sell my house and rent in anticipation of declining property value?

[Smurf Hunter]

I have many thoughts around this, so I'll attempt to be concise.

We bought our home new in 2007.  Put 20% cash down.  2008 happened and we're still a bit under the closing price from 9 years ago.
This whole time we have been gaining some equity however.  Our place is located on the edge of a metropolitan area.  Some of the older properties have livestock and hobby farms, with public forest land within 10 miles or so further.

Recently violent crime has increased. There were 2 home invasion this past weekend.  One was a double:  perp came in 06:30 on Sunday, and stole the wife's purse while family slept.  Then returned 10:30pm same day and stole a vehicle from the garage (car keys were in the purse). 

To make things worse, our mayor plans to designate our town as a sanctuary for heroin addicts.  Basically we're the lower rent city of the big county, so we'll take the problems in exchange for some political favors.

Many of our neighbors are concerned about our property values declining.  My wife and I are inclined to agree, though we aren't sure either.

Our kids attend a private school about 10 miles away, so as long as we stay within commuting radius of that and my work, we're flexible.  Problem is housing prices increase considerably as we get closer to work and school.

Today I started thinking - what if we sold our house and could extract $100K or so from equity, and rented a place in a better area for approximately what our mortgage costs?  Cash flow would be neutral, but we would miss an equity opportunity on paper.

If I could relive 2008 again, that's exactly what I'd do.  Horde my cash, rent during the crisis and then buy back in on the cheap post-collapse.

Even if there's not a collapse, there's still a chance our property value could decline and this would be a defensively play against that.  We don't want to get "stuck" in an area that's worsening.

[osubuckeye4]

I wouldn't sell primarily because you're afraid that property values could decline. They might decline, they also might rise. No one on here can say for certain which way things will go.



You did cite a number of non-hypothetical reasons to consider selling/moving though:

- Increase in violent crime
- You have equity built up in the home and would be selling at a profit which you could use as a down payment for a home at some point down the road
- Local government adopting policies that you view as unfavorable



I can't tell you what to do because that would be extremely irresponsible of me (I don't know you or your family).

What I can say is... spend way more of your time looking at what is going on now, and spend way less time focusing on what happened 10 years ago, or on potential doomsday scenarios 10 months in the future.

[Carl]

The real question is "Do you want to relocate?"
ONE        The house must have been worth what you committed to paying for it when you bought it.
TWO       The "VALUE? of houses tends to go down as a neighborhood ages.
THREE     Your house continues to gain value(for you) from your investment in it's equity.
FOUR      It's where you live.
FIVE       The crime thing is a worry, what I would most worry about.

Just my thoughts , as random as my mangled mind can let me type. The copper in your attic must have some real value...

[Smurf Hunter]

I'm not making any hasty decisions, mostly brainstorming out loud.

Thanks for the replies.

[archer]

if you sell and dont buy again, i believe you will be hit hard by capital gain taxes.

[FrugalFannie]

if you sell and dont buy again, i believe you will be hit hard by capital gain taxes.

no he will not. So long as he lives in the house as his primary residence for at least 2 of the previous 5 years there will be no cap gains tax.

[archer]

no he will not. So long as he lives in the house as his primary residence for at least 2 of the previous 5 years there will be no cap gains tax.

ah good. i was not aware of this. thanks.

[mountainmoma]

no he will not. So long as he lives in the house as his primary residence for at least 2 of the previous 5 years there will be no cap gains tax.

this is only true if the gain is under a certain amount, which his is, but it is pretty easy to have to pay capitol gains on a house sale, esp if you are single

[mountainmoma]

I would base this decision just on actual safety considerations vs. the benefits of owning your own home. When you own (vs renting) you can have pets, you can change things in the environment to fit your families needs, you have security (no one is going to give you notice to move), etc.....

So, you will need to think hard about how much you think the actual safety is changing -- tough call.

I am not in the city here with problems, if I was, I would think seriously about moving( I am outside of city limits in the county). I actual did move based on these concerns, but it was in early to mid 2008 and I rented out my house here and rented in the location I thought I wanted to move to, so I could check out the concept without as much risk. I ended up coming back here for some personal reasons at the end of the school year (my ex was laid off, the whole world felt off with the whole 2008 crash). So we came back, and then we had an uptick in gang violence in the city here and I kept my youngest homeschooling and out of being bussed into the jr high and high school in this close city. So mostly, we stay away from the drug problem stuff, but we can mostly get away with this due to being out of town, the metric could easily be way different if I was in an area of this city that is experiencing home invasions (same like you described) to get money for drugs.  The experience of renting in the other city was tough, I could not find a rental for a very long time that would allow a dog, and we have a dog. We ended up in an interesting rental because we have pets. I had to put up with energy inefficiencies that I couldt remedy, as it wasnt my house and I couldnt maek changes and I was worried at one point we would be given notice because the landlady decided we had too many cars parked there ( older 2 home from college for xmas break) so, renting is not a piece of cake either.

[Smurf Hunter]

I'm not in constant fear, but the area is in decline.

I was wondering about cap gains.  Lived here since 2007 and high estimate is about 30K less than we paid back then.
So while I've built up equity from paying the mortgage, I think on paper I'd have a loss, and I could reserve my one time gain for later.

I don't really want to rent, and we do have dogs.  My thinking is we could liquidate this place, horde some cash and wait for an opportunity to buy several months later as needed.

[Beetle]

Are you in Vancouver Smurf?

[CarbideAndIron]

I don't see anything wrong with the idea. My wife and I are planning to do something similar. I bought at the peak in '07, and it took until last year for my house to be valued back above what I paid. Luckily for us, western WA is seeing very good growth as of late. We hope to sell next spring and move to a MUCH less populated area. Then rent for a year or two to decide where we want to buy.

[FrugalFannie]

this is only true if the gain is under a certain amount, which his is, but it is pretty easy to have to pay capitol gains on a house sale, esp if you are single

Right
$250K is excluded for individuals and $500K for married couples.

The link explains the guidelines
https://www.irs.gov/businesses/small-businesses-self-employed/sale-of-residence-real-estate-tax-tips

[Smurf Hunter]

Are you in Vancouver Smurf?

No.  South King County.

[David in MN]

First off, a house is not an investment. It's where you live and raise a family. If you want to make a return on what you believe to be a downturn in home values you can do that on paper without gambling your domicile.

If you want to move because you don't like your location, I get it. We're planning to move early next year into a more rural area where I can have orchards and outbuildings to build a shop and art studio and my wife can shoot her bow. We get it.

If you do try to sell out and buy back in there are considerable risks. Interest rates could change, legal hurdles could be introduced, and other issues could arise.

Bottom line for me: Your house is your castle, your sanctuary. You buy it because you love it not because it's an investment.

[Smurf Hunter]

Bottom line for me: Your house is your castle, your sanctuary. You buy it because you love it not because it's an investment.

Like changing jobs - the ideal case is you quit your current job because you love the new one more.
Leaving a job because it sucks and then finding "a" job is not the best process in my mind.

That's the pickle for me, and why the idea of renting ever came up.  We have not yet found our dream home, but I worry by the time we do and have the means, we might be stuck in our current location.

Another issue, one that's off topic is my wife and I have different ideas.  We both want an improved demographic, but she wants to downsize, but go upscale (crime is priced out), while I'm more inclined to go rural.

[David in MN]

I feel you. Sometimes it's hard to recognize what the "dream home" is. I'm envious of my cousin's double wide on acreage in the MO Ozarks. It's one of the hardest decisions.

[Richard (richard)]

To make things worse, our mayor plans to designate our town as a sanctuary for heroin addicts.

I have to ask, what is the incentive for this? Federal money? Churches? (which might receive Federal money for this). I think this needs some serious inquiry.

[Smurf Hunter]

I have to ask, what is the incentive for this? Federal money? Churches? (which might receive Federal money for this). I think this needs some serious inquiry.

I'm sure if we could follow the money we'd know.  I am familiar with the major churches in town and have not heard anything. 

Here are some fun info-graphics:

[Carl]

  Are they going to do this in your house?...you should ask and get a good price for it.

[mountainmoma]

I'm sure if we could follow the money we'd know.  I am familiar with the major churches in town and have not heard anything. 

Here are some fun info-graphics:

Ok, so analyzing this : you already have a needle exchange, and it's use has only increased since inception. your use by young people has only increased since inception, and while those seeking treatment has doubled, it is a very low percentage of users, a lower percentage than intial numbers -- most users do not want to quit. They get better results of having people seek treatment if they do not ask them to quit, but substitute a legal free drug for the illegal drug they previously had to purchase. They would like to increase this distribution of the free, legal drug. In addition, they would like to make at least 2 centers where addicts can go and shoot up, out of the weather, warm, food and drink, clean water, free needles and free naproxone and associated medical care if they OD -- and best of all completely free for the rug users and paid for by the tax payers, who will STILL have rising crime to pay for the heroin, cigarettes, booze, and misc others things they want.

As far as the last box of medication treatment saving lives. Well, sure, a legal drug that has consistent doesage has less overdoses than the illegal drug of varying strength. That this treatment hs fewer overdoses than other treatments -- well, yes, if an addict keeps taking the drug they can still overdoes, so the other "treatments" they are comparing to arent real, in that they are not keeping the addict away fromt the drug ! These addicts stay on the legal drug for a LONG TIME , why not ? they basically like self medicting at least to some degree. Cheaper and very effective detox has been done and can be done by keeping the addict AWAY from all drugs, in clinic setting. Heroin actual clears they system relatively quickly, with less problems than some one getting the DT's from getting off of alcohol. Dropping alcohol cold turkey is much more dangerous. But, there is the psycological dependancy. This is where 12 steps or church groups used to get good results, substituting something for this dependancy.

[mountainmoma]

As far as following the money

well, the drug companies make out like bandits from these programs, naloxone and methadone sales guaranteed and paid for by taxpayers.

Cetain government agencies and nonprofits get to expand their sphere of influence, their departments, job security, relevance, power

[Smurf Hunter]

I started reading up on naloxone, and there's a lot of weird info.

It's patent is gone, so potentially any pharma company can make it.
There have been FDA hearings about making in non-prescription, brought on by addicts and their families.
(BTW: who legitimately gets a prescription?  Do heroine users go to their MD and say "I want this just in case I OD"?)
In recent years the manufactured supply has reduced and prices increased 10x

This is starting to feel like the epipen ordeal from last month (people have already forgot their outrage).

It wouldn't shock me to learn that some of these politicians have a financial incentive for these recommendations.
Maybe big pharma campaign contributions or similar?

[Smurf Hunter]

Apparently you can buy naloxone on Alibaba:

https://www.alibaba.com/showroom/naloxone.html

Maybe we should just create a co-op or multi-level marketing scheme for the junkies.  One junkie pays for his naloxone by getting 5 others to sell it to 5 others...

[Richard (richard)]

If you rent you simply do not own anything. You are at the mercy of an owner, they have a multitude of ways of not meeting your expectations. So your house depreciates... when full time RV owners buy a rig they know it will depreciate over time, they don't have a problem with that. You buy a vehicle, it doesn't appreciate, it depreciates. In the meantime you have a place to live that you own. Stand your ground, challenge the forces that artificially bring the value of your homestead down. You figured it was worth your money to buy it for what you paid for it, it's a done deal. Be happy with it.

[Stwood]

Yes rent money just flies out the window, never to return.
I would (already have 21 years ago) sell  out and move rural. Haven't regretted it a bit.
25 miles to the nearest real grocery store. Yea we've been stuck here for a few days (a couple of times) due to a massive snow/ice storm, but that's what preps are for, no? Lol.
We bought this place to retire on, and that's what we are doing now. (retirement is a full time job though.  ) 

[mountainmoma]

since they are trying to expand services in your area, shed light on the existing program, for one, ask a hard quesion, like, are needles actually exchanged one for one ? How do you count them ? Do you give more to a person than they bring back ? Hm, since we are givng away 3 times as many needles as years agao, and no see 3x as many OD's, how is that a surprise ? Has free needles nd compassion helped, or could it have helped expand our drug problem by making it easier, cheaper, less dangerous and less stigmatized ?

We have found here that our "needle exchange" is not an exchange at all, it is a give away of needles ( and related accesories). So, we are subsidizing the drug abuse, and we have had at lest 3 children pricked by used needles left lying about, even though concerned (non-addict) adults work hard at getting any they find cleaned up.



Anyways, other people in your area are more likely to be against new expansion if the facts are shown looking at them the other way, not framed as the people pushing for them are doing

[osubuckeye4]

As far as the drug stuff... sometimes it's cheaper for a county/state/province to "subsidize" the use, rather than let uninsured addicts (most hardcore crack/heroin users scrap insurance to spend that money on drugs) overdose and end up in already overcrowded ER's/ICU's where they will be a much bigger financial burden on the community/state/country, or, end up committing major crimes to finance their drug habit.


I'm not saying that I'm a big supporter (or a supporter at all) of using taxpayer dollars for any of this stuff, but it's a lot more complex than "the politicians are in bed with big pharma and are running an elaborate ruse to put additional money in their pockets".


Getting off topic though, I'm gonna shut up now and defer back to my initial comment as far as the sell/rent question. Focus on the now, rather than what happened in the past or what you think might happen 18-36 months from now. I can come up with a lot of doomsday scenarios, but I could also come up with a lot of ways that things are going to end up fine as well. I will say though... if you legitimately feel unsafe for yourself or your family, trust your gut and get out of there ASAP.

[endurance]

I guess I wouldn't leave without having somewhere you want to land more than where you are at. While I don't oppose renting and holding onto cash, leaving where you are for nothing certain doesn't sound like an improvement either.

Owning a home that could be upside-down prevents mobility. It means you can't leave if the job market turns bad without defaulting on a loan and ruining your credit. But as bad as where you are now, never doubt worse. There's always worse.

[Richard (richard)]

As far as your concern about your neighborhood going downhill, where in America aren't they? We live in a small town of 1200, nearest big city is about 50,000 and 20 miles away. The closest interstate is over 20 miles away and we are on the way to nowhere anyone wants to get to. It is 99.9% caucasian, $50,000 average yearly family income, stable job market, excellent education facilities..... across the street from us there have been 2 drug busts in the last several years involving heroin. Meth labs are a major problem in the rural county. There are home invasions..... you get the picture? This is epidemic in this country, the kind of stuff that use to happen only in the seedy parts of big cities is all over. You can't get away from it, you have to get involved in your community to rescue it. Do not keep your head down, get around town and look for opportunities to challenge decadence. Go city council meetings, join the volunteer fire department, start a neighborhood watch program. (I'm doing some of this stuff now, and more).