What happens if the value of your new home continues to decline, say by 10%? Then the great purchase at $300k is only worth $270k, or a loss of $30k. If your cheap home declines by the same 10%, you only lose $10k. I'd rather be out $10k than $30k any day!

Real estate fees - coming and going.

ole joyful

Personally I'd base the decision on my own situation. Are you happy with your home? Do you need a different home due to size, location, etc?

You can make yourself crazy trying to anticipate what the housing market is going to do (kind of like trying to time the stock market).

Like stocks, it's hard to tell when prices have hit bottom... but that's another variable.

But it doesn't make sense that a person should worry about selling their house cheap if they are going to buy another house that is also cheapened by the marketplace.

Yes, the realtor fees are a part of the deal... but that is always a problem regardless of the market.

On the other hand, I have noticed that on Craigslist there are more and more "for sale by owner" homes. I'm guessing that they are doing the FSBO to avoid further damage from those fees.

I remember last January you were even questioning home ownership over renting. Are you sure you would be comfortable owing so much, for so long.
I've gathered that debt (be it a mortgage or anything) kind of bothers you maybe.

Being debt free, or carrying little debt is really liberating.

Sue

You are correct Sue... and I'm 6 months away from being debt free: mortgage and all.

In my town, prices haven't dropped significantly if at all.. but I see inventory growing. Given that there is such a nice selection of homes *and* and the idea that there could be some very nice prices for them... it occurs to me that I should consider my options.

As I said, my home is small... and I like small homes... but my girl likes to have guests. This makes me long for a larger home! It's a 1 bathroom house!

I am already leaning on your advice, though. Just staying here, not bothering with a new purchase, and keeping things simple is a nice idea. I can just live with the inconveniences of a tiny house.

The best thing about a cheap house is that when prices drop: the totals dollars lost isn't so devastating.
Also, I have the hypothesis that, with tighter mortgage standards, more people will be forced to consider modest homes... increasing my chance of a quicker sale.

Thanks

and I'm 6 months away from being debt free: mortgage and all.
Good for you!

As I said, my home is small... and I like small homes... but my girl likes to have guests. This makes me long for a larger home! It's a 1 bathroom house!
If it was me, and I liked small homes, I'd stay put b4 I'd take on any kind of a mortgage....I think any at all will appear 'big' to you (or me).

Any way to add 1/2 bath to the existing house? It would sure beat buying another house, complete with a mortgage...because of a bath room...more interest, insurance, heating, cooling, maintaining, paying taxes on...you get the idea. I think it could in time be quite stressful and maybe drive a wedge in your relationship.

To quote Benjamin Franklin, "Guests, like fish, begin to smell after three days."
I've found this to be quite true...lol...but I'm sure not everyone does.

Might there be some sort of a happy compromise between the small home you have now, and the $300k home? I know in many areas of the country a $300k home might be a shack, but here in southern Indiana it might be quite a mansion, or often have considerable acreage with it.

Also, I have the hypothesis that, with tighter mortgage standards, more people will be forced to consider modest homes... increasing my chance of a quicker sale.
I agree. There will be a many more buyers being able to 'afford' your home or mine, than something much bigger and more costly.

Sue

Something you may wish to consider is that the baby boom generation is approaching retirement. This will have all kinds of effects on real estate and investments generally. A lot of people attempting to save for retirement have been counting on their homes as their main retirement asset. When a lot of people try to unload their large family homes and downsize around the same time the price for these homes is likely to be soft. On the other hand the sort of homes desirable to retirees is likely to see upward pressure. I have already seen large price increases in a location I would like to retire to in a few years.

By the way, I live in Knoxville, Tn... so homes are crazy cheap, but more affordable than many other places.

I've already crossed "downtown condos" off my list. I called a realtor and asked, "So if I buy a downtown condo and fully own it with no mortgage, what am I looking at in terms of taxes/insurance/condoFees?".

In the end, it looks like $500+ a month!

To me, that sounds like a lot of money for a place that I own outright!

No matter what, I'm going to hang out in this house for a few years (I hope)... because I've only been here for a year and if I move, I want to have enough $$ to have a very small mortgage no matter what I buy.

You are correct.... the taxes, utilities, maintenance all start adding up with bigger homes.

Infringing on the thread a little; but I wonder if it will indeed pan out that the baby boomers will be retiring in droves... earn big, spend big, save little doesn't often translate to first opportunity retirement.

I've kind of been wondering the same thing. DH has two co-workers (all three are boomers). One has not saved as much because he put both his kids through college; he's continuing to work even though he has the age and # of years to be eligible. The other MAY retire, but he still has an awful big mortgage (with no plans to downsize). If he does retire, his wife will continue to work and he'll probably get another job.

Our financial guy says he has a number of clients who want to retire and they get upset when he tells them that they just don't have enough saved up and/or they need to lower their expectations for retirement living.

On the retire or work thing: Remember that older workers are unlikely to be retained or hired for the well-paying jobs they hold now. Many may find that they WANT to work, whether from financial necessity or just 'cause, but where will they work and what will they earn?

IMO, we're in for a rough ride in the USA for a couple of years. Companies are scaling back. Real inflation (groceries, energy, health) is already rising fast. The 'piggy bank' that was one's home is broken.

Today I read several economists predicting there is a 50-50 or even 60-40 chance of recession. (One of them a Nobel prize winner.)

SOME boomers have a lot of wealth. There are predictions of a lot of wealth changing hands as they die. Charities are expecting a windfall. But there are also boomers who have not accumulated wealth; guess the charities can help spread the wealth, eh?

chisue,
Many may find that they WANT to work, whether from financial necessity or just 'cause, but where will they work and what will they earn?

Not as much, that's for sure. One has to leave one's ego at the door when they leave home. I've had a number of part time jobs since retiring - the best paid about 1/3 of what I use to earn. The benefit was that I was able to set limits on my time...

We may well be headed for a recession - would the glass half full be less inflation? At least temporarily?

WDYT?

Ok... we can let the topic drift.

So how long do recessions typically last?

With "my home is my piggy bank" idea: If the housing market does implode, what does that mean?... how much is too much of an "implosion"?
Beyond the craziest 'hot' markets, what can the typical American expect in real estate losses if the sh*t really hits the fan?
If homes merely maintain their value over the next three years...is that a huge problem??
What if, after a few years, your home is worth 10% less? Is that a crisis yet?

None of it is terribly happy news, but in terms of calamities, I'm not quite understanding why it's such a big deal.

Aren't recessions and downturns typical? Why would this one be so fantastic compared to others?

Historically, have we always expected everything we buy to turn into gold?

>>None of it is terribly happy news, but in terms of calamities, I'm not quite understanding why it's such a big deal. You are quite right. It isn't. But that's not a good media headline. The media has always preferred to tell you the glass is half-empty and leaking fast, becaus that's what sells.

>>Aren't recessions and downturns typical? Why would this one be so fantastic compared to others? Because people have extremely short memories. As the saying goes, "History has but one page." There are folks who forget or are too young to remember the painful recession/inflation of the '70's (when I had PhD's begging me to hire them for a $4K/yr clerk-typist job) or even the RE recession of the 1990's, when we petitioned and got two property tax reappraisals DOWNWARDS because our brand-new house (bought, of course, at the top of the market) had lost over 25% of its value.

>>Historically, have we always expected everything we buy to turn into gold? Yes. And this is why most people do so poorly in the stock market, by buying high and selling low instead of the other way around.

Both RE and stocks are best held long-term. Flitting "in and out" of either properties or stocks, to make a profit actually takes a lot of observation, time, work, determination and nerve. It isn't automatic, no matter what the TV infomercials like to imply. There is always a risk, it's a matter of how much you are comfortable with.

You are right that in "sell now and buy now" scenario, it probably doesn't matter much. The astute are the ones who sold at the top, stuck through renting for a few years, and are now able to purchase the same house for anywhere from 10-30% less than before. A friend of mine who is an independent CFP (and my former boss, BTW) did just that. His wife HATES renting, but he talked her into it and now, of course, looks like a genius. Even better, he convinced several of his clients to do the same thing, so they think he's a genius too!

The problem with real estate is that for many people it is a highly leveraged investment.
If someone buys a house for 10% down and the market goes up 10% that person can feel that he has doubled his equity. If on the other hand if the market goes down 10% he can feel that he has lost all his equity. For somebody who has no mortgage and plans to live in that house indefinitely it hardly matters. For somebody who counts on money from the value of the real estate to maintain his lifestyle that can be a major problem.
What has been going on lately with real estate in the US has a lot of similarities with the stock market in 1929 and more recently with stocks and real estate in Japan. If people expect prices to fall and keep on falling they tend to put off purchases or sell before prices fall further; in turn jobs dry up reinforcing the decline.
In a rising market it is easy for people to feel that they are smart and they tend to get overconfident. In a falling market people tend to avoid taking responsibility and look for somebody to blame. Markets thus can seem to behave like somebody with a bipolar disorder.

I should have sold my house awhile back, but had no money to fix it up, and got greedy. I will never lose money on this house, unless it burns down. In 10 years, it's appreciated over 125%, and I owe very little on it, so I could still walk away with a nice profit, but again...I'm loathe to move. I hate moving. I hate packing, moving, unpacking, starting over in a new place.

So here it is, unless I could eventually make so much money, I couldn't possibly resist.