House selling

[Wolf359]

Originally Posted By: HTSS_TR
Originally Posted By: supton
Met with realtor today, confirmed that I read the market properly. Pristine condition, the house is about 15% less than I paid for it 11 years ago. If I had bothered to save up some cash I could live with the loss, but... I didn't, plus I think to sell the house in reasonable speed I'd lose even more than 15%.

You lost 15% after 11 years ownership ? That isn't right.

For the same period of 11 years ownership(2005-2016), most So Cal homeowners would make about 50-70% or more. We had a slow down in 2008-2009, but we recovered the lost by 2011-2012 and started to gain above 2007 by 2013.


All real estate is local. 11 years ago would have been the boom years. It's way different now. Prices are up in the city, but the suburbs took a hit when the market went down and some areas further away from the city didn't fully recover. The value of houses doesn't always have to up. After 11 years, a car is probably only worth 10-15% of original purchase price. Just be happy it's not like a car.

 

[Pop_Rivit]

Originally Posted By: supton
Originally Posted By: SatinSilver
Meet with a good financial advisor to see what he or she recommends for your financial future. Not just based on this thread but some of your other ones dealing with cars, houses, retirement etc.


I'm not sure what an adviser could tell me that I couldn't learn off the web. For free. "Save more, spend less."


Actually, a good financial advisor can look at your entire financial picture, help you set goals, and guide you toward financial vehicles that can get you there. Far more than just picking information up off the web. They do have a cost associated with them, but I've made far more with the guidance of my financial team than I ever could have on my own.

 

[Dave Hess]

Supton,

Be careful, some financial advisors are crooks.

Why do you want to sell your house ?
You mentioned before you drive far to and from work, any other reason(s) ?

 

[PandaBear]

Originally Posted By: supton
I made a poor decision in buying this place, and honestly, if I wait another 10 years, it'll be paid off, and the kids will have moved away. And I won't have to move.


Real estate doesn't always go up in value. In your case it is probably true that 11 years ago it is the peak and right now it is not the bottom. Plus neighborhood changes and the house itself wear out.

In your case I wouldn't refinance to fix it up, hoping it will go to a better price. Many buyer would want to do things their ways and wouldn't want your opinion on how to remodel it. Your remodel / repair might just get yanked out anyways.

If you want to sell:
Take the loss by selling at today's market price, and buy another house at today's market price. Think of it this way: it is a swap, you either make money selling your house and lose money buying another house, or you lose money selling your house and get a good deal buying another house.

If you want to move but don't want to sell:
Rent out your current home and you rent somewhere else. It let you choose the school district you want and not take on the massive mortgage, but you will always have your current home to fall back on if things doesn't work out. You may lose out of the appreciation of a good home but if you can't afford it, it is not a deal for you anyways.

If you don't hate your home, just live in it and don't move. Remember, as you said the house in pristine condition is -15% from the peak 11 years ago. The lost is already made, there is nothing you can do about it. If you cannot afford to move you cannot afford to move.

 

[bladecutter]

I still believe that renting out the house to someone else, and either renting or buying a new place is the best decision in the OP's case. You practically don't have to do anything to get the house in rent-able shape Just place an ad, screen some prospects, and have them sign a lease that favors your rights in case things go south with the renters.

Then you can get the place you want in the area you want to live.
You can rent for a while, and then buy a place when you're ready.

BC.

 

[supton]

The upshot of a market where it's down 15% means the houses I'd like to look at have lost even more dollars--since I want to go upwards. Bigger and better.

*

Reasons for moving:
-50 mile commute, each way. Even my stay-at-home wife racks up 25k/year (I'm at 30k).
-2 bedroom house. Son and daughter share a (small) room.
-2 bedroom means when we have guests (rarely) they get the couch or sleep in the camper (please note, I bought a 15 year old popup for cheap)
-700 square feet. I do have a basement but it's 20x28 minus walls, furnace, supports etc. Cannot be finished due to shallow depth and moisture issues (not bad ones, just typical basement stuff)
-no garage
-no dining room. The kitchen and living room are one open area.
-I had the roof done and kept the skylights and... hate them now. Actually I hate the master bedroom. It's where the attic ought to be, so it roasts in summer. And there's no door on it either, and putting one on would be extremely odd (due to the layout).
-really needs new siding and a new deck--both are "ok" but neither look good. Speaking of which, there is zero flashing around any door or window, and it's clapboard on stud, no sheathing, no vapor barrier.
-balloon frame construction, so doing an addition would involve some fun stuff.
-would be nice to have two bathrooms.

I bought at the height, not knowing it was the height, as I just wanted to get into the game. Figured we'd move after 5-7 years. While we grew to like the property, and the low cost nature of the house, it's something we just never planned to be in long term. We wound up in because it was halfway between our places of work; now that wife is stay-at-home she's put down roots and is busy off doing all sorts of things--usually in the town over. The town we kinda sorta want to move to.

*

Can't justify taking the loss--only way I could is if I taken on a mortgage with like 10% down with PMI due to loss of value. No savings, a scant 2 months in the savings account at the moment, so no ability to to slap down a downpayment and rent out this house or to buy something else and wait for this one to sell.

Wife doesn't want to leave the area and neither do I.

*

While I'm on the subject of my poor financial planning, I'd like to point out that according to an amortization chart, at this time I should be around 78% of the house still owed (I put down 5% to swing it back in the day). I'm at 50% of purchase price now. Even if I had put down 20% I should only be at 65%. We've aggressively paid on this house so as to save money on interest.

 

[HTSS_TR]

Originally Posted By: supton
I bought at the height, not knowing it was the height, as I just wanted to get into the game.

While I'm on the subject of my poor financial planning.

It wasn't poor financial planning, it was just bad luck.

I bought my first house in Santa Ana, Orange County, CA in 1988 for $19x,xxx plus about $15-20k upgrades with 20% down. I sold that house in 1998 for $13x,xxx for a total lost of almost $100k. My mortgage balance was $14x,xxx so I had to pay more than $10k to escrow to pay off the loan.

But my second house I bought in Irvine in 1997 for $5xx,xxx did pay me handsomely when I sold it by myself in 2014. I used the profit to pay for the current house and still have few hundreds thousands left in my saving account.

I had bad luck with first house and good luck with second. You may have similar luck with your second house.

 

[supton]

I don't believe in luck. Had I any foresight I would have realized the market was inflated and that I should have waited until the correction. We would have kept renting, likely moving closer to my work. We would have hated living in the 'burbs (or city) but we'd be richer. We made an emotionally driven decision to settle into a house and start a family--we used a bad set of criteria to settle on the wrong house. Bad planning, not bad luck.

Plus I'm still looking at low end houses, ones unlikely to appreciate. While not debt-adverse I've been large debt adverse. I simply don't want to buy a house 3 times my salary (or more) with 2,000 sqft with attendant high heating costs and taxes. I might have lost $20k in value but I could easily have spent that much in taxes over those years let alone interest.

My selection criteria is at odds with itself. I keep looking at short term plans (10 years or less) while ignoring long term (20 years or more).

 

[PandaBear]

Supton,

You made a decision based on what you can afford and rational at the time, it is hard to be right all the time and as HTSS_TR said, things happen. It was the market price because people believe it is the market price, and as you know, market price is really not that stable and is not a guarantee of future return.

Based on what you describe on your current home, it make sense to just move near your work and rent it out. A 700 sqft home with 2 bedroom, poor insulation, and no garage means it is not going to be popular. It is competing with Condo buyers and would price like a condo. Condo tends to go down in value when economy is bad and bounce back when economy is up, so you cannot expect it go constantly go up like a big home in good school district near high income area (i.e. those 2.5M 2700 sqft Northern California single family home with Greatschool score of 10 from elementary to high school). This kind of property is ideal for rental if you bought at the right price and hold it out for 2-3 decades against inflation.

If I were you I'd forget about selling, just rent a place near your work and rent your current home out. Your 55k driving per year would drop down to 15k per year and that 40k per year would be enough savings to pay for a better home. Your current house would still be appreciating in the long run (look 20-30 years down the road) against inflation, and you can save up more downpayment for another home when you are ready.

 

[Doog]

Originally Posted By: HTSS_TR

It wasn't poor financial planning, it was just bad luck.



No luck at all....it was the US government interjecting itself into the US housing finance market and guaranteeing quick money to a whole segment of the population (Fannie & Freddie) who could never afford or have the means to pay for them. Then the Clinton administration repealed the Glass-Steagal Act. This created a perfect bubble scenario that took 25 years to grow and burst. VOTERS BEWARE. Those who tout free handouts will get the $$ from YOU.

BTW never take advice on real estate from people in California or Florida as both of those markets have their own specific anomalies and bust-bubble cycles that repeat over and over.

 

[HTSS_TR]

Originally Posted By: supton
I don't believe in luck. Had I any foresight I would have realized the market was inflated and that I should have waited until the correction. We would have kept renting, likely moving closer to my work. We would have hated living in the 'burbs (or city) but we'd be richer. We made an emotionally driven decision to settle into a house and start a family--we used a bad set of criteria to settle on the wrong house. Bad planning, not bad luck.

Plus I'm still looking at low end houses, ones unlikely to appreciate. While not debt-adverse I've been large debt adverse. I simply don't want to buy a house 3 times my salary (or more) with 2,000 sqft with attendant high heating costs and taxes. I might have lost $20k in value but I could easily have spent that much in taxes over those years let alone interest.

My selection criteria is at odds with itself. I keep looking at short term plans (10 years or less) while ignoring long term (20 years or more).

Hindsight is 20/20.

After things happened you can see clearly what you should and shouldn't do. But when you bought your house at that time you didn't see the future. That is why I said it was luck(or unlucky in your case).

I had no idea what I would get when I bought both houses, I lost big with first house but I went ahead bought second house to live in and for my daughters to have good school to go to. I didn't do any planning about investing in the real estate market, it just happened that I saved enough for the 10 years I lived in Santa Ana, so I bought the second house nearer to my work place and better school for the kids.

It was totally luck in my case, and I believe it does happen to most home owners too.

Don't blame yourself for whatever happened in the past, just concentrate on doing the best you can now and for future.

 

[JHZR2]

Originally Posted By: PandaBear
Originally Posted By: supton
I made a poor decision in buying this place, and honestly, if I wait another 10 years, it'll be paid off, and the kids will have moved away. And I won't have to move.


Real estate doesn't always go up in value. In your case it is probably true that 11 years ago it is the peak and right now it is not the bottom. Plus neighborhood changes and the house itself wear out.


I once saw a report about how poor real estate was when your domecile was considered an "investment"... After taxes, upkeep, insurance, etc. was considered. Just a few percent return a year over the course of history.

Of course all local...

 

[Pop_Rivit]

Originally Posted By: JHZR2
Originally Posted By: PandaBear
Originally Posted By: supton
I made a poor decision in buying this place, and honestly, if I wait another 10 years, it'll be paid off, and the kids will have moved away. And I won't have to move.


Real estate doesn't always go up in value. In your case it is probably true that 11 years ago it is the peak and right now it is not the bottom. Plus neighborhood changes and the house itself wear out.


I once saw a report about how poor real estate was when your domecile was considered an "investment"... After taxes, upkeep, insurance, etc. was considered. Just a few percent return a year over the course of history.

Of course all local...


True if you look at it only as a single dimensional investment. But you also have to live somewhere, and that in itself has value that many people don't take into consideration.

 

[HTSS_TR]

Originally Posted By: PandaBear
Originally Posted By: supton
I made a poor decision in buying this place, and honestly, if I wait another 10 years, it'll be paid off, and the kids will have moved away. And I won't have to move.

Real estate doesn't always go up in value. In your case it is probably true that 11 years ago it is the peak and right now it is not the bottom. Plus neighborhood changes and the house itself wear out.

Originally Posted By: Pop_Rivit
Originally Posted By: JHZR2
I once saw a report about how poor real estate was when your domecile was considered an "investment"... After taxes, upkeep, insurance, etc. was considered. Just a few percent return a year over the course of history.

Of course all local...

True if you look at it only as a single dimensional investment. But you also have to live somewhere, and that in itself has value that many people don't take into consideration.

Even if it is only few percentage over the years after all expenses, it still can be better than other investments, if you take into account you don't pay for rentals all those years the return is actually better. Also, the benefit of owning the house is you don't have to move from 1 house to another as a renter. Buying/owning a house has several advantages over renting.

One advantage we have in California is proposition 13 limit property tax increase no more than 2% a year. So the yearly expense is pretty much under controlled.

 

[Andrew1972]

Is the school system and town itself decent? Bwyons yourselves for the sake of kids if school is mediocre or town is so so move to a nicer spot closer to work.

I live in a nice town but main push was schools top 5 in state. Once last child graduates we are gone from here.

 

[supton]

School system is ok. We're committed to finishing elementary for the kids; middle and high school, a bit less so. Unfortunately I hated my time in a large school district (not that I did that much better in a smaller one) and swore that I'd never send my kids to a large one. We're unsure how our kids would do in a bigger school; our kids are somewhat opposite in regards to self-drive and outward going-ness.

Region is decent. Small town life, that sort of setting.

 

[PandaBear]

Originally Posted By: HTSS_TR
Originally Posted By: PandaBear
Originally Posted By: supton
I made a poor decision in buying this place, and honestly, if I wait another 10 years, it'll be paid off, and the kids will have moved away. And I won't have to move.

Real estate doesn't always go up in value. In your case it is probably true that 11 years ago it is the peak and right now it is not the bottom. Plus neighborhood changes and the house itself wear out.

Originally Posted By: Pop_Rivit
Originally Posted By: JHZR2
I once saw a report about how poor real estate was when your domecile was considered an "investment"... After taxes, upkeep, insurance, etc. was considered. Just a few percent return a year over the course of history.

Of course all local...

True if you look at it only as a single dimensional investment. But you also have to live somewhere, and that in itself has value that many people don't take into consideration.

Even if it is only few percentage over the years after all expenses, it still can be better than other investments, if you take into account you don't pay for rentals all those years the return is actually better. Also, the benefit of owning the house is you don't have to move from 1 house to another as a renter. Buying/owning a house has several advantages over renting.

One advantage we have in California is proposition 13 limit property tax increase no more than 2% a year. So the yearly expense is pretty much under controlled.


Despite doing pretty good with real estate myself (and my family), I have to agree with JHZR2 here. Real estate's appreciation on average is a few tiny percent per year and it is nothing compare to other higher growth investments.

But, at least in the US, real estate is the only easy way non high net worth people can borrow a huge amount of money for an asset to sit on that will grow with inflation. Try to borrow money to start a business or buy stock, and you'll see triple the interest rate, easily. Plus that interest is tax deductible, not something you see in another investment.

The argument that "you have to live somewhere" is moot. If you want a fair investment argument you have to look at paying yourself rent at market rate vs your home appreciation expense that you cannot deduct (maintenance, repair, insurance, etc). You will then realize that the amount of money you pay to "own" a home is actually not that much cheaper than renting without the appreciation. Look at multi-unit properties and how they are always at a discount per sqft vs a condo, and you'll realize that it is really the mortgage interest deduction and easy credit that inflated the home prices.

 

[HTSS_TR]

Buying/owning 1 house is not only an investment it is also a place to live, one of the advantages of owning instead of renting is nobody can force you to leave as long as you pay mortgage, tax, insurance ... on time.

The peace of mind is worth something.

Also, current mortgage interest rate is fairly low such that monthly payment for PITI(Principle, Interest, Tax and Insurance) isn't much higher than renting of the similar house(or condo).

PS My BIL paid off his main house some year ago, he bought 1 house in Huntington Beach as an investment few years ago, he rented it out and his rental is more than enough to cover 15 years mortgage payment(plus tax and insurance). He bought another house in Stanton(I think) few months ago. He got it rent out within days after closed escrow.

The first house appreciated about 25-30%. So He had positive cash flow on rental plus the appreciation of the property.

 

[Dave Hess]

Supton,

Why not sell your house and in the mean time live in an Extended Stay America to search for new home in your budget ?

Cherry picking data is bad, so is not owning and renting for many years.

 

[supton]

All the more good info about renting vs owning. We never looked into that, we just wanted to get into a house as that was what everyone did. OTOH if we didn't buy, we'd always wonder, and would always dream of home ownership. Hindsight.

We'll stay were we are. It isn't that much more than renting, and if we don't move it'll get real cheap once we own. We have roots here now in the area. I think if we moved out of state to chase cheaper cost of living, we'd always be scheming on how to move back to New England.