Good Time To Move?

[Red Corvette]

I am thinking about selling my house and moving to a new town and into a rental house for a year. Since home prices appear to be on their way down, it seems this is an opportune time to do the move. I've seen estimates of a possible 20% drop in my area of north Atlanta but of course no one knows.

My current mortgage payments are around $1000/month and monthly rent for a comparable rental house I expect to be around $2,200/month.

Does this make sense?

 

[RobbieB]

Sell when prices are low and rent at 2X your mortgage payment?

You thinking of somewhere distant? Don't like where you live now?

 

[Red Corvette]

I live where my job was and never liked the location much so I had been thinking of moving for several years.

The move would be two or three hours away.
I am getting what I think are pretty good offers from Offerpad and expect they may not be around much longer.

 

[Koolau]

Can't advise on the economics of moving at this time, but would suggest moving TO someplace you wish to reside. Most here suggest renting long enough to insure you have "arrived" at your final destination. Money is important but living is more important in general. BUT do keep in mind that our advice is worth what you pay for it so YMMV.

 

[FANOFJESUS]

Sell when prices are low and rent at 2X your mortgage payment?

You thinking of somewhere distant? Don't like where you live now?

I am thinking like RobbieB. I would not sell and pay 2x to rent. I would try to rent around the same $ House prices might go down a little bit but I am not looking for 2010 prices.

 

[tryan]

Couple thoughts:

I've owned and sold dozens of rental properties. But NEVER attempt to market time a primary residence; because you have to live someplace. In your case you're looking at paying 2x MORE after the sale.

The span between peak and valley has never been 1 year. In my hood, more like 4 or 5 years. Think 1989 to 1994 and 2007 to 2011.... your hood will be a little different. But more than a year. So now your STUCK paying 2x times more for a much longer time than expected. Which only leads to one thing .... buying at the wrong time ... pay more and watching the value drop. Which agian explains why I never market time a primary residence.

 

[Aerides]

If you want to move, and check out the new area by renting for a year, that's usually a good idea.

But anyone who did that in 2020/21 is probably not thrilled with that choice right now. Odds are the timing is in your favor now, but RE is fickle, and geography matters - it varies a lot across the country.

So if you want to move, go for it, but don't try to time it, or rent because you think prices will get better. We all know people who have lost that bet.

 

[Red Corvette]

I'm considering Greenville SC as there is so much buzz about it on the internet. Going up today to have a look.

I was wanting to move and take the advice of renting for a year before I bought again.Also if the bottom falls out of the housing market I could be stuck here for a long time. Just seems like the stars may have aligned for a short period.

 

[street]

I am thinking about selling my house and moving to a new town and into a rental house for a year. Since home prices appear to be on their way down, it seems this is an opportune time to do the move. I've seen estimates of a possible 20% drop in my area of north Atlanta but of course no one knows.

My current mortgage payments are around $1000/month and monthly rent for a comparable rental house I expect to be around $2,200/month.

Does this make sense?

To be totally honest, No it doesn't make sense. I personally wouldn't do that for a financial standpoint.

There was great advise given and or options above that would be better avenue. IMO

 

[38Chevy454]

Move because you want to. Don't consider it as a financial decision, although financial is a big part of it. Mortgage rates are rising, just heard they hit 6% for first time. That will put a damper on sales and home sale prices for sure. Most people shop houses by payment they can qualify for, and with rising rates it results in lower house price. I do agree with you to some extent that home prices and sales may fall a bit from the overheated past year results. As we all know real estate markets are local, and statewide or national trends do not mean much - your immediate market is what matters.

The $1000/mo current payment vs $2000/mo rent in new location means it would cost you approx $12K/yr. How is your crystal ball seeing house prices in your area over next year? Will your house drop more than $12K? Can your budget soak up the additional $12K? Do you have any experience with the new area? Vacationing is a lot different than living there, although at some point you just need to make a leap and take a chance in a new location. Renting gives you an easy out plan if you decide it is not for you.

In my case I moved immediately after retiring, cross country 1500 miles. But it was because I wanted to and was planned. If you do not have any real roots in your current area, as I was also just there for work, then it's fine to move because you want to.

 

[Mr. Tightwad]

I don't pay attention to buzz on the internet.

 

[Koolau]

I don't pay attention to buzz on the internet.

And yet, here we are.

 

[Aerides]

$12k difference is not a lot when you're talking about where you live, when it's further than a day's drive away and you're not intimately familiar with the new town. It's really more insurance in making sure that $200-$500k+ investment down the road is the right one.

Assuming housing prices stay the same...that investment buys you time. You get to know the new area, neighborhoods, really look around and pick where you most want to live, and wait for the right house to come available. You can scout for the spots that check all your boxes, not just the house itself, but proximity to amenities that are important for you personally (i.e., walkability/drivability, distance from highways, to hospitals/parks/shopping).

You are in the easy-day-trip range for the new location, so you could do the work in a lot a lot of short visits instead.

The downside is you spend a year in a temporary location. A year in a bit of upheaval, maybe also some stuff in storage. If you have pets it's also a bit of a challenge.

But $12k would not be a factor for me. Incidentally, that's about what Zillow says my home value has lost in the past month. The headwinds are against further increases, and most areas should expect home sales to slow. I'm not much for gambling, but I think selling today would net you more than a $12k difference (in your favor) vs. selling a year from now. If that also holds with the new place...win win!

Of course it could go the other way - you sell now and then in the next year things shift again and start to go back up. That's why you have to be ok with whatever happens and focus on being where you want to be.

 

[Music Lover]

I assume that if you sell your house you will have money to invest that will offset the $1,200 additional cost of renting. And in addition to the $1,000 mortgage you also have property tax, insurance, maintenance, etc. So, it's not really $1,200 more expensive to rent. It may be closer to break even.

 

[Koolau]

$12k difference is not a lot when you're talking about where you live, when it's further than a day's drive away and you're not intimately familiar with the new town. It's really more insurance in making sure that $200-$500k+ investment down the road is the right one.

Assuming housing prices stay the same...that investment buys you time. You get to know the new area, neighborhoods, really look around and pick where you most want to live, and wait for the right house to come available. You can scout for the spots that check all your boxes, not just the house itself, but proximity to amenities that are important for you personally (i.e., walkability/drivability, distance from highways, to hospitals/parks/shopping).

You are in the easy-day-trip range for the new location, so you could do the work in a lot a lot of short visits instead.

The downside is you spend a year in a temporary location. A year in a bit of upheaval, maybe also some stuff in storage. If you have pets it's also a bit of a challenge.

But $12k would not be a factor for me. Incidentally, that's about what Zillow says my home value has lost in the past month. The headwinds are against further increases, and most areas should expect home sales to slow. I'm not much for gambling, but I think selling today would net you more than a $12k difference (in your favor) vs. selling a year from now. If that also holds with the new place...win win!

Of course it could go the other way - you sell now and then in the next year things shift again and start to go back up. That's why you have to be ok with whatever happens and focus on being where you want to be.

I think the word "insurance" that you used was excellent. Much better to "waste" $12K than end up with the expense of a house that doesn't w*rk for you.

 

[walkinwood]

The cost of owning a home isn't just the mortgage. You should calculate what your monthly cost of ownership is (including a conservative opportunity cost on the principal) and how that compares to the rent (rent + insurance + utilities etc)



As others have said - move because you want to. Rent if you aren't sure that the new location will be all that you thought it could be.

 

[Mark1]

It's very hard to tell from the information you provided (age, total assets, etc.), but I vote for move. We "lived where the food was", so once I retired we immediately moved where we wanted to live. We had no mortgage on our old house and rented the second most expensive house in town we could find (we didn't like the most expensive rental in town ). We bought after we found a permanent house in town (ended up paying one months rent that we didn't need to, but who cares). Life's short.

P.S. I hate the idea of trying to time the buying and selling. If you want to move, then move.

 

[pacergal]

By selling and renting for a year, will you have enough money to purchase for cash or will you need a mortgage? Have you priced that into your retirement budget?

If mortgage rates do go to 6% or more, cash is definitely king (although our first house rates were in the 8-10%+ when we were looking, so it is doable if you have the budget for it)

Is this the area you have thought about and investigated for a long time? As Aerides mentioned, you could do some shorter stays to really check it out.

Or, Go for it and live the retirement life you dreamed of!
Only you know your financial situation, and definitely renting for a bit makes more sense when you first move.
Unless you find your Dream House like W2R right off the bat.

 

[FANOFJESUS]

I think your timing is good but I would look for lower rent.

 

[folivier]

We're also considering selling our primary house and either buying a less expensive condo or renting for a few years. We also own a cabin and expect that in the next 5-10 years we'll "age out" of it. That will give us enough equity to buy a place if we're still renting. By selling the primary we'll also be able to pay off our mortgage which will give us a bigger cushion with rising inflation and dropping stock values.
The rent in our area is within a couple hundred $'s of our mortgage. So with the property tax and slight insurance (renter vs owner) savings it will be a wash.

 

[COcheesehead]

I'm considering Greenville SC as there is so much buzz about it on the internet. Going up today to have a look.

I was wanting to move and take the advice of renting for a year before I bought again.Also if the bottom falls out of the housing market I could be stuck here for a long time. Just seems like the stars may have aligned for a short period.

Greenville is nice in parts. I had relatives that lived there. The infrastructure in some areas hasn’t kept up with the growth and has created traffic nightmares. Downtown is cute.
If you want a mix of country town and a little bit of city, Greenville is not a bad choice. Good luck with your decision.

 

[braumeister]

I'm with the people who say to be cautious.

My neighbor had this idea not long ago and decided that since the housing market was so hot right now, there would never be a better time to sell.

He put his condo on the market without even beginning to look for another place to live. It sold within a day for $40K above his already high asking price. He managed to get 60 days before closing and started looking frantically for a replacement.

The only place he could find that would meet his needs was twice the price of the one he sold, half the square footage, and nearly twice the monthly HOA fee. He freely admits he totally outsmarted himself.

 

[njhowie]

I am thinking about selling my house and moving to a new town and into a rental house for a year. Since home prices appear to be on their way down, it seems this is an opportune time to do the move. I've seen estimates of a possible 20% drop in my area of north Atlanta but of course no one knows.

My current mortgage payments are around $1000/month and monthly rent for a comparable rental house I expect to be around $2,200/month.

Does this make sense?

Does market timing make sense? What you have described is market timing to a T.

There's nothing wrong with locking in a big tax free capital gain if that is part of your plan. However, is your objective to stay in the rental permanently or just until home prices fall and then buy a new home to move into? Though prices will likely come down a bit off of highs a few months ago, a 20% fall over the coming 12 months is not highly likely.

What if home prices only fall 5% or 10% before heading back up, and you really can't justify the costs until they fall 15% or 20%? Same logic as market timing with your investment portfolio - when to get back in, or possibly getting left in the dust.

In the mean time, there's no sign that rental prices are doing anything but going higher. So you should factor this in to your decision.

 

[Montecfo]

Hard to craft an answer from limited info. But one impediment to home market timing is the transaction cost to buy and sell, and moving cost.

For me I would only try it if cashing out and moving to a lower cost market.

I do agree that prices have started to fall and will probably fall further.

A neighbor of mine did this. He sold his house for a huge price a couple of years ago and moved into a rental. The market continued to rise. He rented then ended up buying a townhouse in the higher cost market. Not sure that worked out as expected.

 

[COcheesehead]

We moved about three years ago at the start of retirement and built our “dream” house, but we moved from a big city with HCOL to a smaller city with about a 30% arbitrage difference in real estate prices. What we found is that we were just early to the game and eventually real estate went up in the new place as well sort of like water finding it’s own level.
We feel fortunate that we sold high, bought lower and still went higher. I am not sure I would do that in today’s market. Our construction loan rate was also lower than what a 1 year treasury pays today, so we have a nice arbitrage on the mortgage making about 2% difference when comparing our bond ladder to our mortgage rate. That does not include the tax advantage of the mortgage or property tax. That difference would be impossible in today’s interest rate environment.