Housing Slump vs ER

[Texarkandy]

I am planning to ER next year at 49 y/o - part of the plan "was" to sell the house this year or next, use the equity to purchase a smaller house, & dump the mortgage payment. (We have about 200K equity in a 300K- 3400 sq ft - house.)

Well, it seems the housing slump is really messing with that plan.

Things are not so bad here in my area in housing as it is in some others, houses are selling, but prices have depressed quite a bit this past year from what they were. (Texarkana has been second for 2 years in a row on Forbe's list of fastest growing small metro areas)

We still plan to do the ER next year, but things will be a bit "tighter" month-to-month than I had planned if we have to continue paying on the mortgage. (We do have a good 4.5% fixed loan)

So I'm currently contemplating if we should:
Tough it out with the mortgage till the housing market comes back (if ever)
- or
Go ahead & sell this year & take the "hit" on our equity & write it off to "that's life"

Thoughts anyone?
(Note: canelling/delaying ER is not an option due to reasons of my sanity!! )

 

[Marquette]

Put it on the market. You never know what kind of offer you'll get or if you'll even get an offer. But, if you get a few offers, at least you'll have solid numbers to plan with. At that point, you can always decide to not sell. It's good to be prepared for an abysmal sale, but you should at least have some buyers tell you what they're willing to pay.

Is the motive for selling purely to be able to put the cash down on a new place or is it also about cash flow? What about refinancing the current mortgage if it's significantly lower than when you last financed? If it helps cash flow, it might not feel quite like you're toughing it out

 

[W2R]

If it was me (and it will be, in 2009), I would sell the house. The price will be lower, but then the price of your new house will be lower as well. Taxes might be lower, too.

Maybe you can downsize a bit more than you had planned, or maybe you can move to a less expensive area.

I suppose the other alternative is to keep working. Whether or not you would be wise to choose that might depend on your age. I will be 60 in June, so I don't have as many days left on this earth as someone who is 35 or 40. They are too precious to me to waste working, if I can work out a satisfactory lifestyle with what I have.

 

[freebird5825]

how much are you planning to downsize? from house to apt or condo?

an off-the-wall idea but it may work for you...is renting your current house to the "right" kind of tenant a possibility? are you near a university or miltary installation or industry - the idea being visiting professors and 2-3 year PCS families or short term transfer executives are looking to rent but not buy? use word of mouth vs public advertisement to rent it.
being a landlord has its own headaches...but it could pay the mortgage while you re-establish your own residence (lower mortgage) and give you the option to sell later in a better housing market.
sanity is a good thing to keep.

 

[Texarkandy]

The idea is (was?) to use 100% (or near) of the equity we get back out to purchase outright a smaller home with less property tax, insurance, heating/cooling bills - and no mortgage payment.

We don't need the cash to finance ER - it's just that the mortgage & associated xtra expenses kind of mess up our ER month-to-month cash flow.

 

[ziggy29]

The idea is (was?) to use 100% (or near) of the equity we get back out to purchase outright a smaller home with less property tax, insurance, heating/cooling bills - and no mortgage payment.

We did that a couple years ago. I guess some people "trade down" for retirement; we just did it early while still w*rking. Our property taxes are only 1/4 of what they were when we lived in Houston (in a house twice as large). Our summer cooling bills are about 1/2 as much (about $100 a month instead of $200), our insurance about 2/3 less (about $600 a year instead of $1700).

And no mortgage, though all the talk of bailing out irresponsible borrowers on my dime makes me wish we had a huge one sometimes.

 

[jIMOh]

I would put house on market and see what the offers are.

You clearly want all 200k equity you created back. You probably want 300k. Will 100k really make that much of a difference in the long range (40 year) retirement plan? I would assume close to retirement you have 1-2 M saved up, so 100k would be 10% of his total.

Maybe when you move you downsize slightly more than planned to make up for the difference (maybe a 2 BR condo instead of a 3 BR ranch, or 1 BR condo instead of a 2BR condo). Maybe move to a cheaper area too.

I think you can recover the 100k easily because whereever you buy is probably lower in price too. But make that decision once you get a reasonable offer (maybe 225k so difference is only 75k from plan). Then maybe house you want is 50k below plan so you only lost 25k from plan.