If you keep the house, chances are it will go up in value, much more
than 3% in savings account.
In the past 2 years the value of your house went up 50%.

In article <1120762038.223458.298020[at]f14g2000cwb.googlegroups.com> ,
"Les_Duck" <lesliedexduck[at]yahoo.com> wrote:

- quote -

I'm all in favor of taking a profit when you can. A $100K profit
in just a few years is very nice. Ironcially, the rental market
is in the dumpster right now, so you can often rent much cheaper
than what you can buy for at the moment.

The big question is how far will prices come down, if at
all. They might just level off, or just slow the rate of
increase. People are house nuts and mortgage money is
cheap. It might also be many years before this thing breaks.

Where you get the real value out of taking a profit is if
you have the ability to look into alternative housing. For
example, if you can move to a city where that $200K house
sells for $120K right now. Or you move to an area that is
more rural. Or buy a manufactured home with cash and don't
sign up for house payments.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708 john[at]johnweeks.com
Newave Communications http://www.johnweeks.com
================================================== ====================

Les_Duck wrote:
- quote -

The potential downside is that real estate prices might not go down
significantly, in which case earning 3% on your equity will not be
enough to allow you to buy the same amount of house in the future.

I think the chances of housing prices declining depends to a large
degree on what market you are in, with the more overheated markets
having greater odds of declining. However, there are no guarantees.

I think the surge in housing prices has been fueled in part by (1)
declining interest rates, which give you more buying power for the same
monthly payment, and (2) the growth of new mortgage instruments, like
interest only loans and some ARMS, which also give you more purchasing
power for the same monthly payment. An increase in long term interest
rates, which may or may not happen in the next few years (no one know
why they are so low, so no one can predict when they will rise) would
have a downward pressure on housing prices, but if the rise in rates is
gradual and doesn't go too high we may never see prices actually
decline. I have no idea if the current volume of interest only
mortgages is sustainable, but if something causes the market to stop
offering such highly leveraged loans then that could contribute to a
decline in housing prices.

All this to say, I think there are too many variables to be confident
of a drop in housing prices. If I owned multiple rental properties I
might be tempted to sell a few, but I don't think I would sell my
primary residence and rent.

Andy

"Les_Duck" <lesliedexduck[at]yahoo.com> writes:

- quote -

How do you know prices are going to come down again by that much?

I saw an article recently on one of the financial news web sites that
addressed this issue. Basically, cashing out your house only makes
sense if you are going to move to an area where the cost of housing is
much lower than where you are now; for instance, if you are only a few
years away from retirement, or have the flexibility in your job to
live and work where you want. Otherwise, if you think you are going
to be staying in the same area in the long term, and are not looking
to downsize or get out of the homeownership racket for lifestyle
reasons, there's not much point to selling.

-Sandra

Les_Duck wrote:

- quote -

.....and when exactly do you expect prices to come "down again"? If you
ask me, not knowing that is the downside.

With the real estate markets going out of control, has anyone thought
of selling their house, renting for a while and investing the proceeds?

What are the potential downsides of this idea?

In my situation, the purchase price for the house was 200K in 2003.
The same floor plan in my neighborhood is now listed for 315K. (I'm
watching to see if they actually get that much for the house). I have
no kids and am not emotionally attached to the house. If I could get
300K, after paying off the loan and moving costs, I could have approx
100K left in cash. I could at least earn 3% in savings account.

Then just rent until prices come down again, and buy the equivalent
house again for 200K?