Consider renting in today’s out of control real estate market

Richard Montgomery

Reader question: Is America in a Real Estate Bubble? We think today’s out of control real estate market is crazy. We are trying to reduce our lifestyle with a smaller house. In two cases, we made an offer and someone overbid us. Our house is free and clear, so we are cash buyers. We don’t want to sell until we know we have a place to go. Unfortunately, there aren’t many homes to look at, so we don’t want to sell our home first and end up compromising on our new home. Home exchange programs and iBuyers are expensive. What other options are available to us? Author’s Note: We touched on this in a recent column on April 5, 2021. Here’s another option.

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According to a report released by the Joint Center for Housing Studies at Harvard University, about one in three American households is occupied by renters as of 2020. If you're looking to sell your home quickly in a hot market, rent up. one option is that you find a new home that you really enjoy buying.

Response from Monty: While no one knows for sure what will happen with our economy, including the housing sector, many economists are scratching their heads trying to figure out the data to be able to predict the future. Predicting outcomes is a big part of their job. Economists share their thoughts and have very different visions of the future. Here is an article (https://bit.ly/3nh0n9J) written by John Mauldin to warn of an upcoming tsunami. And here is another article (https://on.wsj.com/3dItrDJ) by Alan Blinder explaining our booming economy (partially behind a paywall but you get the drift).

Field

One current solution is to buy a new home now and sell your existing home afterwards. While the interest rate will be favorable, the risk is to sell the old house. We have a strong seller market today, and you can get a premium quickly. There are also hyper-local pockets in most areas where a quick sale at a high price is not likely. Here is an old story of owning two homes (http://bit.ly/2prYsC5) that is repeated regularly across the country today.

One more solution

Salespeople don’t sell because they’re worried that they won’t find a replacement they like due to a lack of inventory. Suppose someone sells in this market with a premium, moves twice, and buys after the bubble bursts. In this case, it is conceivable that they could save a significant amount of money.

According to Move.com, the average move for local households costs $ 1,250. According to the Washington Post, home values ​​fell more than 30% after the 2008 crisis. If this next bubble burst happens and the value drops similarly, it’s easy to see the savings. Realtors won’t like this option unless they’re in the property management industry.

This strategy makes sense even if there is no bubble. Suppose you are fine with the idea of ​​a double movement. In this case, the advantage of the strategy is that you will have realized your current capital before making the next purchase.

Maybe I like the idea because I’m doing it myself. I sold my big house a few months ago, and I’m renting until I find a house that I really like so I don’t have to compromise.

After:Ready to sell? Here are 5 quick tips to prepare your home for sale

Richard Montgomery is the author of “Home Money – An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home”. He advocates for industry reform and offers readers unbiased real estate advice. Follow him on Twitter at @dearmonty or at DearMonty.com.


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