I have friends who are requesting a second appraisal on a home they are trying to buy because the number they got on the first one didn’t come in high enough…it’s feeling more and more like the last bubble with each story I hear. Houses on the same street where I live that are smaller in square footage and lot size are selling for more than the bigger ones sold just a few weeks ago. It’s insane. 4 houses sold on our small block alone in the last month.
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My bil is selling his cottage. The house next door, which is a nicer cottage with a nicer waterfront, sold 2 years ago. It was on the market for 3 years and had multiple price reductions. My bil’s cottage will sell for 1/3 more than the place next door. That sleeps the same amount of people but has nicer finishes.
My bil’s cottage will be on the market for a week. After the first weekend, there were 2 full price plus offers plus more showings to come.
It’s all about timing. Crazy market. My bil is cashing in.
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We have 5 friend/family couples cashing out in the next few weeks. 3 of us have already moved in the last year. Most are staying with family, or they’ve secured rentals. Some plan on staying in a holding pattern for at least a year to see if the bubble bursts and then look for their downsized retirement homes. No inventory, so no hurry; the ability to now work from home has sped up the downsize and relo plans. I guess the bubble is hitting at the right time for many of us close to retirement and looking to get out of the cities or the big houses.
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Live in an area with no bubble. No crash will happen here though no run-up in prices did either. Another reason why real estate isn’t a part of our investment portfolio (beyond our residence).
I didn’t think my parents did either; there isn’t a line of people moving to the area. There’s still an increase in housing prices though because of people taking advantage of low interest rates to get out of their rentals. I’m calling it a “mini bubble,” not like the crazy bubble we took advantage of in Charlotte, but they’re getting a higher price than they would’ve in previous years. There aren’t many neighborhoods with small starter homes and good schools in our hometown, so it’s working to their advantage.
That’s quite typical for many if not most places. Even though we are in a major appreciation market now, it took until now for that to happen. Been in the same house for roughly 20 yrs, and until the pandemic, it was worth approx 10% more than we paid. Has gone up an additional 25% in the past 12 months. Who knows what someone would really pay.
The other aspect of that is you have to live somewhere so where do you go? Assuming downsizing we would still benefit from the ratio / spread. Some have suggested rent for a year. The challenge with that is your giving back a bunch of profit in the form of rent and you don’t know if the bubble will burst or what inventory will look like in 12 months. Could easily get stuck paying rent for two and giving back lots of profit.
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What happens to the gain on the sale of your primary residence if you rent for a year or more?
nothing, as you no longer have to purchase a new primary residence to rollover the gain so to speak. Congress changed teh law awhile ago to eliminate the rollover possibility. Now, when you sell your primary residence n which you have lived 2 out of the last 5 years, $500k in cap gain is excluded from tax (for a couple, or $250k for a single).
As an aside, the President’s proposal would raise cap gains which would more than double the tax due on sales of primary homes, particularly for those that have lived a long time in one place that has experience a lot of appreciation.
Most we know are selling in the NE and moving south, so they want to downsize to a condo. Some rent while they’re waiting for their condos to be built. For the ones that are waiting it out, they aren’t paying the $10-15k/year in property tax, so that helps.
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Thanks. I had forgotten about that tax law change.
This is true about interest rates. On investment properties they are higher. As for managing them (we have 2) we have property managers and best decision ever. They’re in two different states so the terms are different based on how things work in each state. Less hassle for us to deal with.
There is a run up in prices here like crazy. While I don’t take much stock in zillow, as I’ve always known I could get more for my house than zillow had shown, my house suddenly now shows listed on zillow at 100k+ higher in the last 30 days. I know that’s because houses where I live are going faster than they even hit the market. We’ve considered selling, but because I wonder if this is just another bubble, I would not buy right now and would either rent or just go suck it up living with my parents who have huge house.
As for our rental properties, they too have gone up on zillow and those are definitely legit prices. One is in Austin where thanks to tech prices have gone through the roof, plus ours is less than 2 blocks from the university. Our other property is in Vegas and I am constantly getting called with cash offers which are tempting but not interested. I’m in a fb group for Las Vegas and see the people talking how they can’t find anything. We’ve been lucky with tenants but it’s all relative. I figure it’s only a matter of time until we get burned on one of them and I want to run and sell!
I wouldn’t worry about renting and “losing” any profit. I actually read up on it a few years ago and it’s actually more ideal than people think and much better than buying in many instances. You’re not locking up equity/capital in a down payment, many people are losing the full SALT deductions thanks to the 10k limit, if you rent you aren’t responsible for HOA dues depending on if a property requires such, you aren’t responsible for the repairs and maintenace (ie new roof, furnace etc), insurance, property tax, mortgage/interest, so ultimately you come out ahead by spending money in rent than what it costs per month to live in a house you own. I hadn’t really thought about it like that before until one article caught my eye and I started reading more.
Seems like you are either:
- Renting a place to live.
- Renting the money to buy a place to live (mortgage).
- Foregoing alternative investments by using the money to buy a place to live.
So if you cash out selling a house and then rent a place to live, you presumably put the cash into some other investment. Whether that other investment gains or loses more than home equity would if you used it to buy a house is not something that is predictable beforehand.
All those are included in rent. If not, your landlord won’t be around long.
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Not necessarily. A roof for instance can cost $15k or more. A landlord can’t just charge someone an extra $1k/month in rent because they “may” need to replace the roof that year. At some point they will have to replace the roof they just don’t know when. Yes, their goal is always to come out ahead, but as a property owner and investment property owner myself, there are unforeseen repairs that crop up that we cannot prepare for nor can you charge your tenant for. The market only bears charging so much rent, or you won’t get a tenant. You can’t just pass everything off to a tenant, it doesn’t work that way.
Repairs and maintenance are budgeted in the rent. Or the landlord will not be there in a not so distant future. True that it is not paid by any single tenant (unless the tenant lived there for the entire lifetime of the roof), but it is still paid for by the renters.
ETA: here where I live, small, not so savvy landlords bail out just before the major repairs hit the fan. Looked at many a rental property with a roof within a couple of years of being totally shot… 
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Where I live, bailing a few years before a roof needs repairing won’t fly. Most people will walk on a house or get the owners to give a credit.
In any case, like you said, correct one single tenant won’t pay for any of these repairs, which is why for most people as they age it is much better for them to rent than to own. They have full use of their assets to invest how they wish, don’t have the equity locked into a house, don’t have to worry about selling a property or their heirs selling a property if they pass away or need to go into an independent living facility or even assisted facility, etc. and a large down payment is also not required or locked in. Also, many people need to take a reverse mortgage out and this makes sure someone doesn’t have to since again their $ isn’t locked up.
There are also still plenty of cities that have properties under rent control that also makes things very attractive for renters and even in cities with no rent control, there’s often a cap on the amount rent can increase or better if there isn’t, a tenant with a good attorney looking at the lease will make sure there is. All the times I was a renter when I was younger, that was always in my lease, as a landlord that is actually not in any of my leases but we also tend to not really try to raise our rent an unreasonable amount.
While there are many, here is just a basic summary for some reasons for why for certain people renting may be better than owning. 10 Reasons Why Renting Could Be Better Than Buying
On what are you basing this statement? And at what age (or age range) does this happen?
The article you linked says that people who rent aren’t paying for repairs or real estate taxes. Simplistic statements which ignore the economics of the transaction.
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Not at all simplistic statements. For people who need cash or are on a budget, in other words not people who don’t care about the cash outlay of having a mortgage, money tied up in a house, plenty for retirement or if they get sick, etc. renting is the way that people are going as it frees up the cash they need.
Here is a pretty good example from AARP about why and who it is better for. Clearly AARP caters to “older” people but any 50 year old is eligible to join AARP so the age is really relative as to when someone may do this because it seems really when someone is ready to sell their house or needs to sell their house and cash out. So age is really relative.