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I have a condo in an area where sales have been hot due to relatively low inventory and high desirability.
I bought it 2 years ago for $245K and sales price for the same model has been going up steadily over the past 2 years, recently reaching $345K just this past month.
Homes in the area have been in the $400-500K range and are steadily going up to well over $500K-580K for brand new 4bd/3ba/2k-2.4k sqft homes. All condos of similar size and configuration are selling for around what mine is valued out based on recent sales activity.
While this is going on, they are building 60+ new homes right down the block from my condo community, selling for $500K-580K.. and right across the street, a new apartment complex is being built..
I think I've heard that if you have relatively expensive houses built next to you, your property values can expect to rise.. but then again, I've also heard that it's not desirable to have an apartment complex built next to you.. so I'm not sure what it will do overall to my property value.
I do live in a convenient location, 2 blocks from a major employer, across the street from a major supermarket and little shopping center with a bank, restaurants and what not. So it's a very convenient location.
Anyway, I just can't see home sales prices going up much further, because at some point they become out of reach of the target market based on their average income.. And it does kind of feel like we're in a period where properties are overvalued.. perhaps we're not in a big bubble exactly like the latter half of last decade, and may not see values drop as dramatically, but we may still be in a bubble and could see a correction in home values..
So I'm wondering if I should lock in my profits by selling now and walk away with maybe $140k.. or closer to $92K after taking out the $48K down payment I put on it.. then wait for a correction to happen before I buy again.. this way I get to maximize my profit from sale and maximize the amount of property I can get for my dollar on a purchase down the road..
But the thing is I'm not sure when we'll start to see a decline... it probably won't hit right away but it could be as soon as 2 years down the road or so? It would also take some time to gradually decline and bottom out..
If I were to sell, and rent to have a place to stay in the meantime, I'd be paying at least $300 more for the same size/configuration apartment as my condo.. so already, I'd be paying $3600 more per year and that'd eat into the profit from my sale. I also wouldn't be building equity, so whatever amount in equity I build from my mortgage payments each year would also be lost. Also, there's the tax deduction for mortgage interest that I'd no longer be able to claim.
Each year that goes by where I'm renting would be eating away a good chunk of money, taking away from my net profits.. Let's say i'm looking at $10000 a year lost, all things considered, by renting.. if I try to wait 3 years for a market downturn, that's $30K out of that $140K that I was saving to buy a new place. Depending on how sharply property prices drop over that time, I may come out doing better or it may be a wash over all, due to how much I'm losing per year by renting cancelling out some of the benefit of the lower property prices that may or may not come in 3 years or more.
The only way to minimize that impact is to move somewhere where the rent is cheaper, and that may require me to move out of state, which isn't an option with my job right now.
So, what would you guys do? Keep the condo and wait until first signs of a downturn before taking any action?
the man that truly times whatever market - real estate, stock, commodities - correctly over time has not yet been identified.
all things being equal (ie, location within a block or so of each other/not in an urban core) single family homes have ALWAYS appreciated and sold better than condos.
I have a condo in an area where sales have been hot due to relatively low inventory and high desirability.
I bought it 2 years ago for $245K and sales price for the same model has been going up steadily over the past 2 years, recently reaching $345K just this past month.
Homes in the area have been in the $400-500K range and are steadily going up to well over $500K-580K for brand new 4bd/3ba/2k-2.4k sqft homes. All condos of similar size and configuration are selling for around what mine is valued out based on recent sales activity.
While this is going on, they are building 60+ new homes right down the block from my condo community, selling for $500K-580K.. and right across the street, a new apartment complex is being built..
I think I've heard that if you have relatively expensive houses built next to you, your property values can expect to rise.. but then again, I've also heard that it's not desirable to have an apartment complex built next to you.. so I'm not sure what it will do overall to my property value.
I do live in a convenient location, 2 blocks from a major employer, across the street from a major supermarket and little shopping center with a bank, restaurants and what not. So it's a very convenient location.
Anyway, I just can't see home sales prices going up much further, because at some point they become out of reach of the target market based on their average income.. And it does kind of feel like we're in a period where properties are overvalued.. perhaps we're not in a big bubble exactly like the latter half of last decade, and may not see values drop as dramatically, but we may still be in a bubble and could see a correction in home values..
So I'm wondering if I should lock in my profits by selling now and walk away with maybe $140k.. or closer to $92K after taking out the $48K down payment I put on it.. then wait for a correction to happen before I buy again.. this way I get to maximize my profit from sale and maximize the amount of property I can get for my dollar on a purchase down the road..
But the thing is I'm not sure when we'll start to see a decline... it probably won't hit right away but it could be as soon as 2 years down the road or so? It would also take some time to gradually decline and bottom out..
If I were to sell, and rent to have a place to stay in the meantime, I'd be paying at least $300 more for the same size/configuration apartment as my condo.. so already, I'd be paying $3600 more per year and that'd eat into the profit from my sale. I also wouldn't be building equity, so whatever amount in equity I build from my mortgage payments each year would also be lost. Also, there's the tax deduction for mortgage interest that I'd no longer be able to claim.
Each year that goes by where I'm renting would be eating away a good chunk of money, taking away from my net profits.. Let's say i'm looking at $10000 a year lost, all things considered, by renting.. if I try to wait 3 years for a market downturn, that's $30K out of that $140K that I was saving to buy a new place. Depending on how sharply property prices drop over that time, I may come out doing better or it may be a wash over all, due to how much I'm losing per year by renting cancelling out some of the benefit of the lower property prices that may or may not come in 3 years or more.
The only way to minimize that impact is to move somewhere where the rent is cheaper, and that may require me to move out of state, which isn't an option with my job right now.
So, what would you guys do? Keep the condo and wait until first signs of a downturn before taking any action?
What is your goal? To get some profit before the housing market possibly falls?
I would be worried because you obvious live in an are where new homes and buildings are going up, so that can bring down the price of existing homes becuase people like new shiny things.
Do you want to buy a house?
Renting and paying more for a few years seems like a dumb option. If housing prices increase you may be locked out of the market.
You also never lose the down payment unless you mortgage is underwater. You will lose 6% or more due to selling costs.
If your goal is to play the housing lottery it seems like you are already winning and want to potentially throw it all away.
Even if there is a downturn you are far ahead at this point.
Sell high and you have to buy high or rent high. Rents are not going down, when housing crashed a lot of private landlords just didn't raise the rents for good tenants. but where I moved there were many apartments that went unrented for a long time.
If you have some solid reason to suspend homeownership for some period of time
--eg relocating to some new area for a new job or you're otherwise just not prepared
to commit to ownership or any of a hundred other possible scenarios... then yeah.
It can absolutely be the best thing to just park your equity somewhere safe (CD's, T-bills, etc)
for the year or two it can take to answer the question or settle whatever your issue might take.
Rent for tht year or two, get to know the new location and the new people, be sure.
But to do this juggle based on somehow timing the market... that's just making excuses.
Even when prices are at historical highs almost everywhere.
the man that truly times whatever market - real estate, stock, commodities - correctly over time has not yet been identified.
all things being equal (ie, location within a block or so of each other/not in an urban core) single family homes have ALWAYS appreciated and sold better than condos.
Ah the typical "don't time the market" crap.
I believe this was started by Warren Buffett, referring people who make the mistake of buying stocks and then selling on emotion if they start to lose value.
Somehow it's spread to the farthest reaches of buying and selling.
It doesn't take a market genius to see when a market is high.
We live in a cyclical economy. We have for nearly 100 years. This "up" cycle has been one of the longest in history. Are we at the top? Nobody knows. Are we at the bottom? Definitely not.
The "buy and hold" idea works in a recession, but we're not in a recession my friend.
It's a great time to sell OP. Just know that the market might go up a bit more before it starts to fall again, and nobody knows when that will be. If you're happy with the profits you've made, then by all means, go for it.
If you want to time the market, you are on your own, OP. Nobody knows when the market will turn. Your guess is just as valid as anyone else's guess.
The only thing I know about real estate market fluctuation is that generally when it starts down, it goes down fast as people scramble to cut their losses, making the downturn a self-fulfilling prophesy.
It's a great time to sell OP. Just know that the market might go up a bit more before it starts to fall again, and nobody knows when that will be. If you're happy with the profits you've made, then by all means, go for it.
this is very true. and speak to market timing. which is essentially what was being asked - "When is the best time?"
It is ABSOLUTELY true that when "you're happy with the profits you've made" is the BEST time to sell any asset.
I agree.. but the thing is in order to stay in the area and rent, it'd cost about $300+ more per month more than what I pay in total now for mortgage, property tax, insurance, HOA, etc. So I'd be out at least $3600/yr more, plus I wouldn't be able to claim mortgage interest tax deductions after next year if I were to sell this year, for example.. so that is additional money I'd be out..
if home prices don't drop for 2 years, I could be out say $10K per year plus lose out on building equity.. so whatever equity i'd build over the next 2 years is also lost..
the longer I wait for home prices to drop significantly, the more i'm burning in the net proceeds of my sale.. making it more and more like a wash the longer I have to wait..
the only other option is to move somewhere else, a cheaper city entirely.. but then i'm looking at a longer commute..
Your own place is just a place to live, not a place to make money. Your own place is to fix your cost of housing and pay it off in 15 years and only have HOA and property taxes after that.
Your own place is just a place to live, not a place to make money. Your own place is to fix your cost of housing and pay it off in 15 years and only have HOA and property taxes after that.
true, I really need to look at it that way. but the way the market has been.. I have felt a push to sell and lock in profits.. $100K net, not counting the 20% I put down that I'd also get back, is a considerable amount.. since it's tax free, that's a lot of years of savings to build up to that amount..
But if I sold, I'd be left with renting for who knows how long until another real estate downturn brings prices back down and make it a buyers market again. the longer I rent, the more of that profit i'd be burning while waiting for the downturn..
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