Sell Home and Rent or Stay in Place?

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Kman's picture
Kman
Status: Bronze Member (Offline)
Joined: Jan 19 2009
Posts: 72
Sell Home and Rent or Stay in Place?

  Recently, we placed our home on the market for sale.  Our logic was that our neighborhood has to date only seen about a 20% decline in Value (Nor Cal) and we have a fair amount of equity in our home.  A major motivation to sell now is that Option ARMS and Alt A mortgages are about to be wave 2 of the foreclosure crisis (subprime being wave 1).  Our belief is that this will do to move up housing what subprime did to entry, but potentially worse as it will hit while the economy is already down and more people are losing their jobs.  Thus, if we sell now and preserve our equity, we should be able to buy back in a year or two from now for much less after the move up houses get severely impacted from wave 2. We would also like less house and more yard in the future.  We plan to use the cash from the sale, place it in a very safe bank (as safe as we can find using safe & sound ratings as a guide) and then buy back in with that cash. 

  Our biggest concern is inflation.  At the time we placed our home on the market, inflation seemed to be a more distant issue relative to the asset deflation currently in play.  However, now that the China and the rest of the world are no longer inclined to buy US debt and that the US is determined to start up the printing presses in full, inflation appears to be around the corner.

  The question is, how will this impact housing prices as we go forward the next few years.  It's especially important to us since we are planning to use cash from today to buy our next house 1+ yrs from now.  How long will it take for inflation to drive up house prices again?  Will this round of inflation push house prices up or will it actually push them down as interest rates will spike to combat it and the cost of loans will make home purchases prohibitively expensive?

   Note, If house prices will be going up, then from a financial point of view, we are best to stay in place as we have a fixed rate loan with a payment that is low enough that renting will not be a net savings. 

  Your insights are appreciated.  Please feel free to shoot holes in my logic or point out other considerations. 

 

SamLinder's picture
SamLinder
Status: Diamond Member (Offline)
Joined: Jul 10 2008
Posts: 1499
Re: Sell Home and Rent or Stay in Place?

Kman,

I'm sure more intelligent folk will soon chime in here with some well thought out advice.

In the meantime, IMO, if your house payment is cheaper than what renting currently costs (and may rise in the future as all the people tossed out of their homes will have to live somewhere), I would stay where you are. To try to predict the future is pointless. As a very old saying goes, "A bird in hand is worth two in the bush."

joe2baba's picture
joe2baba
Status: Martenson Brigade Member (Offline)
Joined: Jun 17 2008
Posts: 807
Re: Sell Home and Rent or Stay in Place?

if you go to the upper right corner of the page you will find a search box. type in sell or rent and i am sure you will find several threads there dealing with your ? this question comes up about once a month

bruin36's picture
bruin36
Status: Bronze Member (Offline)
Joined: Oct 4 2008
Posts: 48
Re: Sell Home and Rent or Stay in Place?

SELL your house 

I just went through the same thing - we pulled the trigger and sold our house paid of all my debt and rented an apartment three doors down!

It was a gut wrenching decision because we loved the house and took 10 years to restore / renovate it and planned to live their forever - but its a relief and I did not want to see it lose even more value

. It was a 9 month negotiation with the buyers from hell, but I have to say that they were the only game in town - we are in NYC ,alegedly the strongest housing market in the country, and still had only one real buyer after nearly a year -so all the talk about  " well our neighborhood has not lost value..." is  just BS,

I know there is the big inflation / deflation debate here, but I only see things continuing to deflate for at least the next three years and who knows where prices will be then and even with inflation where will the buyers be?

 -Bruin 36

 

 

 

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