Real Estate Values
 

I will be 64 this year, and it will soon be time to sell a rental and pay off my home mortgage. I've done the math, but there are a lot of variables. One is the expected selling price of my rental now, which is suddenly rather surprising. Another is the expected selling price in a year.

Lots of stimulus going out at a time when the economy is set to explode anyway. (don't PARF this up, guys) Inflation is a danger. (In a nearby forum, I started what I thought was an interesting discussion about Modern Monetary theory, and which didn't get PARF'd like I expected).


Today, there is not a sub-prime bubble similar to the one which developed in the early part of this century leading to a collapse. But what, really, are the dangers and expectations of the real estate industry over the next 12-18 months?

Go.

Since 08 the economy does not exist without printing and borrowing. At the time I said they were replacing the Private Debt Bubble with a Sovereign Debt Bubble. that the next time it would take God or the Aliens to bail us out.

It is completely insidious..as they rob from the intrinsic Macro value of the USA to pad your bank accounts today.. So there is an appearance of normality, but behind the screen ohhh boy..bend over.

They are robbing the ability to pick ourselves up from the ground once the crash occurs..There will be no economic structure left. Just a big smoking hole in the ground..a nuclear war without the bombs. In the face of that nadir..civilizations collapse. Lots of historic precedent.

With the latest 1.9T COVID Bill THE USD HAS WOBBLED.... people and institutions are now seriously trying to legitimize Crypto...it has a TRUST problem...being new and made up out of thin air..under dire circumstances people want something they can hold in their hands...see it and touch it..put it into their pockets..Gold Silver Guns & Ammo fulfill that bill. Those hard assets have an intrinsic value that is separate from their monetary value..

Short term it appears that the forces of inflation are once again operative..but the the head winds are DEFLATIONARY.. The American consumer is a spent force..only propped up by printing and borrowing by the govt.


As far as timing goes my security clearance isn't high enough to be in the loop. Recently though I have had the notion that I would go off the Grid and become a Desert Rat..

OP seems you have it all figured out already. So why ask?

Hold your RE for 3.5 more years then sell when the economy is really screaming.

It's a solid plan.

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I'm assuming a sizeable gain? One strategy is to convert it to your primary residence for two years and use the $500k sale exclusion- if you are married. Otherwise, $250k

Sell that **** now.

This climate won’t last.

you are already getting more than you expected.

don’t look a gift horse in the mouth.

after taking it in the shorts big time trying to squeeze a few more bucks on a deal and getting royally ****ed a wise freind said to me, bulls and bears make money, pigs get slaughtered.

You don't say whether its SFH or multi unit rental. Either way, when the eviction moratorium drops no telling which way RE will go. I'd get out now.

The Seattle area is one of the hottest RE markets in the country right now & actually has been for some time. You live a bit south of there, but I imagine Lacey's market is doing well also - as you imply. Some of the market is controlled by factors like availabilty of land for building additional real estate. Where I live the availability of land is very restricted. I would look at factors like that. The Fed is projecting low rates for the forseeable future. Things like this might mean holding onto RE a bit longer may not be a loosing proposition. Remember you need to give Uncle Sam 15% of the captial gain along with your state penalty if any. The other thing(s) in the equation is/are what you intend to do with the money from the sale. If you have an intended target that will meet financial or life time goals, it may not matter a lot if you wait to sell. Ideally the profits will go toward something that will serve you well into the future.

A double wide hidden behind a desert hill sounds better all the time...

My motto:

Sell real estate when I can not when I need

Real estate is not a liquid asset unless selling well into the bid side of the market. I’d much rather sell on my offer than a bid and I’m listing a property this month.

I grew up in Olympia and my son just got stationed at JBLM. He bought a house in Yelm. I assumed when this was all being discussed originally that real estate there would be quiet. Wrong. 6 more than full price offers on a decent house on a nice 2 acres surrounded by S&*T for close to $500k. I couldn't believe it. If this is necessary for your retirement I would get out now if it accomplishes those goals. I'd fear a 2008 type of meltdown and then what happens?

Nobody is factoring in all the cash coming into the market. Unbelievable number of all cash deals closing and you can figure every one of the no contingency offers written are bringing a significant amount of cash.
Probably boomers financing their kids deals but there are also a lot of younger people making way more than we ever imagined.

Was this in 2008 or so?

Your point is well-taken, and this is why I am asking. I could get out now, and doing the math. Looking at the expenses that remain if I sell the SFH rental, and the expenses and revenues that would go away, and assuming a 10% increase in the rental property value over the next year, I'd stand to make $30 more by selling a year from now. And I guess what I am asking is what are the odds of a decline in RE values instead of that assumed increase? A decline of 7% would eat that $30K. Or just cause me to keep the property longer than planned. If I did the math right.

But yeah, housing prices in the Seattle area have been exploding for 20 years. I think it took about a year to recover from the 2008 problem. This rental is at the southern end of King County (Seattle), and just .9 miles from the Sounder (commuter train) station. Its value is connected to Seattle. I do not see the Seattle RE market as particularly dangerous.

WA just passed a state capital gains tax, right? Figure out when it goes into effect and if it will affect your plans.

I am doing the same calculations about our primary home. Daughter is going to college in the fall. Prices are absolutely insane in our neighborhood right now. The thing is, I REALLY do not want to move this year. I would like to have a year of sanity before taking on a move. But I really worry that 1-2 years down the road we could be way down.

Real estate is crazy right now. I just sold a rental condo for 25% above asking in 3 days. Sell price is 75% more than I paid 2 years ago. Maybe it goes higher in the future but I think the bubble needs to burst eventually. I would sell now but not pay off your mortgage on your primary residence. It is essentially free to borrow now so why pay it off?

My current mortgage is not as cheap as it should be. There was a blemish on my credit report, just out of my stupidity. My mortgages are on auto pay now.

Is there an artificial bubble? There was fifteen years ago due to sub-prime lending, but now? Building materials are skyrocketing. Supply of residential structures is not going to explode anytime soon.

but yeah, when the eviction moratorium ends, supply will improve. Then again, the economy is going to explode. Right now, anyone who can steam a mirror can get a job. The labor market will heat up. The economy needs more workers than are available now, and this will get worse. Earnings will improve. Wages, rise.

We've got a different thread on RE prices right now. Had 4 couples over for dinner on Friday. One put their house on the market 2 weeks ago on a Friday. Had an open house on Saturday with about 100(!) people that came through. The RE agent wanted to keep the house open since it was drawing such a crowd, but the owner husband said 3PM is it. They had 11 offers on Sunday and the top offer was $20k over list.

I'd sell that puppy now!

Indeed!! You should hold for 3 years and then decide!!

None of us have a crystal ball.
One thing I have learned- All we can do is make our best decisions based on incomplete information.

Now is a great time to sell. Next year? Who knows?

If your house was paid off, would you borrow against it to buy this rental?
If not, I would lean towards selling.

Even though today's interest rates are at historical lows, life without a mortgage payment is really good.

I doubt you would ever regret living debt free.
If so, you can always borrow again and start making big payments every month.

Everybody agrees that real estate is crazy right now. Many markets for no common sense reason. Is crazy sustainable? I would argue that it’s not, and therefore we are in a bubble. All bubbles will eventually pop, and I firmly believe this one will as well. So I guess it all depends on your inclination towards gambling. Personally I’m conservative with my investing and would get out now, pocket my winnings, and not look back.