losing money on a house....how do Bogleheads deal with it emotionally?

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humbledinvestor
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losing money on a house....how do Bogleheads deal with it emotionally?

Post by humbledinvestor »

How do Bogleheads deal with losing money on a house?

Scenario:

- Moved from city A to city B for a new job 3 years ago.
- 6 months into living in city B we bought a new construction townhome thinking we would stay here for a long time.
- In the last year, DW has become VERY unhappy with city B and wants to move back.

Consequence of selling: We would have to sell 8-10k lower than we bought plus commission(4.5%), so about a 30k loss.

Second consequence of selling: May have to give up or job I love, or be a remote employee (less visibility, opportunity to move up, make more).

How do Bogleheads deal with losing money in this type of situation and potentially risking their future earnings at the same time?
Ybsybs
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by Ybsybs »

humbledinvestor wrote:How do Bogleheads deal with losing money on a house?

Scenario:

- Moved from city A to city B for a new job 3 years ago.
- 6 months into living in city B we bought a new construction townhome thinking we would stay here for a long time.
- In the last year, DW has become VERY unhappy with city B and wants to move back.

Consequence of selling: We would have to sell 8-10k lower than we bought plus commission(4.5%), so about a 30k loss.

Second consequence of selling: May have to give up or job I love, or be a remote employee (less visibility, opportunity to move up, make more).

How do Bogleheads deal with losing money in this type of situation and potentially risking their future earnings at the same time?
The scenario doesn't sound like it is really about the house. Perhaps counseling? If 30k can buy happiness it is a good price, but it sounds like you expect to become VERY unhappy with city A. Good luck working this out.
Silverado
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by Silverado »

Ybsybs wrote:
The scenario doesn't sound like it is really about the house. Perhaps counseling? If 30k can buy happiness it is a good price, but it sounds like you expect to become VERY unhappy with city A. Good luck working this out.
This sounds right, but I will answer the original question.

Easy: a house isn't an investment, so can't lose money on it. We have moved four times in the last decade, and each time when we have purchased a house, I consider the 20-30% down payment to be gone. Just gone, never to be seen again. We have sold at significant losses the last two times (one was in Detroit suburb), but always got a check at closing. That's a housing win.
Topic Author
humbledinvestor
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by humbledinvestor »

more info:

In City A we lived close to downtown and had many friends. Family in City A.

City B: In deep exurbs. i.e. boring
No family in City B
SleepKing
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by SleepKing »

Happy wife = happy life.

In reality, i agree counseling may be appropriate with wife if you see major disagree job vs. city affecting relationship. Do not underestimate the power of an unbiased 3rd party helping you work through these major, and they are major, life events.

Regarding the house, it happens. Silverado nailed it.

Sleepy
grettman
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by grettman »

Move. I agree with the other poster about 30K being a good price for happiness. Time on Earth is finite. The kicker is you don't know how much time you have. Why delay for one minute the pursuit of happiness at a price that you can afford?
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avenger
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by avenger »

I'll let you know how I feel when I sell my condo.

Comps in the building are selling at <50% of what I paid for mine in 2005. Not counting commissions, we are talking $70k in likely losses.

My consolation is that Uncle Sam is going to share in the pain as I will book a large long term capital loss that I will use to offset ordinary income for many years to come.

Edit to add: condo is an investment property
Last edited by avenger on Sat Jul 18, 2015 7:55 am, edited 1 time in total.
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ResearchMed
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by ResearchMed »

avenger wrote:I'll let you know how I feel when I sell my condo.

Comps in the building are selling at <50% of what I paid for mine in 2005. Not counting commissions, we are talking $70k in likely losses.

My consolation is that Uncle Sam is going to share in the pain as I will book a large long term capital loss that I will use to offset ordinary income for many years to come.
Uh oh... sorry to add to the pain, I fear.

If that condo is a residence and not an investment property, there is not any tax deductible loss.
(If it's an investment property, then yes, a loss is deductible.)

Doesn't seem fair, true, but that's how the current tax law is (unless there was a very recent change).

RM
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avenger
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by avenger »

ResearchMed wrote:
avenger wrote:I'll let you know how I feel when I sell my condo.

Comps in the building are selling at <50% of what I paid for mine in 2005. Not counting commissions, we are talking $70k in likely losses.

My consolation is that Uncle Sam is going to share in the pain as I will book a large long term capital loss that I will use to offset ordinary income for many years to come.
Uh oh... sorry to add to the pain, I fear.

If that condo is a residence and not an investment property, there is not any tax deductible loss.
(If it's an investment property, then yes, a loss is deductible.)

Doesn't seem fair, true, but that's how the current tax law is (unless there was a very recent change).

RM
RM,

Thanks for clarifying for the other readers. Yes, the condo is an investment property.
cheers ... -Mark | "Our life is frittered away with detail. Simplify. Simplify." -Henry David Thoreau | [VTI, VXUS, BND, VTEB, SV fund]
cherijoh
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by cherijoh »

avenger wrote:I'll let you know how I feel when I sell my condo.

Comps in the building are selling at <50% of what I paid for mine in 2005. Not counting commissions, we are talking $70k in likely losses.

My consolation is that Uncle Sam is going to share in the pain as I will book a large long term capital loss that I will use to offset ordinary income for many years to come.
Sorry but losses on homes do not count as a capital loss, so Uncle Sam will not be sharing your pain. From Pub 523:

How to Figure Your Gain or Loss Worksheet
7. Figure your gain or loss (amount realized minus adjusted basis).
a. Your amount realized (line 3c) a.
b. Subtract your adjusted basis (line 6c) b.
c. This is your gain or loss c.

•If the number is negative (adjusted basis is greater than amount realized), you sold your home at a loss. You cannot deduct this loss, but you do not need to pay any tax on the money you received from selling your home. Skip to Reporting Your Home Sale , later.
•If the number is positive, you sold your home at a gain. Skip to How Much Is Taxable , later.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by randomguy »

SleepKing wrote:Happy wife = happy life.
Anyone else get annoyed by that statement? Sure you need a happy partner but it isn't sufficient on its own to make your life happy. Having a happy spouse in a location that makes you miserable and a job that leaves you unsatisfied is unlikely to result in a happy life.

As far as losing money in a house, losses happen in any investment. Its part of life. Accept it and move on. The much bigger problem is the job issue. Finding a job you love can be pretty hard.
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avenger
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by avenger »

cherijoh wrote:
avenger wrote:I'll let you know how I feel when I sell my condo.

Comps in the building are selling at <50% of what I paid for mine in 2005. Not counting commissions, we are talking $70k in likely losses.

My consolation is that Uncle Sam is going to share in the pain as I will book a large long term capital loss that I will use to offset ordinary income for many years to come.
Sorry but losses on homes do not count as a capital loss, so Uncle Sam will not be sharing your pain. From Pub 523:

How to Figure Your Gain or Loss Worksheet
7. Figure your gain or loss (amount realized minus adjusted basis).
a. Your amount realized (line 3c) a.
b. Subtract your adjusted basis (line 6c) b.


c. This is your gain or loss c.

•If the number is negative (adjusted basis is greater than amount realized), you sold your home at a loss. You cannot deduct this loss, but you do not need to pay any tax on the money you received from selling your home. Skip to Reporting Your Home Sale , later.
•If the number is positive, you sold your home at a gain. Skip to How Much Is Taxable , later.
cherijoh,

Thanks for your post.

However, see this link: http://www.irs.gov/uac/Ten-Important-Fa ... and-Losses

"You may deduct capital losses only on investment property, not on property held for personal use."
cheers ... -Mark | "Our life is frittered away with detail. Simplify. Simplify." -Henry David Thoreau | [VTI, VXUS, BND, VTEB, SV fund]
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by jebmke »

If the condo was an investment property there may be depreciation recapture.
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
cherijoh
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by cherijoh »

avenger wrote:
cherijoh wrote:
avenger wrote:I'll let you know how I feel when I sell my condo.

Comps in the building are selling at <50% of what I paid for mine in 2005. Not counting commissions, we are talking $70k in likely losses.

My consolation is that Uncle Sam is going to share in the pain as I will book a large long term capital loss that I will use to offset ordinary income for many years to come.
Sorry but losses on homes do not count as a capital loss, so Uncle Sam will not be sharing your pain. From Pub 523:

How to Figure Your Gain or Loss Worksheet
7. Figure your gain or loss (amount realized minus adjusted basis).
a. Your amount realized (line 3c) a.
b. Subtract your adjusted basis (line 6c) b.


c. This is your gain or loss c.

•If the number is negative (adjusted basis is greater than amount realized), you sold your home at a loss. You cannot deduct this loss, but you do not need to pay any tax on the money you received from selling your home. Skip to Reporting Your Home Sale , later.
•If the number is positive, you sold your home at a gain. Skip to How Much Is Taxable , later.
cherijoh,

Thanks for your post.

However, see this link: http://www.irs.gov/uac/Ten-Important-Fa ... and-Losses

"You may deduct capital losses only on investment property, not on property held for personal use."
You are right about investment property - BUT your post didn't mention that it was an investment property :happy. AND you were posting in response to someone looking at a loss on their primary residence. I think lots of people are under the mistaken impression that they can deduct losses on their homes when they sell. Hence my post.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by jabberwockOG »

How about you tell her to quit whining and make a real sustained effort to find a way to enjoy your current residence. Maybe she should get out into the community and get more involved to make new friends. Get involved in local community affairs, do some volunteer work, start a reading group in neighborhood, take or teach some classes at community college, whatever, etc. I suggest you guys instead of giving up after a year that you should make a real effort for minimum of 3 years - then reassess and decide to move. BY that time you likely will be in a better financial position with regard to selling your home.
stan1
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by stan1 »

jabberwock wrote:How about you tell her to quit whining and make a real sustained effort to find a way to enjoy your current residence. Maybe she should get out into the community and get more involved to make new friends. Get involved in local community affairs, do some volunteer work, start a reading group in neighborhood, take or teach some classes at community college, whatever, etc. I suggest you guys instead of giving up after a year that you should make a real effort for minimum of 3 years - then reassess and decide to move. BY that time you likely will be in a better financial position with regard to selling your home.
Are you a divorce attorney by chance? That approach is likely to lead to $5-15K+ in attorney fees plus alimony.

I do agree with the rest of the post, though. Get out and meet some new people (hiking clubs, sports clubs, religion, etc.) Just manage the messaging a little better. $30K is about the cost of a new car; you can recover from that so don't stress about that. If you are worried about losing money on the townhouse it can stress your relationship. Focus on the positive things in life -- not the negative.
Last edited by stan1 on Sat Jul 18, 2015 8:40 am, edited 1 time in total.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by Swampy »

humbledinvestor wrote:How do Bogleheads deal with losing money on a house?

Scenario:

- Moved from city A to city B for a new job 3 years ago.
- 6 months into living in city B we bought a new construction townhome thinking we would stay here for a long time.
- In the last year, DW has become VERY unhappy with city B and wants to move back.

Consequence of selling: We would have to sell 8-10k lower than we bought plus commission(4.5%), so about a 30k loss.

Second consequence of selling: May have to give up or job I love, or be a remote employee (less visibility, opportunity to move up, make more).

How do Bogleheads deal with losing money in this type of situation and potentially risking their future earnings at the same time?
There is MUCH more to this equation than just losing money on a house.

Since all sides of the story and all the facts have not been posted here, which is truly nobody's business except for the two of you, I abstain from any recommendation.

Everything in life is NOT about money.
If I have seen further, it was by standing on the shoulders of giants.
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Watty
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by Watty »

humbledinvestor wrote:- Moved from city A to city B for a new job 3 years ago.
- 6 months into living in city B we bought a new construction townhome thinking we would stay here for a long time.
- In the last year, DW has become VERY unhappy with city B and wants to move back.

I would suspect that you also are making more in the new city. If you take a $30K loss on house, but you also made $10K more a year in the new city for three years then you have broken even compared to not having moved.

In some areas renting would have cost more than your mortgage payment so you also have to consider any money that you might have saved on renting if you had not bought the house.

If you are able to deduct your mortgage interest on your taxes then you also have to factor in any tax savings over the last three years.

Taking the loss on the house will sting but compared to your alternatives it might hot be as large a financial setback as it sounds.


Relocating for a job is almost always a rough choice in the trade offs that you have to make there is no way that we can know the right answer to that. If the townhouse in the burbs is part of the problem then would selling it and renting in a more desirable location be an option to try?
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by White Coat Investor »

humbledinvestor wrote:
Consequence of selling: We would have to sell 8-10k lower than we bought plus commission(4.5%), so about a 30k loss.

Second consequence of selling: May have to give up or job I love, or be a remote employee (less visibility, opportunity to move up, make more).

How do Bogleheads deal with losing money in this type of situation and potentially risking their future earnings at the same time?
I know exactly how you feel. I'm trying to sell a townhouse I bought 9 years ago for the second time, again probably without success. I'm listed at 10% less than I paid for it, there's a similar one listed for 20% less and another one "fire-selling" at 35% less than I paid. Good times.

My issue is it is a heck of an investment, income-wise, at the price these others are selling for. So I may just put it up for rent again rather than sell there. But honestly, I'm not sure it will even sell at that price.

At least I have a much better job in this new location.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by Twins Fan »

Been there, done that, and got the t-shirt. :happy

In my experience anyway, DW will go to City A with or without you OP, if she hates B that much. Being close to family and friends is very important to some. Also in my experience, it still didn't work out after moving back and I got the t-shirt and the divorce.

The OPs post does make it seem there's more than just money as an issue here. OP, if you're really that torn between moving back to City A/DW's happiness and basically money, maybe the relationship needs to be looked at. Would you be the unhappy one moving back to City A and losing out on the job you love? Only a suggestion there. I don't know the OP or their relationship and maybe the post came across wrong. But, it's obvious others see something more here also...

Since it was brought up already and in my experience again, what about turning the City B townhome into a rental? That is what I did because I was upside down on my home and couldn't afford to sell at the time (2010). Where is this townhome anyway that it seemingly lost value in the last 2 1/2 years? The timing should be in your favor on this one considering the housing market over that time.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by 209south »

Ignoring the marital issue...I've lost real money on two real estate investments, both second homes. Bought a ski house in Vermont for $895, renovated if for $300k, listed it for $1.395mm five years later when our usage declined, sold it two years later for...what I paid for it, $895k! Bought a fractional in Jupiter, FL for $328k, sold ten years later for $100k! Financially these were difficult lessons, but emotionally I got over both quickly, as my broader boglehead portfolio did very well over the same time period. On my personal balance sheet I now reflect all real estate at net realizable value, basically taking a very conservative estimate of price and subtracting 10% for commissions, etc...I'm well in the black on my primary residence, but have removed the emotion from the equation.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by dolphinsaremammals »

randomguy wrote:
SleepKing wrote:Happy wife = happy life.
Anyone else get annoyed by that statement?
That statement annoys me every time I read it. It's so demeaning to women AND men.

It seems odd to me that people would be happy living in a place for two years and then a year later it becomes intolerable for one of them, to the point that that person wants to move despite it's having major bad effects on the rest of the couple's life. What is actually going on here?

Away from family - they've had that situation for two years and it was okay. Boring - what's changed in two years? Any place is boring if one sits at home and does nothing else.
Louis Winthorpe III
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by Louis Winthorpe III »

Regarding the loss on the house -- the point of having money is that it allows you to have options . . . options that will make you happier. If your spouse is unhappy, there's no way I'd let the financial loss stand in the way of me moving to make her happier. I might not feel great about taking the loss, but I'd feel good knowing that because I manage my finances well, I'm fully capable of absorbing that loss for the greater good of helping to keep my wife happy.

The angle about your career possibly being hindered is more problematic. You love the job. Your wife hates the city. Something has to give. From the standpoint of a dispassionate 3rd party, I'd encourage your spouse to give the new city some more time. If there's a chance she can grow to like it, she should stick it out. And she should be willing to try because you love your job. If she does give it a fair shot and still is unhappy, then if you love her you've got to make a change for her.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by anonforthis »

randomguy wrote:
SleepKing wrote:Happy wife = happy life.
Anyone else get annoyed by that statement? Sure you need a happy partner but it isn't sufficient on its own to make your life happy. Having a happy spouse in a location that makes you miserable and a job that leaves you unsatisfied is unlikely to result in a happy life.

As far as losing money in a house, losses happen in any investment. Its part of life. Accept it and move on. The much bigger problem is the job issue. Finding a job you love can be pretty hard.

I agree. Happy spouse = happy life. Both partners should be happy to make it work!

OP, 30k isn't worth it for both of you to be miserable. Do you like city B? If you don't like it either then move back is a good choice.

I was in the same position with your wife almost 10 years ago. My husband job relocated him to our current city. My husband came first because I had to stay to sell our house in San Francisco. He came and bought a farm house. I was so bored the first 2 years. My husband was willing to move back because he wanted for me to be happy. I was bored, missed my friends, missed SF and my family. But we would take a huge loss if we sell. I decided to change the way I look at this new city. Now I love where I live. The farm has gone up a lot the last 5 years. We can sell now with profit but i have no desire to move back to SF.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by dbr »

Silverado wrote:
Ybsybs wrote:
The scenario doesn't sound like it is really about the house. Perhaps counseling? If 30k can buy happiness it is a good price, but it sounds like you expect to become VERY unhappy with city A. Good luck working this out.
This sounds right, but I will answer the original question.

Easy: a house isn't an investment, so can't lose money on it. We have moved four times in the last decade, and each time when we have purchased a house, I consider the 20-30% down payment to be gone. Just gone, never to be seen again. We have sold at significant losses the last two times (one was in Detroit suburb), but always got a check at closing. That's a housing win.
I disagree completely. A house is an investment which gains or loses money every day. You can also realize that gain or loss and you have transaction costs. If a person does not want to take these risks, they can be avoided by not buying houses. The overall financial mathematics is obscured by the fact that a house also provides lodging (aka imputed rent, which is income) and may avoid auxiliary costs that come with renting and imposes costs for maintenance, insurance, and auxiliary costs such as furnishings. These factors should not cause one to misunderstand the capital properties of a house.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by dbr »

To answer the OP.

This is a learning experience about how to unify work, marriage, and life. From a financial point of view it is a lesson about the financial and non-financial risks of buying houses. Such lessons may be far more valuable than the price paid in this instance.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by BogleBoogie »

stan1 wrote:
jabberwock wrote:How about you tell her to quit whining and make a real sustained effort to find a way to enjoy your current residence. Maybe she should get out into the community and get more involved to make new friends. Get involved in local community affairs, do some volunteer work, start a reading group in neighborhood, take or teach some classes at community college, whatever, etc. I suggest you guys instead of giving up after a year that you should make a real effort for minimum of 3 years - then reassess and decide to move. BY that time you likely will be in a better financial position with regard to selling your home.
Are you a divorce attorney by chance? That approach is likely to lead to $5-15K+ in attorney fees plus alimony.

I do agree with the rest of the post, though. Get out and meet some new people (hiking clubs, sports clubs, religion, etc.) Just manage the messaging a little better. $30K is about the cost of a new car; you can recover from that so don't stress about that. If you are worried about losing money on the townhouse it can stress your relationship. Focus on the positive things in life -- not the negative.
This was a great response to questionable advice.
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corn18
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by corn18 »

I dealt with the loss on sale of my last home by cringing, whining, lamenting, questioning my decision to sell now vs. rent and many other negative ways. Then after it was sold and I had paid out the cash at settlement ($30k), I was annoyed, perturbed, irritable and just generally unhappy about the whole situation. Then I bought another house and it is worth less than I paid for it a year later. That was 5 years ago and it still is worth less than I paid but at least I am not upside down (just barely break even). I don't let it bother me anymore. It is what it is and I can't do a darn thing about it except include it in my long term plans.

Do you have a long term plan? I just got a job offer in another city. Going to geobachelor it for a year so my daughter can graduate from her current high school. Will be away from home 5 days a week. Living in the moment, this is a nerve racking, second guessing, anxious to the point of crazy decision. Living in my 10 year plan, it puts me a year ahead of schedule. Now I just need to decide if the time away from home is worth the year ahead of schedule. I made that decision easy by agreeing to the job but I have an exit strategy that I can execute after 6 months.

When I look at decisions in terms of decades instead of days or months, they seem to be a lot less stressful. If I have a plan. Without a plan, I get stuck in the decision loop and constantly second guess what I am doing.

Tom
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by LeeMKE »

I am a dying breed, a trailing spouse. I moved more than 40 times over my working life. (half were self-imposed moves from one home to another in each city -- I have/had a real estate habit that was like a monkey on my back)

The marriages that thrived took the attitude that we were touring the US at our employer's expense. We dug in and got out in the community, and found out what kept people living there, putting behind us what we missed from our last or favorite location. As a result there are few places I wouldn't return to, and it is actually hard for me to think about hunkering down in one location for retirement. Every place has it's own charms, no place has cornered the market on a wonderful life.

I now have a niece who moved across country just after getting married. Her family is anchored to their location and were/are very unsupportive. But it is already obvious to me, and in a few years will be obvious to everyone else: the financial cushion they enjoy by moving their careers forward instead of stagnating by insisting they remain in place, is giving them a level of security their friends will not know. When bad times come, and they always do, those who have the willingness and ability to move to meet the opportunities succeed, while others languish in place waiting for the market to rescue them.

FWIW
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by ubermax »

OP, do you have children , does your wife work , & how close is A to B ; the loss on the house wouldn't be a biggy for me but maybe short term your wife gets an apartment back in A and you test the waters with the new job for awhile ; longer term you could see if a good job fit eventually comes up back in A .

If A is close to B , then maybe commuting is a solution ; if the distance is great and you have children , then being apart for a long time doesn't cut it - don't know if there's any best solution but also don't know a lot about your family situation - Good Luck !!!
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by cadreamer2015 »

I would turn the happy=happy equation on it's head:

Unhappy spouse = unhappy life.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by Lafder »

I would remind myself that if I had rented instead of bought, I would likely be out more than 36k in money spent on rent in 3 years.

Calculate what you would have spent on a decent rental for the same time and maybe that will cushion the blow.

I have a saying that I remind myself. "If I can say it is only money, and I will not be out on the street to pay it, it doesn't matter." This has helped me deal with the stress of a multitude of unexpected repair and other expenses over the years that simply need to be paid. ((I do not use this phrase to justify wanted purchases))

I try to tell my husband happy wife = happy life. He agrees to a degree but has no problem saying his happiness is as important as mine................

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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by archii »

We took a $135K loss on a house we purchased at the height of the housing boom (2005), and finally just sold a few years ago. Due to job moves, we only lived in it for about 16 months. After a terrible experience renting it out long distance, expensive major repairs, vacant periods, etc., we finally let it go at a big loss just to get the monkey off our back. It was literally a black hole for cash. Every time we got a call from our property manager I would cringe and get our checkbook ready. Felt terrible at the time, but fortunately it was our prime residence for a while, so we were able to take that 135K as a tax loss, which we are still carrying over today.

For us it was a huge lesson in realizing that real estate appreciation is NOT a given, and before we ever bought again, we would be sure we would be living there for at least 5-10 years. When we bought, I was still under the impression after selling two other former houses at a profit that we would always get our money out of it, even if we only held for a couple of years. How wrong I was.
Besides that valuable lesson, the tax loss carryover is the only thing that has helped us to digest the loss.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by itstoomuch »

randomguy wrote:
SleepKing wrote:Happy wife = happy life.
Anyone else get annoyed by that statement? Sure you need a happy partner but it isn't sufficient on its own to make your life happy. Having a happy spouse in a location that makes you miserable and a job that leaves you unsatisfied is unlikely to result in a happy life.

As far as losing money in a house, losses happen in any investment. Its part of life. Accept it and move on. The much bigger problem is the job issue. Finding a job you love can be pretty hard.
Nope.
What's wrong in keeping the spouse happy. :oops:
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by dbr »

itstoomuch wrote:
randomguy wrote:
SleepKing wrote:Happy wife = happy life.
Anyone else get annoyed by that statement? Sure you need a happy partner but it isn't sufficient on its own to make your life happy. Having a happy spouse in a location that makes you miserable and a job that leaves you unsatisfied is unlikely to result in a happy life.

As far as losing money in a house, losses happen in any investment. Its part of life. Accept it and move on. The much bigger problem is the job issue. Finding a job you love can be pretty hard.
Nope.
What's wrong in keeping the spouse happy. :oops:
It is a silly statement because marriage is all about both partners being happy.

There is point there that some people need the reminder because they don't get it. Better would be "Happy spouse, happy life." applied equally.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by Gattamelata »

dolphinsaremammals wrote:
randomguy wrote:
SleepKing wrote:Happy wife = happy life.
Anyone else get annoyed by that statement?
That statement annoys me every time I read it. It's so demeaning to women AND men.
Yes, every time. It submits that there are completely separate expectations for each partner in the relationship based entirely on gender. How would this advice apply to a homosexual couple, for instance? It always strikes me as glib advice for a man to ignore his own concerns and placate his woman, who is entitled or empowered to make his life miserable if she isn't 100% satisfied. That seems like an ugly view of marriage and the advice always reads to me as "Never get married, because when you do the responsibility for keeping your wife happy shifts from her to you." For instance, nobody ever seems to throw this chestnut at couples who aren't married, I suspect because their advice would be "Break up" or "Tell her to deal" in those cases. Unsettling.

OP: You don't mention how you feel about City A vs. City B, but assuming you share some of your wife's concerns... I wouldn't look at it as losing money on a house. I'd look at it as the cost of an education, or even certainty. You two tried something new, and it sounds like it's not working out, for what sound to me like very valid reasons. I agree that a good faith effort should be made to make your new city into a reasonable home, but I also assume that over the last year and a half or longer that you've tried that and it hasn't worked out. Sometimes that happens. Not every place is right for every person. That's fine. And it's fine to try a big move and find out that it wasn't for you. That 30k is the price of an education. Now you know some things about yourselves: exurbs are maybe not for you, proximity to family and friends is important to you, and satisfaction with where you live is more important to you two than income. That last bit is actually pretty promising. A lot of people will keep themselves miserable for more money even when they don't have to.

One of the problems with financial planning is that things that are hard to quantify, like current happiness, are often left out of the equations. Is living in City A worth losing 30k of non-liquid net worth to you two? It sounds like it is to your wife, and it's not clear whether it is to you, but I'd argue that it could be to you, as well. All of the advice above about getting used to City B could be turned around and used to push you toward getting used to the idea of moving back to City A. I recommend trying the advice both ways and seeing what seems right. But like I said, it seems to me that if you're considering taking a 30k loss to go back to City A, that City A is probably the right choice.

The income potential is another thing, but again, satisfaction matters. I would view 30k as the price of knowing for sure that City A is where you two want to live, and I'd start casually shopping for jobs there so that you have an opportunity to compare whether the reduced potential of remote work is worse than whatever you could get working in City A. Then again, to illustrate how I think about these things, I just took a 20% pay cut to eliminate 2 hours of commute time from my work days, to work on more interesting things with a social impact, and to stop chasing quarterly numbers. It's arguably not a great move financially, but I am so much happier. If that seems nuts to you, then maybe the way I look at these things won't work for you.

Good luck! I hope that you and your wife can find your way to the same position on this dilemma.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by patriciamgr2 »

1. In my experience, people's happiness is not improved long-term by a change in location (exceptions are (i) commute time & (ii) if the current location is dangerous for spouse or the kids). Moving won't necessarily make someone happy--people pack whatever is making them unsatisfied in one of the "Open First" moving boxes. The specifics of what the unhappy one complains about will change, but that's it. I've never done counseling, but it can't hurt. Open, honest communication is key.

2. I agree with other posters: your human capital (employment earnings potential) being damaged is much more destructive to your family's financial well-being than any loss on a house. You need to focus on what the move does to your career & future earnings--not on the real estate loss.

3. If you do accept the real estate loss & de-emphasize your career in order to move, that's a decision both of you have to "own". No whining on either side about the inevitable consequences of the decision.

4. I had a loss on my "rental from hell". It infuriated me for a few months, but the pain of the financial loss faded as I mentally reminded myself of how awful it would have been to deal with the daily insanity of the Horrible Hoarders across the street. It's just a psychological trick--whenever you start to regret the monetary loss, remember whatever it is you've gained (assuming you have gained something--see above comments).

Good Luck!
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by surfer1 »

Here is the method I used when I sold mine at a loss.

Take the dollar amount of loss and divide it by the number of months you've lived in the house. That is roughly the amount you paid in rent to live in the house.

It's actually a little better than this. You can deduct another 25% of the average mortgage interest and property tax from the monthly rent rate, which reduces the rent further.

In your case this would be $30,000 / 12 = $2,500/month. This alone is not too bad. Houses rent for well over this amount. After you deduct for property taxes and mortgage interest, the rent goes a bit lower. Based on this, your loss is really no different than renting the house for the entire period.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by corn18 »

Lafder wrote:I would remind myself that if I had rented instead of bought, I would likely be out more than 36k in money spent on rent in 3 years.
And then remind yourself that if you had a 30 year mortgage, you were still out most of the payments you made because most of it went to interest. If you're staying less than 3-5 years, rent.
Consistently sets low goals and fails to achieve them.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by randomguy »

dbr wrote:
itstoomuch wrote:
randomguy wrote:
SleepKing wrote:Happy wife = happy life.
Anyone else get annoyed by that statement? Sure you need a happy partner but it isn't sufficient on its own to make your life happy. Having a happy spouse in a location that makes you miserable and a job that leaves you unsatisfied is unlikely to result in a happy life.

As far as losing money in a house, losses happen in any investment. Its part of life. Accept it and move on. The much bigger problem is the job issue. Finding a job you love can be pretty hard.
Nope.
What's wrong in keeping the spouse happy. :oops:
It is a silly statement because marriage is all about both partners being happy.

There is point there that some people need the reminder because they don't get it. Better would be "Happy spouse, happy life." applied equally.
Exactly. Would anyone tell the wife "happy husband=happy life" in this situation and tell her to deal with it? Well other than one person:) You need to find a solution that works for both of you. Having one partner make all the sacrifices will just lead to resentment.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by randomguy »

tomhole wrote:
Lafder wrote:I would remind myself that if I had rented instead of bought, I would likely be out more than 36k in money spent on rent in 3 years.
And then remind yourself that if you had a 30 year mortgage, you were still out most of the payments you made because most of it went to interest. If you're staying less than 3-5 years, rent.
It isn't the 80s anymore. It is probably close to a 50/50 split. You could spent a ton of time coming up with an exact number that buying versus renting cost you butbwhats the point?
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by corn18 »

My wife was crying (literally) when she first saw a couple of the places we had to move when I was in the Navy. There were many curse words. Every time, she found a way to love the area and every time she did not want to leave when I got orders. Except once. Ironically, it was when we lived near her family. Just not a nice bunch of people there.

When I moved her to Cincinnati, she was not happy. It was our first move after being in the Navy 20 years and she had no built in Navy family upon arrival. She felt quite lost and unhappy. Fast forward seven years and now she does not want to leave. People here are ridiculously friendly and we have made some great lifelong friends.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by corn18 »

randomguy wrote:
tomhole wrote:
Lafder wrote:I would remind myself that if I had rented instead of bought, I would likely be out more than 36k in money spent on rent in 3 years.
And then remind yourself that if you had a 30 year mortgage, you were still out most of the payments you made because most of it went to interest. If you're staying less than 3-5 years, rent.
It isn't the 80s anymore. It is probably close to a 50/50 split. You could spent a ton of time coming up with an exact number that buying versus renting cost you butbwhats the point?
You're right, I've got you to tell me what to think.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by bberris »

I don't understand this mind set that houses always must increase in value. You are living in a depreciating consumable just like a driving a car (except for the land portion of the asset). You don't expect your car to go up in value.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by JDCarpenter »

Looking solely at the house issue, it is no big deal; "stuff" happens. We lost two-years of what we plan to spend in retirement on the sale of our "forever" house when DW's job situation tanked and we moved to another state. (And, given that only DW was working outside the home at the time, it exceeded our then AGI.)

Repeat after me: "Sunk Cost Fallacy."

More important is for you and your spouse to get back onto the same page.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by stoptothink »

randomguy wrote:
SleepKing wrote:Happy wife = happy life.
Anyone else get annoyed by that statement? Sure you need a happy partner but it isn't sufficient on its own to make your life happy. Having a happy spouse in a location that makes you miserable and a job that leaves you unsatisfied is unlikely to result in a happy life.
My brother works in Saudi Arabia, one month on and one month off, so he could technically live anywhere he wanted. With his income, they (wife and two kids) lived like royalty in his previous area, but his wife told him she refused to live their any longer. Despite his income, they can't even afford their own place where she has to live (Huntington Beach, CA). They've been living in a rented condo with her parents for two years now and doesn't look like they'll be able to be on their own anywhere in the forseeable future. He hates California, is miserable, and they are just treading water despite his six-figure salary.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by humbledinvestor »

Thanks to everyone who replied to my post.

A lot of helpful andinteresting comments.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by leonard »

What's changed in the last year? Without understanding this - you may spend a bunch on moving and end up in a the same or worse situation.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by rec7 »

humbledinvestor wrote:How do Bogleheads deal with losing money on a house?

Scenario:

- Moved from city A to city B for a new job 3 years ago.
- 6 months into living in city B we bought a new construction townhome thinking we would stay here for a long time.
- In the last year, DW has become VERY unhappy with city B and wants to move back.

Consequence of selling: We would have to sell 8-10k lower than we bought plus commission(4.5%), so about a 30k loss.

Second consequence of selling: May have to give up or job I love, or be a remote employee (less visibility, opportunity to move up, make more).

How do Bogleheads deal with losing money in this type of situation and potentially risking their future earnings at the same time?
I lost about 2.5k on a house I lived in about 1.5 years many years ago. I dealt with it not to bad I figured I would have given it to a landlord anyway. Going by your numbers I think you can say the same thing as me.
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Re: losing money on a house....how do Bogleheads deal with it emotionally?

Post by CMartel2 »

dolphinsaremammals wrote:
randomguy wrote:
SleepKing wrote:Happy wife = happy life.
Anyone else get annoyed by that statement?
Boring - what's changed in two years? Any place is boring if one sits at home and does nothing else.
I have long held the belief that only boring people get bored. Sounds like some reframing is due. I roughed it out for 4 years in a city with some of the highest crime rates and highest rates of poverty in the US and had a good time doing it. That decision has saved me thousands of dollars per month and allowed me to live where my heart really lies.

As for selling the home, just be happy it sold. I know people whose homes sat on the market for years.
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