The Potential Seller's Dilemma (Cont)
April 19, 2011
There are folks who want to move to other living quarters who are faced with a different dilemma financially than the dilemma facing the underwater home owner. These home owners may have lived in their homes for many years and over time paid off their home loans or paid them down. They saw their neighbors sell at the height of the real estate boom and may have thought that their homes had appreciated to those levels. The dilemma for these folks involves the choice to sell now at a 30 to 40% discount off the prices of homes that sold in 2005-2006 or to wait for the real estate market to recover. Some of these folks, due to age or health conditions really do want to make a move. What is one to do?
Renting can sometimes be an option, but renting may involve managing the property. Just leaving the home vacant could also be an option. However, both of these ch0ices will involve maintaining the property, repairs, gardeners, etc.
There is also the question as to how long will it take for the property to recover its value. Most economists believe that it may be more than 2-5 years before home prices approach their past values. (Typically the real estate cycles run 10 to 11 years peak to peak which suggests that the next peak will be 2015,20016 or 1017.)
If a home owner sells now the proceeds may be put to a better use. If a homeowner keeps the property these monies are tied up and only appreciate when the real estate market recovers.
It is a real dilemma. Over the long term, holding on to the house may be a wise choice, but one will only know that once the long term is past. Selling now relieves the home owner of the responsibility of maintaining the property and may still produce funds that can earn more in other investments.
As an aside: At the present time, a home owner who has lived in a property 2 of the last 5 years gets the benefit of a $250,000 capital gains exclusion (if a couple, $500,000). The government can always change the rules and with all the deficit reduction talks, this capital gains exclusion may not always be with us.
Obviously folks who want to move have a great deal to consider.
There are folks who want to move to other living quarters who are faced with a different dilemma financially than the dilemma facing the underwater home owner. These home owners may have lived in their homes for many years and over time paid off their home loans or paid them down. They saw their neighbors sell at the height of the real estate boom and may have thought that their homes had appreciated to those levels. The dilemma for these folks involves the choice to sell now at a 30 to 40% discount off the prices of homes that sold in 2005-2006 or to wait for the real estate market to recover. Some of these folks, due to age or health conditions really do want to make a move. What is one to do?
Renting can sometimes be an option, but renting may involve managing the property. Just leaving the home vacant could also be an option. However, both of these ch0ices will involve maintaining the property, repairs, gardeners, etc.
There is also the question as to how long will it take for the property to recover its value. Most economists believe that it may be more than 2-5 years before home prices approach their past values. (Typically the real estate cycles run 10 to 11 years peak to peak which suggests that the next peak will be 2015,20016 or 1017.)
If a home owner sells now the proceeds may be put to a better use. If a homeowner keeps the property these monies are tied up and only appreciate when the real estate market recovers.
It is a real dilemma. Over the long term, holding on to the house may be a wise choice, but one will only know that once the long term is past. Selling now relieves the home owner of the responsibility of maintaining the property and may still produce funds that can earn more in other investments.
As an aside: At the present time, a home owner who has lived in a property 2 of the last 5 years gets the benefit of a $250,000 capital gains exclusion (if a couple, $500,000). The government can always change the rules and with all the deficit reduction talks, this capital gains exclusion may not always be with us.
Obviously folks who want to move have a great deal to consider.
posted by shirley harry at 8:28 AM
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