Real Estate/Equities Market Bull Run

[yakers]

I saw the thread about this being the third longest equity bull run and it may go on longer. Is there a relation to the real estate market and the equity market?

I am pondering selling the family house (no mortgage) and buying a condo/townhouse/low maintenance property. I can buy first and sell second or vice versa, some risk either way but possible market neutral if the real estate market does not shift significantly. Crazy bull run in real estate here in southern Caliornia but we want to buy here too so a small market decline would favor our efforts as everything we look at costs more than what we would get from selling our house. The 'lucky' position would be to sell high and have a market decline before buying but then we would have to rent awaiting a market decline. I have no doubt there will be a market decline (and eventual recovery) but seems too difficult to time.

 

[DrRoy]

There certainly can be a connection. The Great Recession bear market was preceded by the peak and decline of real estate, which then hurt the banks etc., led to the financial meltdown which brought the economy and stock market down with it. That being said, in individual local real estate markets, there can be trends that do not link to equities at all. I would say just do what you want to do real estate wise and don't try to time it.

 

[photoguy]

I saw the thread about this being the third longest equity bull run and it may go on longer. Is there a relation to the real estate market and the equity market?

They compete for investment dollars and people may feel flush about buying homes if their equities have done well. Also many see rent as alternative to bond income. Some local areas may have significant foreign investment in homes.

Check out piggington.com -- they discuss a few valuation measures for real estate in the san diego market. If you are in OC / LA i'd try to find out similar information for that market.

Anecdotally I saw quite a few landlords deciding to cash out on their rentals this summer.

I am pondering selling the family house (no mortgage) and buying a condo/townhouse/low maintenance property. I can buy first and sell second or vice versa, some risk either way but possible market neutral if the real estate market does not shift significantly.

You could reduce risk by making the first transaction contingent on the second.

Crazy bull run in real estate here in southern Caliornia but we want to buy here too so a small market decline would favor our efforts as everything we look at costs more than what we would get from selling our house.

Are you already in SoCal and moving to a more expensive neighborhood? Usually SFH > condo/townhome.

In San Diego I believe entry level homes/condos are appreciating more than the upper end. One thing to check is to see how many months of inventory exist at your price points.

The 'lucky' position would be to sell high and have a market decline before buying but then we would have to rent awaiting a market decline. I have no doubt there will be a market decline (and eventual recovery) but seems too difficult to time.

Selling and renting runs the risk that prices continue to rise for several years before any decline occurs. In this case the decline may not completely offset the appreciation -- quite a few people have been priced out of the market while renting. Also if you are buying with a mortgage, a decline in price due to rising rates might not change your payment.

If you are buying a more expensive home, then waiting in your current home might be less risky as an across the board decline of 20% will still shrink the gap in absolute dollar terms (when buying a more expensive home).

On the other hand, getting the timing right could easily save several hundred k in $$$.