Time to sell?

[ua_guy]

Last year we moved to the Minneapolis area for work. We bought a house for cash; home prices are significantly lower here, and not having a mortgage allowed us to save significant money compared to renting. In the first year alone, we've saved over $40k compared to a comparable rental. Of course, all this saving was predicated on the idea that the housing market would at least hold its course. So far, it has...but I'm starting to feel really uncertain about what the next 6+ months could bring. We are fairly certain that by next spring, it will be time for us to move home-- we are not in love with this area of the country and prefer to live near family.

We had our realtor come through. He is confident that the house will sell in 30-45 days at the list price we discussed, all within range of comps and standard timeline for the market here. After expenses, and potential negotiations, we're looking at net proceeds between $10k on the lowest and most severe scenario, and upwards of $55k on the high side. Adding the fact that we've basically lived for free in the house for a year, that's nothing to shake a stick at, for just one year of ownership.

The question is what do we do for the next year while we finish out our work obligations. That's somewhere around $40k in rental costs. The question is, will the housing market hold for a year, allowing us to live for free for another year in our house. Or is it time to sell, sell, sell and get out while the proceeds are still on the up and up.

[cypher1]

If you're not planning to live in Minneapolis, or MN for long term, I'd say put on the market now and just rent until you have a better idea where you want to be for the next 5+ years. Otherwise if you wait it out, who knows where the housing market could be in the next 6-12 months. My buddy's house in St. Paul (in a great neighborhood), was on the market in early March, got multiple offers, and still waiting to close due to bank hiccups and people pulling out due to lay offs. He's hoping to close end of this month if there are no more surprises.

[riverwed070707]

I don't see why you would go through the hassle and expense of selling and moving now. Did you buy the house as a short term gain investment or to provide shelter? Will the market probably go down over the next year? Ya. Will you be better off if you keep living for free and socking away $3,500/mo? Yes.

Scenario 1:
You have $40k extra saved now.
You sell your home and put an extra $50k in the bank beyond what you spent on your home. You have amassed $90k.

Scenario 2:
You have $40k extra saved now.
You keep your home and save another $40k over the next year. You have $80k.
You sell your home at only $10k over what you paid because the market has gone down. You now have $90k.

Of course we can't predict how hard the housing market will be hit, and I'm speaking generically because I don't even know what price point your home is in, but the likelihood of you taking a loss large enough to wipe out that 2 years in additional savings from not having a mortgage or paying rent are pretty slim to none. If it does sink more than you can stomach, sit on a it a while or rent it and sell when things rebound. I see no downside to keeping the home but a half a dozen reasons not to sell and move to temp housing.

[LivingAlmostLarge]

Depends. RE is so local the MN might be chugging along but other parts of the coastal cities tank. I don't think it necessarily it'll rise and fall at the same rate. So I would chat more with the realtor and get a feel for where the market is going. Is there a lot of layoffs? I predict home prices dropping sharply in hawaii. I think that the way this plays out is people will leave because they don't have jobs and have to sell.

[Fishindude77]

I think all this discussion about a housing market crash is nonsense. Some of that stuff happens in the coastal areas, resort areas and high growth areas, but in the majority of the country real estate stays relatively stable.
I'd stay where you are until closer to time to move.

[kork13]

I'm with the others -- stay put. You're likely to continue to make out for the positive, or at least to no significant loss, by continuing to live in a paid-for home. Minneapolis has a relatively diverse economy, no? (more than 1-2 industries fueling the economy, unlike oil towns or tourist spots for example) As with investments, diversity provides protection. I know agriculture is big up there, and guessing some large banks/financials, plus maybe a burgeoning tech sector, and some tourism? All of this to say that Minneapolis likely will continue to grow, and growth means steady demand for quality homes. You'll do just fine, and continue to invest the savings from no rent/mortgage, and you'll be great.