my mortgage.

And I’m thinking that maybe I SHOULD do exactly that and yank it off the market. Still thinking it over.

[spdrun]

One is aggregate, one is per sq ft. Also, I suspect that Redfin’s graph ends in March 2013.

And, again, what’s wrong with renting to others? I have one rental property already. If I don’t get the one in SD that’s going through the SS approval process right now, then I’ll get a couple locally in NJ, Staten Island, or north of NYC.

My stated goal is to have someone else paying my entire housing cost inside of a year. Zero housing payment in NYC — I’ll already be way ahead of the game, since NYC billing rates and salaries are geared towards high housing costs.

[CA renter]

[quote=spdrun]No guarantee that prices will keep climbing indefinitely. If anything, median asking prices seem to have flattened over the last month.

http://www.deptofnumbers.com/asking-prices/california/san-diego/

This may actually BE a good time to sell, since inventory is still tight, so you have less competition from other sellers.

As far as being a landlord, if you cash-flow, what’s wrong with being one? Let some other dumbkopf pay part of your mortgage on your new pad.[/quote]

Agree that this is the time to sell. For those of us who sold at/near the top in 2004-2006, especially if one was selling to rent, there was a non-stop barrage of advice and opinions from the peanut gallery who would constantly ask why we were willing to “give up all that equity” by selling out of the market…effectively short-selling the housing market. IMHO, that is EXACTLY when it’s time to sell.

Remember, be a seller when nobody else is selling, which is almost always because people erroneously believe that prices will continue to go up from that point. It’s admittedly not easy to do because it’s a very contrarian position, but most contrarians are pretty happy with their decisions once everything has settled.

You have severely constrained inventory, incredibly low rates, unusually massive numbers of investors (and many of them are leveraged…so don’t pay to much attention to the “all cash” stories) scrambling around in the RE market, and a sizzling hot “spring selling season” on your side — this is what’s causing the frenzy right now. What conditions do you see in the future that would cause prices to rise further and/or give you a better opportunity to sell?

Of course, if keeping the old house as a rental would **realistically** provide a positive cash flow, that’s a reasonable option as well. But be sure to consider all of the costs involved: vacancies, maintenance/repairs (possibly more than if you were living there yourself), eviction/non-collection of rent for an extended period of time, etc. Also, do not count on rents rising or remaining stable since the “foreclosure crisis” is pushing an unusually large group of people into the rental market at this time, and if investors continue to buy homes to rent out, that will also put downward pressure on rents.

Good luck with whatever actions you decide to take. It sounds like you’re not under a lot of pressure, which is always helpful.

[Adame99]

Thanks CA renter.

Yeah, that’s exactly why I don’t want to be a landlord, even if the numbers currently make sense. My neighbor rented to a family that did considerable damage to his place while having serious financial problems that affected payment of rent. I think he had to go to court to get them out or something like that. He eventually said forget it and sold. Right at the bottom of the market.

I wonder what the realtors on this site are saying to their prospective sellers: “Sell now while the market is hot” or “Wait, wait, don’t do it”.

[Adame99]

Wow, that would be quite an accomplishment if you can have zero housing costs in NYC!

I’m familiar with the NY-area market since I used to live there. Makes San Diego real estate prices look like affordable housing.

[NotCranky]

Not many realtors say “wait don’t sell” though some of the ones around here might.

Spring buying is probably going to make the inventory situation more desperate for buyers and their agents. If demand stays good , even for a few more months , which seems very likely, you could make tens of thousand more. If I were a seller with a nice property,especially one as comfortable as you are financially, I’d probably take that chance.

[spdrun]

Wow, that would be quite an accomplishment if you can have zero housing costs in NYC!
I’m familiar with the NY-area market since I used to live there. Makes San Diego real estate prices look like affordable housing.

It’s DIFFERENT. Manhattan and parts of Brooklyn are expensive to be sure.

Then again:
(1) Tax millage rates on SFRs in Brooklyn and Queens are about 50% of those under Prop 13, if that.
(2) You can actually get a decent SFR in a commutable area of NJ for between $100 and $200k if you look hard enough. The minus side of that are NJ’s high property taxes, but not all towns have that problem.
(3) Deals on apartments still exist. I just looked at a 3-bedroom (or 2+office) in Harlem just north of the park, needs some work but not unliveable, well under $300k. Common charges (including tax) = $600/mo. Meaning that I’d pay about $1600/mo + utilities if I financed 80%.

[Adame99]

Good lord! On the other thread, Kev mentions a house that had 45 offers and went for 20% over list price to a cash buyer.

Kev, if you are reading this, any idea if that buyer was a person or some kind of fund? Thanks.

[livinincali]

It probably depends on what segment of the market your old place is in. If it’s in the lower half, I’d look at 2 things. Is it cheaper to buy than to rent using FHA financing. Is the cap rate on the property greater than 5%. If either of those conditions are true than it might be better to hold off. If those conditions aren’t true than I would sell now as the current frenzy is likely overpaying.

[SD Realtor]

My personal opinion is that I would not sell now but each case has exceptions to it. In general I always advise people who are moving up, to hold the asset and convert it to a rental. If you are looking at it as a wealth building exercise and can accumulate 3 or 4 quality homes in 20 years verses trading a home out over that same period then I would prefer the former over the latter. Of course this is all in the absence of trying to time the market to avoid price distortions. As much as people hate the jargon that the real estate market always appreciates in the long run, it has been a true statement.

Now if you are attempting to be a real estate market timer then you may want to consider selling. It was not hard to forecast the previous crash. The frenzy that we are seeing now is not going to last, however it is not going to be a precursor to any sort of crash either. If you think there will be a substantial depreciation event in the near future then sell now. That is a no brainer. I do not, so I would not.

[spdrun]

Remember that there was a similar rise in average price over the 2009-10 homeowner tax credit. The rise was far in excess of the average credit of $8000 and popped even before the credit expired for good. Markets behave strangely and not always rationally.

Also keep in mind that foreclosures and short sales are essentially stayed in CA right now due to the Homeowners’ Bill of Rights. Same thing happened in NJ due to a Superior Court case, and the foreclosures are coming on line right now, 2 years late. This isn’t causing a huge dip in prices, but they ain’t goin’ up more than the average rise for spring either.

[recordsclerk]

It depends how much appreciation you have on the house. Don’t forget about the tax free appreciation for primary home. You will need to sell before the 3 year (must occupy home 24 out of last 60 months prior to closing) mark to save on taxes. If you don’t have much appreciation the tax benefit doesn’t come into play. Other than the tax implications, I would hold. Don’t see anything but appreciation on the horizon. As the new appreciation numbers get recorded you will see more buying frenzy. That will only stall out once prices get out of line with income.

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