Downsizing, selling house, and renting

[marimara]

I started a thread about this a while back but now things have changed in the scenario I would like to get some feedback on this idea.

So, we are military and have owned our home for 2 years. Our market is pretty stable here, but prices have gone down a tiny bit and houses are taking longer to sell. We *may* be here for 3 more years, OR after this summer (my dh is getting a new job) they could drop the bomb on us at ANY time and say we have to move short notice.

We have significant equity in our home because we put down more than 50%. This money that we "invested" in our home is our lifeline to financial independence. In 7 years, my dh will be retiring after 20 years of service in the military and we need that $ to be debt free in addition to his pension. We plan on traveling and homeschooling our daughter and not owning a home at that time all the while being self-sufficient.

Right now, we have no other debt except our home mortgage. We put aside a good chunk into savings every month. We can definitely afford to keep our house, no problems.

However, we know we don't want to live in this house forever and it does not fit into our future plans. We bought this house and "invested" our money in it because we didn't trust the stock market 2 years ago (rightfully so it turns out).

Now, things are starting to look a tad shaky in the economy ( and we are getting nervous about our money tied up in the house. The stock market is still not a good place to put it either.

Soooo, dh wants to put up the house for sale this spring (as in one month) because who knows how long it will take to sale (I think the average is around her about 4 months or so). Summer is the best time to sell. I voted wait till next spring/summer but he is adamant. He says there is no difference between now and then except NOW we know the market is still moving and prices are relatively what we paid, NEXT year who knows what it will look like.

So, is he being reactionary or is this a good decision? My dh is very conservative financially- wise and normally makes very good decisions. Anyone else been through this? It's not that we're panicking about the economy but we have a lot at stake here (namely our entire future dreams and plans). Plus we would like to sell the house on our own time table, not when we actually do have to move short notice. I know we shouldn't have even bought the house in the first place but we did, so now we are where we are...

[Denvergirlie]

I'd sell, rent and put your money into CD's for the time being.

[lizziebits]

I'd sell, too. I just don't see that you have much to lose. It's not like there is a good chance of the market swinging up in the next couple of years, and certainly not the next year.

Moving is a pain, but other than that, can you think of why you'd want to stay?

[marimara]

Originally Posted by lizziebits

I'd sell, too. I just don't see that you have much to lose. It's not like there is a good chance of the market swinging up in the next couple of years, and certainly not the next year.

Moving is a pain, but other than that, can you think of why you'd want to stay?

I know this is stupid, but I wonder what I'm going to tell the neighbors Plus, yeah moving is a pain. It's just we've made friends here and it's kinda weird to say yeah, we're moving but we don't really have to. I don't want to have to explain my whole financial situation to them either, yk? I guess I'll just say it's because of the job situation. I'm silly, I know..

[Kaitnbugsmom]

I'd also sell before the real estate market in your area tanks like it has almost everywhere else

[Kaitnbugsmom]

Originally Posted by marimara

I know this is stupid, but I wonder what I'm going to tell the neighbors Plus, yeah moving is a pain. It's just we've made friends here and it's kinda weird to say yeah, we're moving but we don't really have to. I don't want to have to explain my whole financial situation to them either, yk? I guess I'll just say it's because of the job situation. I'm silly, I know..

If they are smart/have any grasp of our national economy, simply tell them the truth- that you are getting out of the real estate market while it's still financially advantageous to do so

[lucyem]

Originally Posted by marimara

I know this is stupid, but I wonder what I'm going to tell the neighbors Plus, yeah moving is a pain. It's just we've made friends here and it's kinda weird to say yeah, we're moving but we don't really have to. I don't want to have to explain my whole financial situation to them either, yk? I guess I'll just say it's because of the job situation. I'm silly, I know..

Just tell them it is because of the job situation. It is. You do not know what is going to happen and it is easier to start the selling process now.

[mom0810]

Why on earth would you rent when you own now? the economy WILL come back, and if you are renting, you are just throwing money away to someone else. Why would you want to do that instead of paying yourself which is what you would be doing with owning a house? The economy is not going to stay like this forever. If you lose your most valuable asset, which is your home, then what will you have? I just can't imagine why someone would want to do that. You have the security of being a homeowner now. Why take a step down from there?

My father does finance for a living and would think you are crazy for doing that. He's pretty good at his job... he has made a fortune over the years. I would never do what you are thinking about. Do you know for sure you will have to relocate? I would not sell just to turn around and rent. It's one thing to sell and then turn around and BUY again... but you would have to do that in a certain amount of time to avoid the capital gains tax on the property you sold. I know you say you are not panicking, but it really sounds like you are.

[mom0810]

Originally Posted by Kaitnbugsmom

If they are smart/have any grasp of our national economy, simply tell them the truth- that you are getting out of the real estate market while it's still financially advantageous to do so

Hahaha... the real estate market will ALWAYS be advantageous. My gosh, if this is how people are thinking, no wonder the economy is getting worse! Real estate will always be valuable, HOLD ON to it! The economy is not even as bad now as it was in 1982... just keep holding on, people! Oh my gosh, it's bad but to sell your house because you are worried that it's value has gone down is so silly! It will always come back up!

You don't buy a house to have liquid investment, anyway. Maybe the OP should not have SO much tied up in the house, but selling it now, when prices are down, and then turning around and throwing your money into a landlord's pocket just seems crazy to me.

[marimara]

Originally Posted by mom0810

Hahaha... the real estate market will ALWAYS be advantageous. My gosh, if this is how people are thinking, no wonder the economy is getting worse! Real estate will always be valuable, HOLD ON to it! The economy is not even as bad now as it was in 1982... just keep holding on, people! Oh my gosh, it's bad but to sell your house because you are worried that it's value has gone down is so silly! It will always come back up!

You don't buy a house to have liquid investment, anyway. Maybe the OP should not have SO much tied up in the house, but selling it now, when prices are down, and then turning around and throwing your money into a landlord's pocket just seems crazy to me.

Yes we are sure we will have to move within 2-3 years, perhaps sooner. That's the thing with the military and particularly dh's new job, we may not have any more notice than 3 months. So, we have to sell sometime within the next 3 years for SURE. It's now or wait, is the question. And the thing is, prices are NOT really that down here, so it's still safe to sell here.

[Emmeline II]

Originally Posted by marimara

So, is he being reactionary or is this a good decision? My dh is very conservative financially- wise and normally makes very good decisions. Anyone else been through this? It's not that we're panicking about the economy but we have a lot at stake here (namely our entire future dreams and plans). Plus we would like to sell the house on our own time table, not when we actually do have to move short notice. I know we shouldn't have even bought the house in the first place but we did, so now we are where we are...

I would do it now because the spring IS the best time to sell for civilian customers AND it is PCS season. You have the most options right now; I would assume the worst--that you will receive short notice orders and need to be out from under your house. We sold our first house when I left the AF and closed on it with DAYS to spare, before we left AK for TX.

Last April ('08) some issues our neighborhood were having got worse and we decided to get out. At that point the real estate down turn was steadily rumbling down hill, but the market in our area was holding steady.

We put our home up for sale at the end of Mar; our realtor was :. She was not as aggressive as she should have been considering the way the real estate market was going and our desire to get out ASAP. Also, she was stupidly was not advertising to the best market we have here: military. We lived within 20min of three military bases and she had not posted in the base papers or listed with the housing offices! We lit a fire under her, she advertised on CL and in the paper and we had two showings in a weekend. One made a low ball offer but raised it when they heard we were having another showing.

The buyer was military and, fortunately, was in a hurry to secure housing. We were building our new house and lived in an apartment for 3months while it was being finished. When we sold sale prices had already begun to slide. Soon after we closed, the market really went south and it is taking months to sell in our old neighborhood; our old across the street neighbor would like to sell but is stuck for now. We really sold just before the real estate market "fell off the cliff."

Also, since you may not have a lot of time for mistakes, I'd put limits on the length of your contract with your realtor; ours was pretty restrictive and we were really kicking ourselves when she was not doing what we needed.

[Emmeline II]

Originally Posted by marimara

I know this is stupid, but I wonder what I'm going to tell the neighbors Plus, yeah moving is a pain. It's just we've made friends here and it's kinda weird to say yeah, we're moving but we don't really have to. I don't want to have to explain my whole financial situation to them either, yk? I guess I'll just say it's because of the job situation. I'm silly, I know..

You are military; they should understand. I'd probably say that I was expecting orders anywhere from tomorrow to two years from tomorrow and decided it was best to sell now.

[Emmeline II]

Originally Posted by mom0810

Why on earth would you rent when you own now? the economy WILL come back, and if you are renting, you are just throwing money away to someone else. Why would you want to do that instead of paying yourself which is what you would be doing with owning a house? The economy is not going to stay like this forever. If you lose your most valuable asset, which is your home, then what will you have? I just can't imagine why someone would want to do that. You have the security of being a homeowner now. Why take a step down from there?

My father does finance for a living and would think you are crazy for doing that. He's pretty good at his job... he has made a fortune over the years. I would never do what you are thinking about. Do you know for sure you will have to relocate? I would not sell just to turn around and rent. It's one thing to sell and then turn around and BUY again... but you would have to do that in a certain amount of time to avoid the capital gains tax on the property you sold. I know you say you are not panicking, but it really sounds like you are.

Um, no. Did you completely overlook the fact that they are military? Being a homeowner and military isn't a particularly secure position to be in. The nature of military life is UNCERTAINTY. Generally you know you will be in one location for a particular period of time, but that is not the case for the OP.

They will not have to pay capital gains if they have used the home as their primary residence for two years, the gain is no more than $250,000, and they haven't sold another principal residence the previous two years. Before May 7, 1997, the only way you could avoid paying taxes on your home-sale profit was to use the money to buy another, more-expensive house within two years. The rollover or once-in-a-lifetime options were replaced with the current per-sale exclusion amounts.

[SeekingJoy]

Sell. Now.

Even if mom0810 is right and real estate prices go back up, your current situation doesn't give you the flexibility to ride it out if it takes 10-15+ years.

[Kavita]

*

[tree-hugger]

Originally Posted by SeekingJoy

Sell. Now.

Even if mom0810 is right and real estate prices go back up, your current situation doesn't give you the flexibility to ride it out if it takes 10-15+ years.

yup