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When is it better to move - before or after a housing bubble bursts?
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My husband and I currently own our home and are looking at upgrading to a bigger house in the next year or two. The housing market right now in our area (US East Coast city) is doing really well, and our home is valued much higher than it was when we purchased it. However, with all of the new expensive developments popping up, I strongly suspect that the housing bubble here is going to burst soon.
On the one hand, if we wait until after the market turns, then buying our new place will be much cheaper than if we moved earlier. On the other hand, waiting would also mean losing value in our current home we would be selling. One of the other reasons we're thinking about this now is that we are on year 5 of our 7-year ARM, so our interest rates will be going up if we don't sell or refinance.
Considering that we would be looking to both sell and buy property around the same time, is it better to do it when the market is up or after it makes a downturn?
I have seen both this question and this question, but they are both specifically about going from renting to owning, while we already own.
real-estate housing bubble
edited 20 mins ago
Mark Rogers
1093
asked 7 hours ago
David K
21827
 |Â
show 15 more comments
up vote
19
down vote
favorite
My husband and I currently own our home and are looking at upgrading to a bigger house in the next year or two. The housing market right now in our area (US East Coast city) is doing really well, and our home is valued much higher than it was when we purchased it. However, with all of the new expensive developments popping up, I strongly suspect that the housing bubble here is going to burst soon.
On the one hand, if we wait until after the market turns, then buying our new place will be much cheaper than if we moved earlier. On the other hand, waiting would also mean losing value in our current home we would be selling. One of the other reasons we're thinking about this now is that we are on year 5 of our 7-year ARM, so our interest rates will be going up if we don't sell or refinance.
Considering that we would be looking to both sell and buy property around the same time, is it better to do it when the market is up or after it makes a downturn?
I have seen both this question and this question, but they are both specifically about going from renting to owning, while we already own.
real-estate housing bubble
edited 20 mins ago
Mark Rogers
1093
asked 7 hours ago
David K
21827
4
Is selling now and buying later an option (rent until the market goes down)?
– yoozer8
6 hours ago
1
What's your current mortgage? How much of a down payment will you be able to put on the new house in each scenario? How much more will the new house cost compared to the old? I think there are too many variables involved to provide a blanket "sell now"-vs-"wait" answer.
– chepner
6 hours ago
1
@DavidK I don't think yoozer8 means that you're going to rent permenantly. It's more of a "If you can rent for a few years and watch the bubble burst, you can get a house you otherwise might not be able to afford". Especially with many new developments, the worst case would be the market doesn't burst, and you're in the same position you were previously; looking for a bigger house, and a bunch of money to put towards it.
– Anoplexian
3 hours ago
1
@BruceWayne We do still have plenty of mortgage. It's worth noting that we have a 7 year ARM, and we are currently on year 5, which is one of the reasons we're looking at the move now.
– David K
2 hours ago
1
@DavidK All "recourse" means is that the bank can come after you for the difference between what you owe (the remaining principal balance of the mortgage) and what they sell the house for in foreclosure. I can't see why just walking away and letting them foreclose is a good strategy in any situation, especially in a "good" market.
– D Stanley
1 hour ago
 |Â
show 15 more comments
up vote
19
down vote
favorite
up vote
19
down vote
favorite
My husband and I currently own our home and are looking at upgrading to a bigger house in the next year or two. The housing market right now in our area (US East Coast city) is doing really well, and our home is valued much higher than it was when we purchased it. However, with all of the new expensive developments popping up, I strongly suspect that the housing bubble here is going to burst soon.
On the one hand, if we wait until after the market turns, then buying our new place will be much cheaper than if we moved earlier. On the other hand, waiting would also mean losing value in our current home we would be selling. One of the other reasons we're thinking about this now is that we are on year 5 of our 7-year ARM, so our interest rates will be going up if we don't sell or refinance.
Considering that we would be looking to both sell and buy property around the same time, is it better to do it when the market is up or after it makes a downturn?
I have seen both this question and this question, but they are both specifically about going from renting to owning, while we already own.
real-estate housing bubble
edited 20 mins ago
Mark Rogers
1093
asked 7 hours ago
David K
21827
My husband and I currently own our home and are looking at upgrading to a bigger house in the next year or two. The housing market right now in our area (US East Coast city) is doing really well, and our home is valued much higher than it was when we purchased it. However, with all of the new expensive developments popping up, I strongly suspect that the housing bubble here is going to burst soon.
On the one hand, if we wait until after the market turns, then buying our new place will be much cheaper than if we moved earlier. On the other hand, waiting would also mean losing value in our current home we would be selling. One of the other reasons we're thinking about this now is that we are on year 5 of our 7-year ARM, so our interest rates will be going up if we don't sell or refinance.
Considering that we would be looking to both sell and buy property around the same time, is it better to do it when the market is up or after it makes a downturn?
I have seen both this question and this question, but they are both specifically about going from renting to owning, while we already own.
real-estate housing bubble
real-estate housing bubble
edited 20 mins ago
Mark Rogers
1093
asked 7 hours ago
David K
21827
edited 20 mins ago
Mark Rogers
1093
asked 7 hours ago
David K
21827
edited 20 mins ago
Mark Rogers
1093
edited 20 mins ago
Mark Rogers
1093
edited 20 mins ago
Mark Rogers
1093
1093
asked 7 hours ago
David K
21827
asked 7 hours ago
David K
21827
asked 7 hours ago
David K
21827
21827
4
Is selling now and buying later an option (rent until the market goes down)?
– yoozer8
6 hours ago
1
What's your current mortgage? How much of a down payment will you be able to put on the new house in each scenario? How much more will the new house cost compared to the old? I think there are too many variables involved to provide a blanket "sell now"-vs-"wait" answer.
– chepner
6 hours ago
1
@DavidK I don't think yoozer8 means that you're going to rent permenantly. It's more of a "If you can rent for a few years and watch the bubble burst, you can get a house you otherwise might not be able to afford". Especially with many new developments, the worst case would be the market doesn't burst, and you're in the same position you were previously; looking for a bigger house, and a bunch of money to put towards it.
– Anoplexian
3 hours ago
1
@BruceWayne We do still have plenty of mortgage. It's worth noting that we have a 7 year ARM, and we are currently on year 5, which is one of the reasons we're looking at the move now.
– David K
2 hours ago
1
@DavidK All "recourse" means is that the bank can come after you for the difference between what you owe (the remaining principal balance of the mortgage) and what they sell the house for in foreclosure. I can't see why just walking away and letting them foreclose is a good strategy in any situation, especially in a "good" market.
– D Stanley
1 hour ago
 |Â
show 15 more comments
4
Is selling now and buying later an option (rent until the market goes down)?
– yoozer8
6 hours ago
1
What's your current mortgage? How much of a down payment will you be able to put on the new house in each scenario? How much more will the new house cost compared to the old? I think there are too many variables involved to provide a blanket "sell now"-vs-"wait" answer.
– chepner
6 hours ago
1
@DavidK I don't think yoozer8 means that you're going to rent permenantly. It's more of a "If you can rent for a few years and watch the bubble burst, you can get a house you otherwise might not be able to afford". Especially with many new developments, the worst case would be the market doesn't burst, and you're in the same position you were previously; looking for a bigger house, and a bunch of money to put towards it.
– Anoplexian
3 hours ago
1
@BruceWayne We do still have plenty of mortgage. It's worth noting that we have a 7 year ARM, and we are currently on year 5, which is one of the reasons we're looking at the move now.
– David K
2 hours ago
1
@DavidK All "recourse" means is that the bank can come after you for the difference between what you owe (the remaining principal balance of the mortgage) and what they sell the house for in foreclosure. I can't see why just walking away and letting them foreclose is a good strategy in any situation, especially in a "good" market.
– D Stanley
1 hour ago
4
4
Is selling now and buying later an option (rent until the market goes down)?
– yoozer8
6 hours ago
Is selling now and buying later an option (rent until the market goes down)?
– yoozer8
6 hours ago
1
1
What's your current mortgage? How much of a down payment will you be able to put on the new house in each scenario? How much more will the new house cost compared to the old? I think there are too many variables involved to provide a blanket "sell now"-vs-"wait" answer.
– chepner
6 hours ago
What's your current mortgage? How much of a down payment will you be able to put on the new house in each scenario? How much more will the new house cost compared to the old? I think there are too many variables involved to provide a blanket "sell now"-vs-"wait" answer.
– chepner
6 hours ago
1
1
@DavidK I don't think yoozer8 means that you're going to rent permenantly. It's more of a "If you can rent for a few years and watch the bubble burst, you can get a house you otherwise might not be able to afford". Especially with many new developments, the worst case would be the market doesn't burst, and you're in the same position you were previously; looking for a bigger house, and a bunch of money to put towards it.
– Anoplexian
3 hours ago
@DavidK I don't think yoozer8 means that you're going to rent permenantly. It's more of a "If you can rent for a few years and watch the bubble burst, you can get a house you otherwise might not be able to afford". Especially with many new developments, the worst case would be the market doesn't burst, and you're in the same position you were previously; looking for a bigger house, and a bunch of money to put towards it.
– Anoplexian
3 hours ago
1
1
@BruceWayne We do still have plenty of mortgage. It's worth noting that we have a 7 year ARM, and we are currently on year 5, which is one of the reasons we're looking at the move now.
– David K
2 hours ago
@BruceWayne We do still have plenty of mortgage. It's worth noting that we have a 7 year ARM, and we are currently on year 5, which is one of the reasons we're looking at the move now.
– David K
2 hours ago
1
1
@DavidK All "recourse" means is that the bank can come after you for the difference between what you owe (the remaining principal balance of the mortgage) and what they sell the house for in foreclosure. I can't see why just walking away and letting them foreclose is a good strategy in any situation, especially in a "good" market.
– D Stanley
1 hour ago
@DavidK All "recourse" means is that the bank can come after you for the difference between what you owe (the remaining principal balance of the mortgage) and what they sell the house for in foreclosure. I can't see why just walking away and letting them foreclose is a good strategy in any situation, especially in a "good" market.
– D Stanley
1 hour ago
 |Â
show 15 more comments
4 Answers
4
active
oldest
votes
up vote
35
down vote
If you're moving up in house in the same area, it's better to wait until the alleged bubble bursts, since bubbles affect higher-prices homes more than lower-priced homes. You could also sell now and rent until the market bottoms out. There is no shame in renting, especially if you don't plan to stay in the house for more than a few years.
If you're downsizing, then it's better to move now for the same reasons.
If you're changing areas, then it all depends on the markets in those areas.
All that said, timing any market (including housing) is very tricky and can often work against you. Unless you think there's an enormous bubble (like a 50% premium) then in the long run it won't make much difference.
It's worth noting that we have a 7 year ARM, and we are currently on year 5, which is one of the reasons we're looking at the move now.
This should be your consideration, not a supposed "bubble". Interest rates are poised to go up over the next few years, so the sooner you can get out of that ARM the better. If you can afford to get a 15-yeard fixed mortgage on a new house in the next few years, that's your best bet. If not, then refinance what you have into a fixed rate mortgage.
answered 6 hours ago
D Stanley
48.6k7147157
11
Why would it be shameful to rent if you do plan to stay?
– Taacoo
5 hours ago
11
@Taacoo I didn't say it would be. I was responding to the comment "we don't plan to go back to renting now that we own"
– D Stanley
5 hours ago
3
"You could also sell now and rent until the market bottoms out." and if you do that and property prices and rents shoot up you are screwed. Just because you think there is a bubble doesn't mean that the alleged bubble will burst before you go insolvent.
– Peter Green
2 hours ago
@PeterGreen I just posed it as an option because of a comment that the OP seemed reluctant to rent.
– D Stanley
2 hours ago
add a comment |Â
up vote
14
down vote
Tricky choice, but there's a couple of things to consider. You said you plan on upgrading to a more expensive house, so you might save more on the new house post-bubble than you'd lose on your current house. Suppose you want to move from a $1M house to a $1.5M house - you'll need $0.5M. The bubble bursts, and housing prices fall 20% across the board. Now you have an $0.8M house and want to buy a $1.2M house, so you only need $0.4M to make up the difference. That's a big assumption that housing prices fall equally in all areas, but you get the idea.
The other things to consider is how easy it will be to sell your current house. Housing prices fall because the demand isn't there. Even with a lower price, you may have more trouble finding a buyer post-bubble, so consider how important timing is for the sale of your current home.
answered 6 hours ago
Nuclear Wang
1,010613
9
Another thing to be cautious of are moving interest rates. Borrowing 500k @ 4% APR has roughly the same total repayment amount (over 30 thirty years) as borrowing 400k @ 6% APR. If waiting for the market to drop by 20% also allows enough time for interest rates to climb by 2% then your 100k equity savings would be entirely wiped out by additional interest payments (assuming you need a mortgage).
– CactusCake
6 hours ago
add a comment |Â
up vote
13
down vote
If you sell and buy around the same time, the market situation (hot, cold, before, after, or no crash) is of little relevance - it just affects the size of the numbers on both contracts, and about the same, so it's mostly a wash.
If you want to take advantage of your prediction, you have to split the selling and the buying in time - several months at least - and sell high, wait until after the predicted crash, and then buy low. Obviously, that implies that you rent in between (or live in your car, or with your parents, or whatever). And if the crash doesn't come - because your prediction was wrong - you don't make money on it, but lose the value gain from the period you waited. No risk, no gain.
edited 4 hours ago
yoozer8
1,7663921
answered 6 hours ago
Aganju
19.1k23076
1
+1 Additionally, even if you're prediction is accurate, the cost of renting in between could wipe out any gains
– yoozer8
4 hours ago
1
@yoozer8 Not necessarily if they're still paying a mortgage and taking into account the cost of upkeep and property taxes.
– yitzih
4 hours ago
1
@yoozer8 Rent isn't an additionaly cost.
– Acccumulation
4 hours ago
Rent clearly is an additional cost, just of far lesser extent than most people think. If Rent is > (interest + homeowner's insurance + taxes & fees) it's an additional cost. Sometimes it's a wash, most of the time Rent has 10%-20% premium vs the non principal mortgage payment (When I decided to buy in my area rent was actually more expensive than the whole mortgage payment, in which case it's a pretty significant additional cost).
– xyious
1 hour ago
add a comment |Â
up vote
-1
down vote
For most people, most of the time, the issue is qualifying for the mortgage, not the price differential between the old house and the new house.
The problems is that periods when prices go down are often times when interest rates go up, like now. It tends to be a wash, since you wind up with the same monthly payment.
You have a particular situation which may bias your decision towards "buy now", which is that you have an ARM. Since your mortgage rate is going to adjust in two years, the fact that we are in a period of rising interest rates means that you are going to either have move up or refinance.
edited 29 mins ago
Rupert Morrish
3,3852728
answered 46 mins ago
Seattle Part-Time Broker
1
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– Rupert Morrish
30 mins ago
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4 Answers
4
active
oldest
votes
4 Answers
4
active
oldest
votes
active
oldest
votes
active
oldest
votes
up vote
35
down vote
If you're moving up in house in the same area, it's better to wait until the alleged bubble bursts, since bubbles affect higher-prices homes more than lower-priced homes. You could also sell now and rent until the market bottoms out. There is no shame in renting, especially if you don't plan to stay in the house for more than a few years.
If you're downsizing, then it's better to move now for the same reasons.
If you're changing areas, then it all depends on the markets in those areas.
All that said, timing any market (including housing) is very tricky and can often work against you. Unless you think there's an enormous bubble (like a 50% premium) then in the long run it won't make much difference.
It's worth noting that we have a 7 year ARM, and we are currently on year 5, which is one of the reasons we're looking at the move now.
This should be your consideration, not a supposed "bubble". Interest rates are poised to go up over the next few years, so the sooner you can get out of that ARM the better. If you can afford to get a 15-yeard fixed mortgage on a new house in the next few years, that's your best bet. If not, then refinance what you have into a fixed rate mortgage.
answered 6 hours ago
D Stanley
48.6k7147157
11
Why would it be shameful to rent if you do plan to stay?
– Taacoo
5 hours ago
11
@Taacoo I didn't say it would be. I was responding to the comment "we don't plan to go back to renting now that we own"
– D Stanley
5 hours ago
3
"You could also sell now and rent until the market bottoms out." and if you do that and property prices and rents shoot up you are screwed. Just because you think there is a bubble doesn't mean that the alleged bubble will burst before you go insolvent.
– Peter Green
2 hours ago
@PeterGreen I just posed it as an option because of a comment that the OP seemed reluctant to rent.
– D Stanley
2 hours ago
add a comment |Â
up vote
35
down vote
If you're moving up in house in the same area, it's better to wait until the alleged bubble bursts, since bubbles affect higher-prices homes more than lower-priced homes. You could also sell now and rent until the market bottoms out. There is no shame in renting, especially if you don't plan to stay in the house for more than a few years.
If you're downsizing, then it's better to move now for the same reasons.
If you're changing areas, then it all depends on the markets in those areas.
All that said, timing any market (including housing) is very tricky and can often work against you. Unless you think there's an enormous bubble (like a 50% premium) then in the long run it won't make much difference.
It's worth noting that we have a 7 year ARM, and we are currently on year 5, which is one of the reasons we're looking at the move now.
This should be your consideration, not a supposed "bubble". Interest rates are poised to go up over the next few years, so the sooner you can get out of that ARM the better. If you can afford to get a 15-yeard fixed mortgage on a new house in the next few years, that's your best bet. If not, then refinance what you have into a fixed rate mortgage.
answered 6 hours ago
D Stanley
48.6k7147157
11
Why would it be shameful to rent if you do plan to stay?
– Taacoo
5 hours ago
11
@Taacoo I didn't say it would be. I was responding to the comment "we don't plan to go back to renting now that we own"
– D Stanley
5 hours ago
3
"You could also sell now and rent until the market bottoms out." and if you do that and property prices and rents shoot up you are screwed. Just because you think there is a bubble doesn't mean that the alleged bubble will burst before you go insolvent.
– Peter Green
2 hours ago
@PeterGreen I just posed it as an option because of a comment that the OP seemed reluctant to rent.
– D Stanley
2 hours ago
add a comment |Â
up vote
35
down vote
up vote
35
down vote
If you're moving up in house in the same area, it's better to wait until the alleged bubble bursts, since bubbles affect higher-prices homes more than lower-priced homes. You could also sell now and rent until the market bottoms out. There is no shame in renting, especially if you don't plan to stay in the house for more than a few years.
If you're downsizing, then it's better to move now for the same reasons.
If you're changing areas, then it all depends on the markets in those areas.
All that said, timing any market (including housing) is very tricky and can often work against you. Unless you think there's an enormous bubble (like a 50% premium) then in the long run it won't make much difference.
It's worth noting that we have a 7 year ARM, and we are currently on year 5, which is one of the reasons we're looking at the move now.
This should be your consideration, not a supposed "bubble". Interest rates are poised to go up over the next few years, so the sooner you can get out of that ARM the better. If you can afford to get a 15-yeard fixed mortgage on a new house in the next few years, that's your best bet. If not, then refinance what you have into a fixed rate mortgage.
answered 6 hours ago
D Stanley
48.6k7147157
If you're moving up in house in the same area, it's better to wait until the alleged bubble bursts, since bubbles affect higher-prices homes more than lower-priced homes. You could also sell now and rent until the market bottoms out. There is no shame in renting, especially if you don't plan to stay in the house for more than a few years.
If you're downsizing, then it's better to move now for the same reasons.
If you're changing areas, then it all depends on the markets in those areas.
All that said, timing any market (including housing) is very tricky and can often work against you. Unless you think there's an enormous bubble (like a 50% premium) then in the long run it won't make much difference.
It's worth noting that we have a 7 year ARM, and we are currently on year 5, which is one of the reasons we're looking at the move now.
This should be your consideration, not a supposed "bubble". Interest rates are poised to go up over the next few years, so the sooner you can get out of that ARM the better. If you can afford to get a 15-yeard fixed mortgage on a new house in the next few years, that's your best bet. If not, then refinance what you have into a fixed rate mortgage.
answered 6 hours ago
D Stanley
48.6k7147157
edited 2 hours ago
answered 6 hours ago
D Stanley
48.6k7147157
answered 6 hours ago
D Stanley
48.6k7147157
answered 6 hours ago
D Stanley
48.6k7147157
48.6k7147157
11
Why would it be shameful to rent if you do plan to stay?
– Taacoo
5 hours ago
11
@Taacoo I didn't say it would be. I was responding to the comment "we don't plan to go back to renting now that we own"
– D Stanley
5 hours ago
3
"You could also sell now and rent until the market bottoms out." and if you do that and property prices and rents shoot up you are screwed. Just because you think there is a bubble doesn't mean that the alleged bubble will burst before you go insolvent.
– Peter Green
2 hours ago
@PeterGreen I just posed it as an option because of a comment that the OP seemed reluctant to rent.
– D Stanley
2 hours ago
add a comment |Â
11
Why would it be shameful to rent if you do plan to stay?
– Taacoo
5 hours ago
11
@Taacoo I didn't say it would be. I was responding to the comment "we don't plan to go back to renting now that we own"
– D Stanley
5 hours ago
3
"You could also sell now and rent until the market bottoms out." and if you do that and property prices and rents shoot up you are screwed. Just because you think there is a bubble doesn't mean that the alleged bubble will burst before you go insolvent.
– Peter Green
2 hours ago
@PeterGreen I just posed it as an option because of a comment that the OP seemed reluctant to rent.
– D Stanley
2 hours ago
11
11
Why would it be shameful to rent if you do plan to stay?
– Taacoo
5 hours ago
Why would it be shameful to rent if you do plan to stay?
– Taacoo
5 hours ago
11
11
@Taacoo I didn't say it would be. I was responding to the comment "we don't plan to go back to renting now that we own"
– D Stanley
5 hours ago
@Taacoo I didn't say it would be. I was responding to the comment "we don't plan to go back to renting now that we own"
– D Stanley
5 hours ago
3
3
"You could also sell now and rent until the market bottoms out." and if you do that and property prices and rents shoot up you are screwed. Just because you think there is a bubble doesn't mean that the alleged bubble will burst before you go insolvent.
– Peter Green
2 hours ago
"You could also sell now and rent until the market bottoms out." and if you do that and property prices and rents shoot up you are screwed. Just because you think there is a bubble doesn't mean that the alleged bubble will burst before you go insolvent.
– Peter Green
2 hours ago
@PeterGreen I just posed it as an option because of a comment that the OP seemed reluctant to rent.
– D Stanley
2 hours ago
@PeterGreen I just posed it as an option because of a comment that the OP seemed reluctant to rent.
– D Stanley
2 hours ago
add a comment |Â
up vote
14
down vote
Tricky choice, but there's a couple of things to consider. You said you plan on upgrading to a more expensive house, so you might save more on the new house post-bubble than you'd lose on your current house. Suppose you want to move from a $1M house to a $1.5M house - you'll need $0.5M. The bubble bursts, and housing prices fall 20% across the board. Now you have an $0.8M house and want to buy a $1.2M house, so you only need $0.4M to make up the difference. That's a big assumption that housing prices fall equally in all areas, but you get the idea.
The other things to consider is how easy it will be to sell your current house. Housing prices fall because the demand isn't there. Even with a lower price, you may have more trouble finding a buyer post-bubble, so consider how important timing is for the sale of your current home.
answered 6 hours ago
Nuclear Wang
1,010613
9
Another thing to be cautious of are moving interest rates. Borrowing 500k @ 4% APR has roughly the same total repayment amount (over 30 thirty years) as borrowing 400k @ 6% APR. If waiting for the market to drop by 20% also allows enough time for interest rates to climb by 2% then your 100k equity savings would be entirely wiped out by additional interest payments (assuming you need a mortgage).
– CactusCake
6 hours ago
add a comment |Â
up vote
14
down vote
Tricky choice, but there's a couple of things to consider. You said you plan on upgrading to a more expensive house, so you might save more on the new house post-bubble than you'd lose on your current house. Suppose you want to move from a $1M house to a $1.5M house - you'll need $0.5M. The bubble bursts, and housing prices fall 20% across the board. Now you have an $0.8M house and want to buy a $1.2M house, so you only need $0.4M to make up the difference. That's a big assumption that housing prices fall equally in all areas, but you get the idea.
The other things to consider is how easy it will be to sell your current house. Housing prices fall because the demand isn't there. Even with a lower price, you may have more trouble finding a buyer post-bubble, so consider how important timing is for the sale of your current home.
answered 6 hours ago
Nuclear Wang
1,010613
9
Another thing to be cautious of are moving interest rates. Borrowing 500k @ 4% APR has roughly the same total repayment amount (over 30 thirty years) as borrowing 400k @ 6% APR. If waiting for the market to drop by 20% also allows enough time for interest rates to climb by 2% then your 100k equity savings would be entirely wiped out by additional interest payments (assuming you need a mortgage).
– CactusCake
6 hours ago
add a comment |Â
up vote
14
down vote
up vote
14
down vote
Tricky choice, but there's a couple of things to consider. You said you plan on upgrading to a more expensive house, so you might save more on the new house post-bubble than you'd lose on your current house. Suppose you want to move from a $1M house to a $1.5M house - you'll need $0.5M. The bubble bursts, and housing prices fall 20% across the board. Now you have an $0.8M house and want to buy a $1.2M house, so you only need $0.4M to make up the difference. That's a big assumption that housing prices fall equally in all areas, but you get the idea.
The other things to consider is how easy it will be to sell your current house. Housing prices fall because the demand isn't there. Even with a lower price, you may have more trouble finding a buyer post-bubble, so consider how important timing is for the sale of your current home.
answered 6 hours ago
Nuclear Wang
1,010613
Tricky choice, but there's a couple of things to consider. You said you plan on upgrading to a more expensive house, so you might save more on the new house post-bubble than you'd lose on your current house. Suppose you want to move from a $1M house to a $1.5M house - you'll need $0.5M. The bubble bursts, and housing prices fall 20% across the board. Now you have an $0.8M house and want to buy a $1.2M house, so you only need $0.4M to make up the difference. That's a big assumption that housing prices fall equally in all areas, but you get the idea.
The other things to consider is how easy it will be to sell your current house. Housing prices fall because the demand isn't there. Even with a lower price, you may have more trouble finding a buyer post-bubble, so consider how important timing is for the sale of your current home.
answered 6 hours ago
Nuclear Wang
1,010613
answered 6 hours ago
Nuclear Wang
1,010613
answered 6 hours ago
Nuclear Wang
1,010613
answered 6 hours ago
Nuclear Wang
1,010613
1,010613
9
Another thing to be cautious of are moving interest rates. Borrowing 500k @ 4% APR has roughly the same total repayment amount (over 30 thirty years) as borrowing 400k @ 6% APR. If waiting for the market to drop by 20% also allows enough time for interest rates to climb by 2% then your 100k equity savings would be entirely wiped out by additional interest payments (assuming you need a mortgage).
– CactusCake
6 hours ago
add a comment |Â
9
Another thing to be cautious of are moving interest rates. Borrowing 500k @ 4% APR has roughly the same total repayment amount (over 30 thirty years) as borrowing 400k @ 6% APR. If waiting for the market to drop by 20% also allows enough time for interest rates to climb by 2% then your 100k equity savings would be entirely wiped out by additional interest payments (assuming you need a mortgage).
– CactusCake
6 hours ago
9
9
Another thing to be cautious of are moving interest rates. Borrowing 500k @ 4% APR has roughly the same total repayment amount (over 30 thirty years) as borrowing 400k @ 6% APR. If waiting for the market to drop by 20% also allows enough time for interest rates to climb by 2% then your 100k equity savings would be entirely wiped out by additional interest payments (assuming you need a mortgage).
– CactusCake
6 hours ago
Another thing to be cautious of are moving interest rates. Borrowing 500k @ 4% APR has roughly the same total repayment amount (over 30 thirty years) as borrowing 400k @ 6% APR. If waiting for the market to drop by 20% also allows enough time for interest rates to climb by 2% then your 100k equity savings would be entirely wiped out by additional interest payments (assuming you need a mortgage).
– CactusCake
6 hours ago
add a comment |Â
up vote
13
down vote
If you sell and buy around the same time, the market situation (hot, cold, before, after, or no crash) is of little relevance - it just affects the size of the numbers on both contracts, and about the same, so it's mostly a wash.
If you want to take advantage of your prediction, you have to split the selling and the buying in time - several months at least - and sell high, wait until after the predicted crash, and then buy low. Obviously, that implies that you rent in between (or live in your car, or with your parents, or whatever). And if the crash doesn't come - because your prediction was wrong - you don't make money on it, but lose the value gain from the period you waited. No risk, no gain.
edited 4 hours ago
yoozer8
1,7663921
answered 6 hours ago
Aganju
19.1k23076
1
+1 Additionally, even if you're prediction is accurate, the cost of renting in between could wipe out any gains
– yoozer8
4 hours ago
1
@yoozer8 Not necessarily if they're still paying a mortgage and taking into account the cost of upkeep and property taxes.
– yitzih
4 hours ago
1
@yoozer8 Rent isn't an additionaly cost.
– Acccumulation
4 hours ago
Rent clearly is an additional cost, just of far lesser extent than most people think. If Rent is > (interest + homeowner's insurance + taxes & fees) it's an additional cost. Sometimes it's a wash, most of the time Rent has 10%-20% premium vs the non principal mortgage payment (When I decided to buy in my area rent was actually more expensive than the whole mortgage payment, in which case it's a pretty significant additional cost).
– xyious
1 hour ago
add a comment |Â
up vote
13
down vote
If you sell and buy around the same time, the market situation (hot, cold, before, after, or no crash) is of little relevance - it just affects the size of the numbers on both contracts, and about the same, so it's mostly a wash.
If you want to take advantage of your prediction, you have to split the selling and the buying in time - several months at least - and sell high, wait until after the predicted crash, and then buy low. Obviously, that implies that you rent in between (or live in your car, or with your parents, or whatever). And if the crash doesn't come - because your prediction was wrong - you don't make money on it, but lose the value gain from the period you waited. No risk, no gain.
edited 4 hours ago
yoozer8
1,7663921
answered 6 hours ago
Aganju
19.1k23076
1
+1 Additionally, even if you're prediction is accurate, the cost of renting in between could wipe out any gains
– yoozer8
4 hours ago
1
@yoozer8 Not necessarily if they're still paying a mortgage and taking into account the cost of upkeep and property taxes.
– yitzih
4 hours ago
1
@yoozer8 Rent isn't an additionaly cost.
– Acccumulation
4 hours ago
Rent clearly is an additional cost, just of far lesser extent than most people think. If Rent is > (interest + homeowner's insurance + taxes & fees) it's an additional cost. Sometimes it's a wash, most of the time Rent has 10%-20% premium vs the non principal mortgage payment (When I decided to buy in my area rent was actually more expensive than the whole mortgage payment, in which case it's a pretty significant additional cost).
– xyious
1 hour ago
add a comment |Â
up vote
13
down vote
up vote
13
down vote
If you sell and buy around the same time, the market situation (hot, cold, before, after, or no crash) is of little relevance - it just affects the size of the numbers on both contracts, and about the same, so it's mostly a wash.
If you want to take advantage of your prediction, you have to split the selling and the buying in time - several months at least - and sell high, wait until after the predicted crash, and then buy low. Obviously, that implies that you rent in between (or live in your car, or with your parents, or whatever). And if the crash doesn't come - because your prediction was wrong - you don't make money on it, but lose the value gain from the period you waited. No risk, no gain.
edited 4 hours ago
yoozer8
1,7663921
answered 6 hours ago
Aganju
19.1k23076
If you sell and buy around the same time, the market situation (hot, cold, before, after, or no crash) is of little relevance - it just affects the size of the numbers on both contracts, and about the same, so it's mostly a wash.
If you want to take advantage of your prediction, you have to split the selling and the buying in time - several months at least - and sell high, wait until after the predicted crash, and then buy low. Obviously, that implies that you rent in between (or live in your car, or with your parents, or whatever). And if the crash doesn't come - because your prediction was wrong - you don't make money on it, but lose the value gain from the period you waited. No risk, no gain.
edited 4 hours ago
yoozer8
1,7663921
answered 6 hours ago
Aganju
19.1k23076
edited 4 hours ago
yoozer8
1,7663921
edited 4 hours ago
yoozer8
1,7663921
edited 4 hours ago
yoozer8
1,7663921
1,7663921
answered 6 hours ago
Aganju
19.1k23076
answered 6 hours ago
Aganju
19.1k23076
answered 6 hours ago
Aganju
19.1k23076
19.1k23076
1
+1 Additionally, even if you're prediction is accurate, the cost of renting in between could wipe out any gains
– yoozer8
4 hours ago
1
@yoozer8 Not necessarily if they're still paying a mortgage and taking into account the cost of upkeep and property taxes.
– yitzih
4 hours ago
1
@yoozer8 Rent isn't an additionaly cost.
– Acccumulation
4 hours ago
Rent clearly is an additional cost, just of far lesser extent than most people think. If Rent is > (interest + homeowner's insurance + taxes & fees) it's an additional cost. Sometimes it's a wash, most of the time Rent has 10%-20% premium vs the non principal mortgage payment (When I decided to buy in my area rent was actually more expensive than the whole mortgage payment, in which case it's a pretty significant additional cost).
– xyious
1 hour ago
add a comment |Â
1
+1 Additionally, even if you're prediction is accurate, the cost of renting in between could wipe out any gains
– yoozer8
4 hours ago
1
@yoozer8 Not necessarily if they're still paying a mortgage and taking into account the cost of upkeep and property taxes.
– yitzih
4 hours ago
1
@yoozer8 Rent isn't an additionaly cost.
– Acccumulation
4 hours ago
Rent clearly is an additional cost, just of far lesser extent than most people think. If Rent is > (interest + homeowner's insurance + taxes & fees) it's an additional cost. Sometimes it's a wash, most of the time Rent has 10%-20% premium vs the non principal mortgage payment (When I decided to buy in my area rent was actually more expensive than the whole mortgage payment, in which case it's a pretty significant additional cost).
– xyious
1 hour ago
1
1
+1 Additionally, even if you're prediction is accurate, the cost of renting in between could wipe out any gains
– yoozer8
4 hours ago
+1 Additionally, even if you're prediction is accurate, the cost of renting in between could wipe out any gains
– yoozer8
4 hours ago
1
1
@yoozer8 Not necessarily if they're still paying a mortgage and taking into account the cost of upkeep and property taxes.
– yitzih
4 hours ago
@yoozer8 Not necessarily if they're still paying a mortgage and taking into account the cost of upkeep and property taxes.
– yitzih
4 hours ago
1
1
@yoozer8 Rent isn't an additionaly cost.
– Acccumulation
4 hours ago
@yoozer8 Rent isn't an additionaly cost.
– Acccumulation
4 hours ago
Rent clearly is an additional cost, just of far lesser extent than most people think. If Rent is > (interest + homeowner's insurance + taxes & fees) it's an additional cost. Sometimes it's a wash, most of the time Rent has 10%-20% premium vs the non principal mortgage payment (When I decided to buy in my area rent was actually more expensive than the whole mortgage payment, in which case it's a pretty significant additional cost).
– xyious
1 hour ago
Rent clearly is an additional cost, just of far lesser extent than most people think. If Rent is > (interest + homeowner's insurance + taxes & fees) it's an additional cost. Sometimes it's a wash, most of the time Rent has 10%-20% premium vs the non principal mortgage payment (When I decided to buy in my area rent was actually more expensive than the whole mortgage payment, in which case it's a pretty significant additional cost).
– xyious
1 hour ago
add a comment |Â
up vote
-1
down vote
For most people, most of the time, the issue is qualifying for the mortgage, not the price differential between the old house and the new house.
The problems is that periods when prices go down are often times when interest rates go up, like now. It tends to be a wash, since you wind up with the same monthly payment.
You have a particular situation which may bias your decision towards "buy now", which is that you have an ARM. Since your mortgage rate is going to adjust in two years, the fact that we are in a period of rising interest rates means that you are going to either have move up or refinance.
edited 29 mins ago
Rupert Morrish
3,3852728
answered 46 mins ago
Seattle Part-Time Broker
1
New contributor
Seattle Part-Time Broker is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
@downvoter, please consider explaining to our new contributor what they did wrong.
– Rupert Morrish
30 mins ago
add a comment |Â
up vote
-1
down vote
For most people, most of the time, the issue is qualifying for the mortgage, not the price differential between the old house and the new house.
The problems is that periods when prices go down are often times when interest rates go up, like now. It tends to be a wash, since you wind up with the same monthly payment.
You have a particular situation which may bias your decision towards "buy now", which is that you have an ARM. Since your mortgage rate is going to adjust in two years, the fact that we are in a period of rising interest rates means that you are going to either have move up or refinance.
edited 29 mins ago
Rupert Morrish
3,3852728
answered 46 mins ago
Seattle Part-Time Broker
1
New contributor
Seattle Part-Time Broker is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
@downvoter, please consider explaining to our new contributor what they did wrong.
– Rupert Morrish
30 mins ago
add a comment |Â
up vote
-1
down vote
up vote
-1
down vote
For most people, most of the time, the issue is qualifying for the mortgage, not the price differential between the old house and the new house.
The problems is that periods when prices go down are often times when interest rates go up, like now. It tends to be a wash, since you wind up with the same monthly payment.
You have a particular situation which may bias your decision towards "buy now", which is that you have an ARM. Since your mortgage rate is going to adjust in two years, the fact that we are in a period of rising interest rates means that you are going to either have move up or refinance.
edited 29 mins ago
Rupert Morrish
3,3852728
answered 46 mins ago
Seattle Part-Time Broker
1
New contributor
Seattle Part-Time Broker is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
For most people, most of the time, the issue is qualifying for the mortgage, not the price differential between the old house and the new house.
The problems is that periods when prices go down are often times when interest rates go up, like now. It tends to be a wash, since you wind up with the same monthly payment.
You have a particular situation which may bias your decision towards "buy now", which is that you have an ARM. Since your mortgage rate is going to adjust in two years, the fact that we are in a period of rising interest rates means that you are going to either have move up or refinance.
edited 29 mins ago
Rupert Morrish
3,3852728
answered 46 mins ago
Seattle Part-Time Broker
1
New contributor
Seattle Part-Time Broker is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
edited 29 mins ago
Rupert Morrish
3,3852728
edited 29 mins ago
Rupert Morrish
3,3852728
edited 29 mins ago
Rupert Morrish
3,3852728
3,3852728
answered 46 mins ago
Seattle Part-Time Broker
1
New contributor
Seattle Part-Time Broker is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
answered 46 mins ago
Seattle Part-Time Broker
1
answered 46 mins ago
Seattle Part-Time Broker
1
1
New contributor
Seattle Part-Time Broker is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
New contributor
Seattle Part-Time Broker is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
Seattle Part-Time Broker is a new contributor to this site. Take care in asking for clarification, commenting, and answering.
Check out our Code of Conduct.
@downvoter, please consider explaining to our new contributor what they did wrong.
– Rupert Morrish
30 mins ago
add a comment |Â
@downvoter, please consider explaining to our new contributor what they did wrong.
– Rupert Morrish
30 mins ago
@downvoter, please consider explaining to our new contributor what they did wrong.
– Rupert Morrish
30 mins ago
@downvoter, please consider explaining to our new contributor what they did wrong.
– Rupert Morrish
30 mins ago
add a comment |Â
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4
Is selling now and buying later an option (rent until the market goes down)?
– yoozer8
6 hours ago
1
What's your current mortgage? How much of a down payment will you be able to put on the new house in each scenario? How much more will the new house cost compared to the old? I think there are too many variables involved to provide a blanket "sell now"-vs-"wait" answer.
– chepner
6 hours ago
1
@DavidK I don't think yoozer8 means that you're going to rent permenantly. It's more of a "If you can rent for a few years and watch the bubble burst, you can get a house you otherwise might not be able to afford". Especially with many new developments, the worst case would be the market doesn't burst, and you're in the same position you were previously; looking for a bigger house, and a bunch of money to put towards it.
– Anoplexian
3 hours ago
1
@BruceWayne We do still have plenty of mortgage. It's worth noting that we have a 7 year ARM, and we are currently on year 5, which is one of the reasons we're looking at the move now.
– David K
2 hours ago
1
@DavidK All "recourse" means is that the bank can come after you for the difference between what you owe (the remaining principal balance of the mortgage) and what they sell the house for in foreclosure. I can't see why just walking away and letting them foreclose is a good strategy in any situation, especially in a "good" market.
– D Stanley
1 hour ago