geko29

Now is a (financially) great time to downsize your home, or switch to renting. It's a very bad time to be a new homebuyer or considering an upgrade.

AJT123

Not sure I agree/understand. If I downsized my home I'd be in a less nice house, I don't think I'd make out with a lot of money because I'd have to find another place to live. A cheaper crappy house would cost more to own now. Why would someone want to switch to renting?

But yes I agree this isn't a great time to buy, however I'm not complaining because my house value has been skyrocketing.

jrmckinley

There has never been a better time to be a seller. I think what the above poster was saying is if you can rent for 2-3 years you'd likely be able to make a small fortune selling your house now and could wait out the inevitable correction in the market. We actually just sold our house (although we are buying another one, not renting) - and I can tell you that people buying houses are making VERY attractive offers. If our situation were different and we could have rented something, I absolutely would've done it (although I think FL will be a desirable place for people to continue moving for a while). It's a very similar situation to what's happening in the car market. Limited supply, raising labor and production costs - if you have a turnkey house you can pretty much name your price and someone will pay it. The cost to build right now is astronomical. Toll Brothers just reported their earnings 2 days ago - they completely blew it out of the water and their CEO said they are "raising prices well in excess of the increase we're paying in labor and product costs and the demand is not changing."

tex2670

Ok, except that many, many, many home buyers got pummeled by the "generally speaking, your home prices will always go up, and so will your salary" analysis. "Generally speaking" is fine, until it's not.

tex2670

Why is a smaller home "less nice"?

geko29

Prices are up dramatically, so you'd make a ton on yours. Less expensive houses would of course also be inflated, but you'd wind up giving back a small portion of your profit, vs. all of it and then a whole lot more if you were upsizing.

Someone could choose to switch to renting so they could pocket all of that profit, and then get back in the market once some sanity is restored.

There are plenty of other (non-financial) reasons NOT to do either of these things. That's why I specified that from a financial perspective ONLY, now is a very advantageous time to do either. I am certainly not doing either. But I wouldn't consider upsizing right now, even if I wanted to.

HOMER350

I read that article too, one of the more straightforward ones I found.
Yup I get what your saying you are correct. And this does happen historically every 13 years or so I think I remember. My thoughts were a bit more theoretical than I had admitted to myself at the time. Chances are the time to sell AND buy simultaneously would be better later, in my area at least. But then...you can find an equal amount of "experts" to say the contrary.

AJT123

Got it. That said, I’m not sure the market is ever going to crash in my area. I can’t go into specifics per the rules but I don’t think Tennessee is going to stop being the #1 UHaul “in state” for a while.

It’s just a personal preference. Space= luxury to us. It’s not a dense city where space is precious. If you want a big house you can find one easily. I wish our house were slightly bigger actually, bigger garage maybe 3 car, but like I said that’s not worth cashing in all our equity and having to buy back in and pay a higher price for the next home, so we are fine with it. We owe roughly half what our house is worth, that’s quite a secure and warm and fuzzy feeling lol.

AJT123

It's gone even more nuclear here, since my last time on this thread at least.

House down the street is for sale again, priced $182,000 higher than it sold for TWO years ago. No upgrades done per listing photos from the last time.

The house took a while last time to sell because it doesn't have great curb appeal and the floorpan is sort of awkward.

If it sells for what or near asking price my mind will be blown.

tex2670

Yup. Average selling price in my neighborhood jumped more than $100K this year; will probably be even higher by the end of this year based on the most recent sales. Guy down the street from me sold in March 2020 - he's got to be kicking himself.

AJT123

It's NUTS. NUTS!!!! In a year or two more my house will be worth double what I paid which its just crazy. Double the value in well less than a decade. House-wise I feel rich!!! Everyone around here does, my friends etc. etc.

This house down the street, I can't believe there is a realtor on crack to advise to list it for that much. But I sure hope it sells for top dollar.

$182 grand more if they get their price in 2 years. $182k?????? That is just crazy. This is a hot area for sure, but damnnnnnn.

geko29

It's kind of an illusion though, because unless this is an investment property and you're exiting the market, you don't really get to keep that. You have to live somewhere, after all. So if you decided to downsize, then yes you would get to pocket a small portion of the profit. You could rent for a couple of years and hope that the RE market cools off, letting you keep more of the gains. But if you're looking to upgrade, your new house price is going to be even more inflated than the one you're selling, so you actually lose out.

AJT123

I don't think it's an illusion, you want to make some serious cash from a home here you can. Bottom line.

However, you just have to buy back in to the market here so yes I get what you mean.

I'm never selling this house, I would be stupid to. I'll just rent it out eventually and charge 3xs the mortgage (I could easily).

Or we may just do nothing and stay here and live here forever, that would be fine too. We might want a big cabin cruiser Sea Ray 340 in retirement, big enough to live on and and take off the grid for a week.

Used car prices are still sky high. I still watch the market, LXs and Land Cruisers are still going for top dollar. I got in just under the wire.

SailorTPD

It's a bit more complicated when you consider taxes--if you sell for a profit, you owe long term capital gains unless you buy something more expensive than your basis within 2 years. I't a bit more complicated as well when you consider interest rates--they've been pretty stable BUT you can see inflation starting with cars, food, homes...interest rates in the future will likely be higher which reduces your purchasing ability. You could always realize some of the gains your home has made by taking out a new mortgage while interest rates are still low. Then you pocket that cash (but you will have a higher monthly).

RNM GS3

I see you’re in TN.
Certain markets like TN, FL, Carolinas etc have seen massive increases due to ppl fleeing NY, CA etc.

If i were you, I would leverage the new equity you have by investing in several Rental homes. Its a good way to have passive cash flow with long term wealth growth. I think states with no income taxes will continue to see population growth as families get priced out of other states. I just received my “school tax” bill for 1st half of 2022 and its painful lol.