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Re: U.S. Economy: Home Sales Drop to Lowest in More Than Two Years
Old 08-25-2006, 08:48 AM   #61
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Re: U.S. Economy: Home Sales Drop to Lowest in More Than Two Years

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Originally Posted by HaHa
I understand your point. But what is the early retiree in an expensive area to do? Condemn his kids to being the outcasts, or condemn them to a crappy education?

Possibly the real answers to this would not be welcome on an ER forum

Ha
A good solution is homeschool.
It is a good, often very rewarding, option to Ealy Retirees.
Some States make it easy, some not as much but it is always an option. And you can provide an outstanding education true to your own values whatever they may be.

A good place to move is a community with not so good schools which are increasing funding to make them good. A safer bet to have home value increase. Excluding very exclusive locales, school districts performance wax and wane over time. Do your research where the community will improve and buy there. Homeschool for a while if you have a kid and if it gets better send them over.

20 years is a long time - 40 years an eternity: Have you ever gone back to a place decades after it was built new? Many go decrepit before someone goes pitty on the place and renovate. Go visit the up and coming places that your GrandMa or TV was touting in the 70s and prior.
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Re: U.S. Economy: Home Sales Drop to Lowest in More Than Two Years
Old 08-25-2006, 09:04 AM   #62
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Re: U.S. Economy: Home Sales Drop to Lowest in More Than Two Years

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Originally Posted by Oldbabe
Update:* My ex just got a contract on the family home for $280K, after spending 40K in improvements and upgrades in the past 2 years.* We bought it for $245K in 1995.* Glad I didn't keep the house!
Holy cow, where was this?

Ha
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Re: U.S. Economy: Home Sales Drop to Lowest in More Than Two Years
Old 08-25-2006, 09:16 AM   #63
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Re: U.S. Economy: Home Sales Drop to Lowest in More Than Two Years

Ooops, we bought it in 1998. Not much appreciation anyway. Medium size city in the midwest.
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Re: U.S. Economy: Home Sales Drop to Lowest in More Than Two Years
Old 08-25-2006, 02:06 PM   #64
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Re: U.S. Economy: Home Sales Drop to Lowest in More Than Two Years

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Originally Posted by Sam
Nords, what happened in 1996?
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Originally Posted by shiny
I'm not Nords , but part of the problem in 1996 was the Japanese economy started tanking and lots of real estate was held by Japanese owners at that time - they flooded the market with selling.
The hemorrhaging stopped but the patient remained in a coma for four more years...

The Japanese market was part of it, especially when Gensiro Kawamoto bought a couple hundred homes from his infamous 1988-89 Oahu limo tours, but the Hawaii RE market slammed to a halt on 2 Aug 90. When Hussein invaded Kuwait, the Japanese realized that Hawaii was an island surrounded by oil tankers... just like them, only without civilian nuclear reactors. Once the Japanese visitor market imploded, everyone started losing their jobs and the economy nosedived. The real estate followed.

Keep in mind that my numbers are based on neighborhood comps and "realtor's market appraisals", which around here tend to be wildly optimistic. The actual sale value of our home would probably have been even lower.

In Feb 96 the home two doors up the street from ours went on the market. 3 BR instead of our 4 BR and a smaller lot, it would've made a great rental at a low $225K sale price and the prospect of a $1500/month rent. Deep-value fools that we are we desperately wanted to buy that place but we couldn't swing the cashflow bloodletting that would inevitably occur. Of course today the home appraises for over $600K (this week) and it's in cherry condition despite being 27 years old.

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Originally Posted by Laurence
Also, I remember in high school that we "good students" were completely segregated from the "bad students" and never even saw each other. Gangbanger boy didn't get enrolled in physics.
Tsk, tsk, your Mom would scold you on your vocabulary if she read this post. They're not segregated from the honors gifted & talented students, they're just enrolled in a different college-prep track!

Quote:
Originally Posted by Caroline
So, Nords, you kept the house, rented it at some point, and it came back over time. Are you satisfied with that result?
Of course we're satisfied, we've had years to rationalize our decisions!

Context is everything. In 1989 we DINKs flipped our Pacific Grove CA condo for $30K profit in two years and sunk it all into our Hawaii home. It was the only home we could afford (we'd looked at over 50 of them) but back then it was "easy to make money in real estate" and the Hawaii home had been trashed by years of renter neglect, so we put plenty of sweat equity into it. The decision pretty much made itself.

By 1994 the Navy had decreed that we had to leave Hawaii for San Diego. We doubted that we could sell the home for much more than the mortgage, we had no time to deal with selling it, and we thought that we might be coming back to Hawaii someday. Renting was an easy choice although we were bleeding cashflow. Another decision made itself.

When we returned in 1997 we happily cleaned the place up and moved back in. We enjoyed going to open houses but we weren't really interested in buying until spouse found her dream house three years later. I did the math and realized that the pits of a market is a great time to upgrade, so we put in an offer. (You married veterans are thinking "Yeah, as if he had a vote!") By that weekend we'd been forced to vacate all our purchase contingencies (including the sale of our home) and we had no time to deal with selling our home AND moving into the new place. I called our credit union to discuss the mortgage but they were thrilled to see a dual-income couple with an ER portfolio. That's when we realized that we could rent out our first home, and that it would be a lot easier than selling. So that decision made itself too, and the home has appreciated quite nicely since then.

You may be surprised to hear this coming from a nuclear engineer, but I keep a spreadsheet on that 1989 purchase and all its upgrades/repairs. Over the last 17 years our "investment" has appreciated slightly better than the rate of inflation, which probably only reflects our sweat-equity efforts. So it hasn't been better than a no-load index fund, but we've never had a compelling reason to sell it.

Our kid is almost 14 and we're beginning to appreciate that she'll probably be attending college on the Mainland. Someday she'll want to return to Hawaii and buy a home, but she might be locked out of the real estate market if it's booming again. As prospective grandparents we'd rather facilitate her Hawaii housing by being able to offer her the ol' homestead at a subsidized rent or even a gifted deed. That's an emotional decision and it can't be spreadsheeted.

In your situation I'd be tempted to take the money and run, but you don't seem to have any compelling reason to do so. However you have a bunch of math to do:
- If you sold the house for $400K would you be able to ER tomorrow? What about $350K? How low can you go before ER is impacted?
- If the house is rented and you like the management, is there a compelling reason to sell? Will the cash flow support a semi-ER now?
- If you had the opportunity to buy this house tomorrow all over again and rent it out, would the numbers make it a compelling investment? If not then you should probably sell.
- What's your tax bite? You have a slug of Section 1250 depreciation recapture taxes to pay at 25%, and then you'll be paying another slug of cap gains taxes. Not too pretty when you compare selling to a 1031 exchange or holding it for another 10 years.
- Is there even the slightest chance that you might move back into it someday? Don't laugh-- I know naval officers who've done so as part of a retirement plan to stay in their former rental residences for two years, fix them up, then sell what is now their personal residence for a tax-free cap gain. Some of them are doing this with three or four properties but they've been handsomely rewarded for the hassles of moving.

Another issue for you to consider is Prop 13 taxes. You're in a great property tax situation now, but if you sold that place and ended up buying another home someday you'd effectively triple your property taxes.
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Re: U.S. Economy: Home Sales Drop to Lowest in More Than Two Years
Old 08-25-2006, 02:54 PM   #65
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Re: U.S. Economy: Home Sales Drop to Lowest in More Than Two Years

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Originally Posted by shiny
I'm not Nords* , but part of the problem in 1996 was the Japanese economy started tanking and lots of real estate was held by Japanese owners at that time - they flooded the market with selling.
Thank you, Shiny.
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Re: U.S. Economy: Home Sales Drop to Lowest in More Than Two Years
Old 08-25-2006, 08:37 PM   #66
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Re: U.S. Economy: Home Sales Drop to Lowest in More Than Two Years

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Originally Posted by newguy888
So many people are trying to flat out CASH OUT! they still think it is early 2005. Now we have people who are pricing homes at still high prices and they sit because there is SO MUCH INVENTORY!
Yeah, here in the MD suburbs of DC, the inventory is the biggest issue. One of the local papers tracks a statistic they call "sales chances" (homes sold/ inventory). Last month the homes sold was close to last year but the inventory was 20 % higher. This month homes sold figure dropped a bunch more and inventory remained high. I think sellers have not accepted how much less they will have to accept. I suspect it no big deal for now, but when people with fancy ARMs get hit, things could get really dicey. In this area prices are so high that the 3x rule just wont work for many people, and lenders are flexible. Flexible is good , but what not good is lax policies like no money down. I am just glad I don't anticipate selling anytime soon
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