Soliciting Advice Version 2

[mking]

Hello all. I too would like to solicit some advice. Wife and I are struggling to decide what to do with our home.

We own a home we really like. 1950s construction, beautiful hardwood floors, doors and cabinets, 1900 sf, large rooms, 1/3 acre city lot, view of the sound, less than 5 minutes to freeway onramp (but far enough away there is no freeway noise), 4.375 % 15 year fixed rate with 11 more years to go, in an area we love. lot is zoned for a second story, which if built would provide a stunning view of the Narrows Bridge.

Problem is the home is 40 miles from work, and last year the commute became too tough. We currently rent the house out to international students from a local college (we have experience being a host family, international students are much better behaved than frat boys). we modestly furnished the house, so the students dont need anything but their personal items. We moved to a rental house ourselves.

We have a 20% downpayment but are waiting for better market conditions to buy a home closer to work, and are comfortable in the rental we have found.

we bought the house in 2002, conservativley have about $150k in equity, and understand that if we keep the house our equity position will deteriorate. as the loan is a 15 year loan, the payments are higher than fair market rent for the area. to keep it, we will be out about $400/monthly, but we live well below our means, and that is comfortably managable.

We are attracted to the idea of keeping the house for the following reasons

1) we like the house and area, and i can retire in 20 years, and are looking forward to having a home paid off by then
2) we have a strong cash postion beyond our 20% down (moved from stocks to cash in the last 6 months), so we dont need to extract the equity (though i recognize that by not selling some equity will be lost in the short term), .
3) if inflation ramps up, even if real estate stays flat, rents are likely to rise to meet our fixed mortgage cost.
4) we suspect that the view and large city lot will make the house less suseptible to a large decrease in value (ive heard that nicer homes may go down less proporationally than starter homes)
5) we realize keeping the home will reduce the amount we can spend on another home if and when we buy, and are ok with that (now seems to be a good time to only own 1 home, not a couple).

i guess i just want a sanity check, to see if other bubble heads think we are crazy for not selling now, rather than keeping a house we like and want to own for the long term

thanks
mking

[jon]

You probably won't be able to time the bottom of the market, and by keeping this house you skip all the costs of selling this one and buying another later on. No telling what interest rates will be when you are ready to buy again, so it seems to me you have the right strategy to wait for rents to rise to fully cover your costs.

[Ubersalad]

You are crazy to get rid of your 4.375% rate for a house you like to keep for a long time.

I wouldn't do anything to the house especially if you bought it at market value in 2002. You missed the real estate bubble altogether, so all this market concern doesn't apply to you.

[biliruben]

For once, I'd agree with ubersalad. Just pretend prices only went up 2% a year for the last 6 years, and then make your decision.

[Ubersalad]

[biliruben]

Sick 'em, shrew!

[Big Mike 34]

Soliciting:

I am guessing that the fall or spring of next year will be a great time to buy....If your renters or paying the mortgage you have no reason to sell unless you just want to lose money....

To Sell: You will have these costs:

1) Preparing the house for sale...Painting inside or/and out or both...freshening up the kitchen and baths ...replacing carpet ...God forbid the Roof....Etc.

2) Gregor's Sales Tax

3) 6% real Estate Fees.

Could you sell it for enough to just cover those fees? and the market is falling and will continue to.

On the big Plus side if you can afford to buy another house ...you stand to be able to buy all the house you really want because the prices will be tumbling down, we are just at the beginning of the drop...

In 2-5 years the prices will recover and then you will have two houses with huge equity and can retire ...To Panama ...or Balise...and have a full time house keeper...and be Rich and Happy....AMEN

[Ubersalad]

Uhh...here comes the amateurs.

[rose-colored-coolaid]

[ira s]

I think if you took this survey amongst agents, the consensus would be to sell now and buy another home, because it's a great time to sell and a great time to buy now.
That said, really, you shouldn't do anything. prices are going down, but in my opinion not more than another 15%, and if you're holding on for the long term you should do just fine.

[Ubersalad]

[Robroy]

To original post:

The home is now an investment. From that perspective merged with the other data you provided I would HIGHLY recommend selling - and price it to sell. I would also continue to rent into the near future (one to five years). When the dust settles on this mess you can re-enter the market. The reward is low and the risk is high if you enter now. Conversely, the opposite is true if you wait until AFTER an ESTABLISHED bottom. You'll buy a little higher than the bottom, but it is better than buying a little better than the top - especially during the busting of the biggest real-estate bubble in US history.

And yeah, it is affecting the Seattle area. We don't even know how much yet since it is just ramping up.

[Ubersalad]

[Robroy]

[Ubersalad]

I see where the disagreement comes from. You think that the owner should treat it like an investment because she's forced to move out of the place and renting it out.

I believe that the owner is "forced" to move out and trying to recover her loss by renting it out as oppose to using it as an investment. Hence the reason why I hesitate to treat it as one. Also like I mentioned before, she "missed" the bubble altogether, so she's not in any danger of losing the value of the home, plus she's under great term for mortgage.

Adding everything together, there's no reason to sell and try to time the market and buy again. House is not a collateral for everyday people, try trading like one and see if you can handle the stress and risk.