Bought a home a year back, thinking of selling now

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Topic Author
starter
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Bought a home a year back, thinking of selling now

Post by starter » Fri Aug 23, 2019 12:19 pm

Facts
Both I and my better half work in bay area tech companies with overall tc 700k, base 400k.
We bought a home last year (around the market peak) that we loved for around 1.5 mn. We had just enough funds for 20% downpayment and now have around 250k in funds (cash in bank, 401k, vested stocks). On the hindsight, I do feel it was a very expensive home and we were not financially astute to see through it. I dont know if its the buyers remorse now :D.

Question
With recession fears looming, I do feel the time ahead might be painful if one of us loses job. I am mentally ready to part with the house but feel like I have lost my peace. I am always anxious, thinking about 100 things that can go wrong. Sometimes it feels like i should just sell now rather than investing more in the house through property tax, interest over the years - stop the loss, use this experience as a learning and gain my peace back.

I know this may sound insane to some but how rational is it to stop the loss from a bad investment and start over again rather than remain invested and increase your potential losses? Feel like i could use some perspective from seasoned folks here.

sd323232
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Re: Bought a home a year back, thinking of selling now

Post by sd323232 » Fri Aug 23, 2019 1:30 pm

Who says it is a bad investment? What if you sell now, and in 2 years this home is 2 million?

You only see negative here now, but this home can increase in value as well. Also, if you sell, you still have to spend money on rent. I would advice to keep the home for another couple years, and sell when the house is up in value.

I know the feeling, but after you sell the house, you will get another feeling that you made the worst mistake of your live and should have kept the house. Believe me, how are you gonna feel, when this house is 2 mil or 2.5 mil later on.

runner3081
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Re: Bought a home a year back, thinking of selling now

Post by runner3081 » Fri Aug 23, 2019 1:31 pm

starter wrote:
Fri Aug 23, 2019 12:19 pm
Facts
Both I and my better half work in bay area tech companies with overall tc 700k, base 400k.
We bought a home last year (around the market peak) that we loved for around 1.5 mn. We had just enough funds for 20% downpayment and now have around 250k in funds (cash in bank, 401k, vested stocks). On the hindsight, I do feel it was a very expensive home and we were not financially astute to see through it. I dont know if its the buyers remorse now :D.

Question
With recession fears looming, I do feel the time ahead might be painful if one of us loses job. I am mentally ready to part with the house but feel like I have lost my peace. I am always anxious, thinking about 100 things that can go wrong. Sometimes it feels like i should just sell now rather than investing more in the house through property tax, interest over the years - stop the loss, use this experience as a learning and gain my peace back.

I know this may sound insane to some but how rational is it to stop the loss from a bad investment and start over again rather than remain invested and increase your potential losses? Feel like i could use some perspective from seasoned folks here.
A house is not an investment, it is a place to live. You will still need a place to live. You will be losing a ton in transaction fees on that pricey of a house.

calisaver
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Re: Bought a home a year back, thinking of selling now

Post by calisaver » Fri Aug 23, 2019 1:34 pm

How much is the home worth now? Where in the bay area if you don't mind me asking?

ohai
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Re: Bought a home a year back, thinking of selling now

Post by ohai » Fri Aug 23, 2019 1:38 pm

If you sell now, you take a 10% loss on transaction costs. You have to lose a lot of home value to make up for that.

Now, there could be other reasons to not want to own the house. For example, Mr Money Mustache justifies selling his house by saying the rental yield would be less than 2% (it's not worth owning and effectively renting from himself). Just make sure your decision is driven by economics and not fear.
Last edited by ohai on Fri Aug 23, 2019 1:40 pm, edited 1 time in total.

delamer
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Re: Bought a home a year back, thinking of selling now

Post by delamer » Fri Aug 23, 2019 1:38 pm

As an earlier poster noted, you need a place to live. Selling the house does rid you of that cost. It may reduce it, but you won’t save your entire PITI.

How many months of mortgage payments does that $250,000 represent? I am betting it would get you through a pretty long job loss.

rbaldini
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Re: Bought a home a year back, thinking of selling now

Post by rbaldini » Fri Aug 23, 2019 1:39 pm

You seem to be basing this decision entirely on a belief that the house price will drop soon - hence, sell now, while the price is high. But you really don't know this: it could go up for many years. You also don't know if selling your house and putting equity in stocks before a recession will cause an ever greater loss, due to a greater dip in stock prices.

So I'd back off of decisions based on "looming recession fears", realize that you probably aren't any good at predicting the future, and work from the usual, simpler set of questions. Is the house just too damn expensive? Would you be able to pay the bills if one of you lost a job? Could you rent for much cheaper and thereby come out ahead (use one of many rent vs buy calculators out there)? Do you find that your quality of life is suffering now that you are responsible for home maintenance? Do you feel that your house is too large a proportion of your net worth, and would prefer to downsize so you could invest more elsewhere and balance out your allocation? These are all fine reasons to sell a house.
Last edited by rbaldini on Fri Aug 23, 2019 1:43 pm, edited 5 times in total.

megabad
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Re: Bought a home a year back, thinking of selling now

Post by megabad » Fri Aug 23, 2019 1:40 pm

starter wrote:
Fri Aug 23, 2019 12:19 pm
Feel like i could use some perspective from seasoned folks here.
I mean no offense, but there are a lot of "I" statements in your post. A home is a very "we" decision. Have you discussed your feelings with your better half? What does he/she think? If both of you feel similarly, than you have made a good case to change your path either in thought or in action.

You know your financial position and career prospects better than anyone I assume so only you can make the call as to what your family can afford. That said, I agree with other posters that it may be useful to consider the house an expense, not an investment. As such, you can mentally assign things like a large emergency fund to help cover the expense of the house if a job loss occurs. That doesn't mean that you should or should not keep the home, only that it may alleviate some of your stress and worry by assigning a portion of a large emergency fund to this function.
Last edited by megabad on Fri Aug 23, 2019 4:42 pm, edited 1 time in total.

chevca
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Re: Bought a home a year back, thinking of selling now

Post by chevca » Fri Aug 23, 2019 1:45 pm

I see that "we" bought a house together and now "I" is fearing an unknown future. What does the other half feel about owning the home one year later?

Maybe building up a bigger emergency fund should be the priority if one losing their job is a concern. Maybe we don't even have a recession anytime soon. Maybe.... Control what you can, OP.

*** I'm a slow at typing, I guess. I see I posted about the same thing mega did. :happy

HomeStretch
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Re: Bought a home a year back, thinking of selling now

Post by HomeStretch » Fri Aug 23, 2019 1:47 pm

You bought a house that was ~2x your total comp. That’s not a bad ratio and seems affordable for you.

I wouldn’t sell out of remorse or anxiety or what “might” happen with the economy. If you and spouse no longer want to be homeowners, then sell and rent instead. If you keep the house, suggest saving as much as you can as quickly as you can to give yourselves a buffer in the event of a downturn. You/spouse are in the same industry. You wouldn’t want a downturn where you both lost your jobs and you couldn’t sell an underwater house if you could no longer afford the mortgage.

I *think* CA is a non-recourse state for home loans which means if things really got bad you would lose the house in foreclosure but wouldn’t have to pay the bank anything from your savings.

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LilyFleur
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Re: Bought a home a year back, thinking of selling now

Post by LilyFleur » Fri Aug 23, 2019 1:54 pm

I think the house is a reasonable expense given OP's tc.

Rents are horrendous in the bay area.

OP is probably living in an older tract house that would sell for $400k or less in a MCOL area. It's not like they are living in a mansion.

It is difficult to comprehend life in the bay area when one does not live there.

My son recently visited a friend whose family lives in a 1.5-million dollar house in the bay area. It is dated and just not that extraordinary.

MrDrinkingWater
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Re: Bought a home a year back, thinking of selling now

Post by MrDrinkingWater » Fri Aug 23, 2019 1:58 pm

If your total compensation is $700K a year (base $400K + variable zero-to-plus-$350K), maybe your home purchase price and mortgage payment are less of a problem than all of your other expenses combined. With more information, perhaps the members of this board can help you analyze your overall cost of living and help you with some useful suggestions that might lower all of your other living expenses.

Cycle
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Re: Bought a home a year back, thinking of selling now

Post by Cycle » Fri Aug 23, 2019 2:30 pm

Yeah, owning a home is a heahache. There are headaches with the alternative too.

I believed a recession to be imminent for over 7 years now. I don't let it affect my investing / housing decisions.

But I don't do mortgages, to reduce financial obligations during times of financial turmoil
Never look back unless you are planning to go that way

HornedToad
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Re: Bought a home a year back, thinking of selling now

Post by HornedToad » Fri Aug 23, 2019 2:56 pm

Keep the house. Stop reading the news. Problem solved.

You make enough that you are fine with the house and just rebuild your emergency fund/taxable savings so that it helps you sleep better.

JGoneRiding
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Re: Bought a home a year back, thinking of selling now

Post by JGoneRiding » Fri Aug 23, 2019 3:00 pm

Selling comes with such a high transaction cost there is no way I would pre emptively trigger that. Unless you see a job less as coming soon I would wait. Very few recessions are as bad as the last one was and in most cases the world isnt really fully aware we had one until it is over.

SC Anteater
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Re: Bought a home a year back, thinking of selling now

Post by SC Anteater » Fri Aug 23, 2019 3:43 pm

LilyFleur wrote:
Fri Aug 23, 2019 1:54 pm
I think the house is a reasonable expense given OP's tc.

Rents are horrendous in the bay area.

OP is probably living in an older tract house that would sell for $400k or less in a MCOL area. It's not like they are living in a mansion.

It is difficult to comprehend life in the bay area when one does not live there.

My son recently visited a friend whose family lives in a 1.5-million dollar house in the bay area. It is dated and just not that extraordinary.
This for sure. Dirt is very very expensive in the Bay Area. :-)

Chadnudj
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Re: Bought a home a year back, thinking of selling now

Post by Chadnudj » Fri Aug 23, 2019 3:49 pm

1. Hoard cash.
2. Get a HELOC now while you're both still employed.

Seems like your concern is more of the "we don't have enough emergency funds to make ends meet if we encounter job losses" type than a "oh my god this house was a bad idea" type.

So hoard some cash to increase your emergency funds, and get a HELOC that could help you make ends meet for awhile in the event of a job loss (but that you hopefully will not touch at all).

The Bay Area, even if a recession were to hit, would still be a hot real estate area overall -- you won't be seeing a 20% drop in your home equity (thus wiping out all your equity if you were forced to sell). Find some ways to build up your cash/emergency reserves, and i'm sure you'll sleep a lot better.

UpperNwGuy
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Re: Bought a home a year back, thinking of selling now

Post by UpperNwGuy » Fri Aug 23, 2019 3:55 pm

Keep the house.

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Watty
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Re: Bought a home a year back, thinking of selling now

Post by Watty » Fri Aug 23, 2019 4:04 pm

starter wrote:
Fri Aug 23, 2019 12:19 pm
Both I and my better half work in bay area tech companies with overall tc 700k, base 400k.
We bought a home last year (around the market peak) that we loved for around 1.5 mn. We had just enough funds for 20% downpayment and now have around 250k in funds (cash in bank, 401k, vested stocks).
You may be looking at the wrong place to figure out why you are feeling uneasy. The thing that strikes me is that your net worth seems to only be around $500K. If you have been making anywhere near your current income for a while then in the last few years you would have had several million dollars in gross income. A lot of that went to pay taxes but where did the rest of it go? It could be that your other spending is more of a problem than the house.
starter wrote:
Fri Aug 23, 2019 12:19 pm
I know this may sound insane to some but how rational is it to stop the loss from a bad investment and start over again rather than remain invested and increase your potential losses? Feel like i could use some perspective from seasoned folks here.
It would be good to make a spreadsheet and put some hard numbers on what your options are and to compare the costs of earning the house to what it renting a different place that you could live in.

This is just guesswork but as a start I would think the numbers might look something like this;
1) interest on the mortgage. $1.2 million x 4% = $48,000
2) property tax at 1.5% of the property value. $1.5 x 1.5%= $22,500
3) Property maintenance at 1% = $15,000

You could also have had your down payment money invested and earning money but that would be hard to quantify.

That adds up to $85,500 a year. If you divide that by 12 that is $7,125 a month so a big question is what sort of place you could rent around $7K a month.

With the changes to the tax laws you might not have much tax savings so that would also be good to put a number on.

You would want to do that math with your real numbers but once you see them then you could better decide if what you want to do.

I lived in Silicon Valley decades ago and one thing that amazed me even back then was not how expensive the housing was but also how little you got for your money. If your $1.5 million only got you a dumpy 50 year old small house on a tiny lot part of what you may be feeling could be a disappointment with your lifestyle in your current house if it is not very nice.

If your current house is not something that you can picture still being in ten years from now then you will be paying the transactions costs to sell it sooner or later so it makes little difference if you pay the cost to sell the house now or ten years from now. If that is the case then I would ignore the transaction costs in your decision.
starter wrote:
Fri Aug 23, 2019 12:19 pm
I know this may sound insane to some but how rational is it to stop the loss from a bad investment and start over again rather than remain invested and increase your potential losses? Feel like i could use some perspective from seasoned folks here.
Very sane since you are concerned about what would happen if one of you loses their job and cannot find a similar one there.

One big problem is that if the job market changes and then it is very likely that the housing market would be be bad there too since fewer people will be spending big bucks on houses like yours. In a bad housing market prices not only go down but it can be difficult or impossible to sell a house without reducing it down to the level that distressed sales are happening at like foreclosures or from an estate after someone dies.

If you are renting and saving and you run into job problems then you could move somewhere that you could find jobs and maybe buy a nice house for cash.

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starter
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Re: Bought a home a year back, thinking of selling now

Post by starter » Fri Aug 23, 2019 5:14 pm

calisaver wrote:
Fri Aug 23, 2019 1:34 pm
How much is the home worth now? Where in the bay area if you don't mind me asking?
Almost same price at one real estate portal, 50-70k less at other portals. South bay

Topic Author
starter
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Re: Bought a home a year back, thinking of selling now

Post by starter » Fri Aug 23, 2019 5:18 pm

MrDrinkingWater wrote:
Fri Aug 23, 2019 1:58 pm
If your total compensation is $700K a year (base $400K + variable zero-to-plus-$350K), maybe your home purchase price and mortgage payment are less of a problem than all of your other expenses combined. With more information, perhaps the members of this board can help you analyze your overall cost of living and help you with some useful suggestions that might lower all of your other living expenses.
We have limited expenses beyond that, one car loan, day care and regular house expenses. Nothing over the top except for this house.

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Re: Bought a home a year back, thinking of selling now

Post by Dottie57 » Fri Aug 23, 2019 5:19 pm

UpperNwGuy wrote:
Fri Aug 23, 2019 3:55 pm
Keep the house.
This. You do not have a crystal ball and neither does anyone else. Ramp up your liquid assets so you can weather a recession. I was worried about losin my job my whole career. I weathered over10 layoffs. Just strive to give value to your employer.

Prepare for bad economy so you can weather it.

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starter
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Re: Bought a home a year back, thinking of selling now

Post by starter » Fri Aug 23, 2019 5:22 pm

Watty wrote:
Fri Aug 23, 2019 4:04 pm
starter wrote:
Fri Aug 23, 2019 12:19 pm
Both I and my better half work in bay area tech companies with overall tc 700k, base 400k.
We bought a home last year (around the market peak) that we loved for around 1.5 mn. We had just enough funds for 20% downpayment and now have around 250k in funds (cash in bank, 401k, vested stocks).
You may be looking at the wrong place to figure out why you are feeling uneasy. The thing that strikes me is that your net worth seems to only be around $500K. If you have been making anywhere near your current income for a while then in the last few years you would have had several million dollars in gross income. A lot of that went to pay taxes but where did the rest of it go? It could be that your other spending is more of a problem than the house.
starter wrote:
Fri Aug 23, 2019 12:19 pm
I know this may sound insane to some but how rational is it to stop the loss from a bad investment and start over again rather than remain invested and increase your potential losses? Feel like i could use some perspective from seasoned folks here.
It would be good to make a spreadsheet and put some hard numbers on what your options are and to compare the costs of earning the house to what it renting a different place that you could live in.

This is just guesswork but as a start I would think the numbers might look something like this;
1) interest on the mortgage. $1.2 million x 4% = $48,000
2) property tax at 1.5% of the property value. $1.5 x 1.5%= $22,500
3) Property maintenance at 1% = $15,000

You could also have had your down payment money invested and earning money but that would be hard to quantify.

That adds up to $85,500 a year. If you divide that by 12 that is $7,125 a month so a big question is what sort of place you could rent around $7K a month.

With the changes to the tax laws you might not have much tax savings so that would also be good to put a number on.

You would want to do that math with your real numbers but once you see them then you could better decide if what you want to do.

I lived in Silicon Valley decades ago and one thing that amazed me even back then was not how expensive the housing was but also how little you got for your money. If your $1.5 million only got you a dumpy 50 year old small house on a tiny lot part of what you may be feeling could be a disappointment with your lifestyle in your current house if it is not very nice.

If your current house is not something that you can picture still being in ten years from now then you will be paying the transactions costs to sell it sooner or later so it makes little difference if you pay the cost to sell the house now or ten years from now. If that is the case then I would ignore the transaction costs in your decision.
starter wrote:
Fri Aug 23, 2019 12:19 pm
I know this may sound insane to some but how rational is it to stop the loss from a bad investment and start over again rather than remain invested and increase your potential losses? Feel like i could use some perspective from seasoned folks here.
Very sane since you are concerned about what would happen if one of you loses their job and cannot find a similar one there.

One big problem is that if the job market changes and then it is very likely that the housing market would be be bad there too since fewer people will be spending big bucks on houses like yours. In a bad housing market prices not only go down but it can be difficult or impossible to sell a house without reducing it down to the level that distressed sales are happening at like foreclosures or from an estate after someone dies.

If you are renting and saving and you run into job problems then you could move somewhere that you could find jobs and maybe buy a nice house for cash.
Thanks we do think we should be able to stay in this house for a decade or so. The fear is not only job loss but with home values trending down, losing money in this investment and not be able to recover in the near future. I would take the advice of treating it as an expense and not an investment but then its hard to keep putting money into an asset that is losing value.

calisaver
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Re: Bought a home a year back, thinking of selling now

Post by calisaver » Fri Aug 23, 2019 5:27 pm

One thing that's always useful is to compare your total monthly expenses for the home vs. how much you would spend on rent on a similar home. Most likely it's somewhat similar?

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Nate79
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Re: Bought a home a year back, thinking of selling now

Post by Nate79 » Fri Aug 23, 2019 5:29 pm

If you are worried about a minor drop in house value how are you going to feel when stocks have a major drop >>50%) and the economy is in a recession?

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Re: Bought a home a year back, thinking of selling now

Post by fru-gal » Fri Aug 23, 2019 5:34 pm

starter wrote:
Fri Aug 23, 2019 12:19 pm
Facts
Both I and my better half work in bay area tech companies with overall tc 700k, base 400k.
We bought a home last year (around the market peak) that we loved for around 1.5 mn.
I thought you said you loved the house for 1.5 months. Then I thought it was maybe 1.5 minutes. Then I deduced from other posts that it was a $1.5 million price...

What's tc? I now assume tc is total compensation. You guys make $700,000 a year and you're worrying about a $1.5 million house for no apparent reason?

And why haven't you saved a giant amount of money on those salaries? If you had a pile of money stashed away, you would be less anxious about this. Are you spending like there's no tomorrow?

In the bay area a $1.5 million house is not a luxury house.

I don't know what has triggered this anxiety, but I would look at that first and would really ramp up your savings, Perhaps your anxiety is because you realize you are spending far too much and saving far too little.

rage_phish
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Re: Bought a home a year back, thinking of selling now

Post by rage_phish » Fri Aug 23, 2019 5:39 pm

I’d assume half that take home would still afford the house should one person lose their job

just1question
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Re: Bought a home a year back, thinking of selling now

Post by just1question » Fri Aug 23, 2019 6:06 pm

First and foremost, congratulations. You have purchased a home in one of the most highly desired areas of the country. Don't forget that. I'm sure there are many people living in the Bay area that wish they could say the same.

What I'm not hearing is that you hate the house or the neighborhood or wish you bought in a different area. Basically, it sounds like you are stressed about the mortgage and other financial obligations (taxes, etc) given a possible impending recession. But here is the thing. No matter if you have a 30-year or 15-year mortgage, there is an overwhelming chance that there will be an economic downturn at some point. If not now, there will be one later. Everyone goes through it. I had a mortgage during the dot-com burst, and then 2008-09. I made it through both. You will too.

Fortunately, you have at least two things working in your favor. First, you paid approximately 2x your annual salary (with bonus) for the house, so you didn't overreach. Second, I have to assume that if your current company is paying you (and your spouse) such a high salary and you are still relatively young, finding employment elsewhere might not be such a challenge, should the situation arise. It's not like the possibility of you or your spouse losing your job will go away in a few years. If you are going to lose your job while having a mortgage, IMO it's better to be young, not an old fart like me.

Stress sucks. Stress over finances really sucks. But if you sell the house now, the stress will be there later when you purchase again. Then, there will be the stress of renting, and the stress of worrying that the housing market prices will appreciate while you are on the sidelines.

If you and your spouse like the house, stick it through. Maybe trying to pay extra money towards the principal each month and cutting expenses elsewhere will help alleviate the stress.

Best of luck. Try to stay positive (easier said than done).

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starter
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Re: Bought a home a year back, thinking of selling now

Post by starter » Fri Aug 23, 2019 6:15 pm

fru-gal wrote:
Fri Aug 23, 2019 5:34 pm
starter wrote:
Fri Aug 23, 2019 12:19 pm
Facts
Both I and my better half work in bay area tech companies with overall tc 700k, base 400k.
We bought a home last year (around the market peak) that we loved for around 1.5 mn.
I thought you said you loved the house for 1.5 months. Then I thought it was maybe 1.5 minutes. Then I deduced from other posts that it was a $1.5 million price...

What's tc? I now assume tc is total compensation. You guys make $700,000 a year and you're worrying about a $1.5 million house for no apparent reason?

And why haven't you saved a giant amount of money on those salaries? If you had a pile of money stashed away, you would be less anxious about this. Are you spending like there's no tomorrow?

In the bay area a $1.5 million house is not a luxury house.

I don't know what has triggered this anxiety, but I would look at that first and would really ramp up your savings, Perhaps your anxiety is because you realize you are spending far too much and saving far too little.
We moved here few years back, dont spend a lot and that is how we were able to save for the downpayment in a few years only. Also one of us recently got a major bump which has made the numbers a bit more favorable. 700k includes 300k stocks which may go down in recession.

For now, to cure the anxiety and to deal with economic downturn, we have increased our savings. But still feel I would have been better off just paying the rent and saving one person's salary and not be that vulnerable to market volatility :).

JW-Retired
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Re: Bought a home a year back, thinking of selling now

Post by JW-Retired » Fri Aug 23, 2019 6:48 pm

starter wrote:
Fri Aug 23, 2019 12:19 pm
Both I and my better half work in bay area tech companies with overall tc 700k, base 400k.
We bought a home last year (around the market peak) that we loved for around 1.5 mn. We had just enough funds for 20% downpayment and now have around 250k in funds (cash in bank, 401k, vested stocks). On the hindsight, I do feel it was a very expensive home and we were not financially astute to see through it.
....................
Question
I know this may sound insane to some but how rational is it to stop the loss from a bad investment and start over again.........
Why do you say it was very expensive? I live near the middle of Silicon valley and your 1.5 mil seems a whopping bargain if it's anywhere near a doable commuting range of your job. The old 1950's track houses are going for 2.5 mil. :oops:
JW
Retired at Last

Frisco Kid
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Re: Bought a home a year back, thinking of selling now

Post by Frisco Kid » Sat Aug 24, 2019 8:42 am

I suspect OP is debt adverse and a worrier as many people are.

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Watty
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Re: Bought a home a year back, thinking of selling now

Post by Watty » Sat Aug 24, 2019 10:24 am

Frisco Kid wrote:
Sat Aug 24, 2019 8:42 am
I suspect OP is debt adverse and a worrier as many people are.
They have about $1.2 million in debt and the median home price in San Jose/Sunnyvale/Santa Clara dropped 5.3% over the last year.

Pdf link
https://www.nar.realtor/sites/default/f ... -08-07.pdf

The have a net worth of around $500k and while I am not predicting it a 33% drop in their home price to be "only" a million dollars would leave them with a net worth of around $0 after having had a higher income than many Fortune 500 executives.

That would be way out of my comfort zone.

That is a lot different than someone there who bought a $1.5 million dollar home for cash.

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starter
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Re: Bought a home a year back, thinking of selling now

Post by starter » Wed Aug 28, 2019 12:14 pm

This has been my concern - prices going down, impending recession. I can say I worry a lot but in this case may be because i can see through the next few years being rough - recession, drop in home price. I see a lot of good suggestions but I wonder for folks who have seen their home prices go down -> How can you ever enjoy being in a home you know you could have got cheaper if you would have waited some time? Or is it that you get used to it and stop checking the estimate after some time?
Last edited by starter on Wed Aug 28, 2019 12:21 pm, edited 1 time in total.

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starter
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Re: Bought a home a year back, thinking of selling now

Post by starter » Wed Aug 28, 2019 12:20 pm

ohai wrote:
Fri Aug 23, 2019 1:38 pm
If you sell now, you take a 10% loss on transaction costs. You have to lose a lot of home value to make up for that.

Now, there could be other reasons to not want to own the house. For example, Mr Money Mustache justifies selling his house by saying the rental yield would be less than 2% (it's not worth owning and effectively renting from himself). Just make sure your decision is driven by economics and not fear.
true, I do understand the transaction cost and plus with the market lately slowing down, I might have to sell at a lesser price. So > 10% loss for sure.
But then I still save on the mortgage + property tax payment if I go back to renting (for time being). Better than putting money in a depreciating asset?? I pay around 5k in interest, property tax payment, which is around 60k expense yearly. If i sell the house in 5 years, it has to go upto to 2 mn for me to break even (300k interest+prop tax, transaction costs). And thats considering the recession does not happen or does not further take down the prices.

SC Anteater
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Re: Bought a home a year back, thinking of selling now

Post by SC Anteater » Wed Aug 28, 2019 12:27 pm

starter wrote:
Wed Aug 28, 2019 12:14 pm
This has been my concern - prices going down, impending recession. I can say I worry a lot but in this case may be because i can see through the next few years being rough - recession, drop in home price. I see a lot of good suggestions but I wonder for folks who have seen their home prices go down -> How can you ever enjoy being in a home you know you could have got cheaper if you would have waited some time? Or is it that you get used to it and stop checking the estimate after some time?
Stop checking. They'll go up again. House prices went down in 2008-2011. Do you think anyone who stayed put in their bay area house remembers that now?

researcher
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Re: Bought a home a year back, thinking of selling now

Post by researcher » Wed Aug 28, 2019 12:31 pm

starter wrote:
Wed Aug 28, 2019 12:20 pm
But then I still save on the mortgage + property tax payment if I go back to renting (for time being). Better than putting money in a depreciating asset?? I pay around 5k in interest, property tax payment, which is around 60k expense yearly. If i sell the house in 5 years, it has to go upto to 2 mn for me to break even (300k interest+prop tax, transaction costs). And thats considering the recession does not happen or does not further take down the prices.
You are not thinking this through fully.

How much will it cost you to rent a comparable property right now?
And how much do you expect rent to increase over the next 5 years?

You are willing to "waste" thousands of dollars on rent (which goes to paying the landord's taxes/interest), but are unwilling to spend money on interest/taxes for a property you own.

sd323232
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Re: Bought a home a year back, thinking of selling now

Post by sd323232 » Wed Aug 28, 2019 12:33 pm

starter wrote:
Wed Aug 28, 2019 12:20 pm
ohai wrote:
Fri Aug 23, 2019 1:38 pm
If you sell now, you take a 10% loss on transaction costs. You have to lose a lot of home value to make up for that.

Now, there could be other reasons to not want to own the house. For example, Mr Money Mustache justifies selling his house by saying the rental yield would be less than 2% (it's not worth owning and effectively renting from himself). Just make sure your decision is driven by economics and not fear.
true, I do understand the transaction cost and plus with the market lately slowing down, I might have to sell at a lesser price. So > 10% loss for sure.
But then I still save on the mortgage + property tax payment if I go back to renting (for time being). Better than putting money in a depreciating asset?? I pay around 5k in interest, property tax payment, which is around 60k expense yearly. If i sell the house in 5 years, it has to go upto to 2 mn for me to break even (300k interest+prop tax, transaction costs). And thats considering the recession does not happen or does not further take down the prices.
You buying high and selling low here. You will never make money this way. Tune out the noise and keep the house. You will be fine.

sbaywriter
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Re: Bought a home a year back, thinking of selling now

Post by sbaywriter » Wed Aug 28, 2019 12:34 pm

I pay around 5k in interest, property tax payment, which is around 60k expense yearly. If i sell the house in 5 years, it has to go upto to 2 mn for me to break even (300k interest+prop tax, transaction costs).

If you are not paying this 60k yearly in mortage etc, you would be paying rent, so you would have to deduct your projected rent from the 300k when figuring out how much it is "costing you" to own this house. And landlords do raise rents.

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whodidntante
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Re: Bought a home a year back, thinking of selling now

Post by whodidntante » Wed Aug 28, 2019 12:41 pm

I've noticed that people who spend a lot of money on a house tend to call it a home. I don't think I could stand to tie up that much money in a house. The economics of the bay area fascinate me in much the same way that it can be fun to watch a huge hornet's nest, unless you're too close and it gets disturbed.

chevca
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Re: Bought a home a year back, thinking of selling now

Post by chevca » Wed Aug 28, 2019 2:57 pm

starter wrote:
Wed Aug 28, 2019 12:20 pm
ohai wrote:
Fri Aug 23, 2019 1:38 pm
If you sell now, you take a 10% loss on transaction costs. You have to lose a lot of home value to make up for that.

Now, there could be other reasons to not want to own the house. For example, Mr Money Mustache justifies selling his house by saying the rental yield would be less than 2% (it's not worth owning and effectively renting from himself). Just make sure your decision is driven by economics and not fear.
true, I do understand the transaction cost and plus with the market lately slowing down, I might have to sell at a lesser price. So > 10% loss for sure.
But then I still save on the mortgage + property tax payment if I go back to renting (for time being). Better than putting money in a depreciating asset?? I pay around 5k in interest, property tax payment, which is around 60k expense yearly. If i sell the house in 5 years, it has to go upto to 2 mn for me to break even (300k interest+prop tax, transaction costs). And thats considering the recession does not happen or does not further take down the prices.
How long would it take you to break even as a renter? As a renter, part of your rent goes to property taxes and insurance.... just someone else's bills. I get a kick out of that renters argument... like the landlord is just going to cover those on their own out of the goodness of their heart. Just because you as a renter don't write a check to the county or insurance company, doesn't mean you don't pay those bills effectively.

If you bought a house to make money, or break even, you probably shouldn't have bought a house. We, as homeowners, hope the value of the house goes up over the long run. But, things like taxes, insurance, maintenance, additions or upgrades, and so on are just the costs of owning a house. Worrying about breaking even on things like that will just drive you insane.

Guess what? The housing market doesn't only go up. It can go down as well... just like the late 2000's. Also part of the deal we as homeowners have to accept. If you only want to be a homeowner when the market is going up... well, again, why did you buy a house?

I don't know you, but from your posts it seems you will never enjoy home ownership if you constantly worry about the value only going up and "breaking even". Maybe you should sell. But, not just for the reason that the market/value might go down.

harrychan
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Re: Bought a home a year back, thinking of selling now

Post by harrychan » Wed Aug 28, 2019 3:04 pm

starter wrote:
Fri Aug 23, 2019 5:22 pm

Thanks we do think we should be able to stay in this house for a decade or so. The fear is not only job loss but with home values trending down, losing money in this investment and not be able to recover in the near future. I would take the advice of treating it as an expense and not an investment but then its hard to keep putting money into an asset that is losing value.
You purchased a home, not a car. Think of it this way. The only way you will lose money is if the depreciation is greater than the amount of money you would have spent on rent at the point of sale. Obviously there are other costs such as tax deduction and opportunity costs which I'm not factoring here. If you sell now, you are guaranteed to lose money. When my DW and I purchase our home, there were no telling what would happen back in 2010. We told ourselves to make sure we can live in our home at the min. 10 years and be ok with home prices dropping over 20% in the short term.
This is not legal or certified financial advice but you know that already.

spinj
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Re: Bought a home a year back, thinking of selling now

Post by spinj » Wed Aug 28, 2019 5:45 pm

CA is a non-recorse state so it might help to think of it this way. If you both loose your jobs and the house drops the bank can't come after your other assets in which case you'll probably have 6 months payment/rent free.

I bought in 07 in the bay area with 5% down and sold in 2014 even in 2014 I wasn't sure if I'd pay at closing, barely squeaked by with a minor loss. I don't think I'll forget that experience but the realization that it'd take the bank a while to foreclose/evict me gave me comfort that living in a rental wouldn't have.

If you bought to make money then sell and move into a rental then if you still want real estate buy a REIT or an out-of-state rental.

My guess is you bought not because you wanted to make money, but because
  1. You were worried you'd priced out (probably right) and
  2. You'd like to modify the house as you see fit.
Assuming it's (a) what would you do otherwise? Sell and purchase another in a year or two? What happens if the market doesn't drop and instead goes up another 20%? Then when would you buy again?

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Re: Bought a home a year back, thinking of selling now

Post by rage_phish » Wed Aug 28, 2019 6:10 pm

starter wrote:
Wed Aug 28, 2019 12:14 pm
This has been my concern - prices going down, impending recession. I can say I worry a lot but in this case may be because i can see through the next few years being rough - recession, drop in home price. I see a lot of good suggestions but I wonder for folks who have seen their home prices go down -> How can you ever enjoy being in a home you know you could have got cheaper if you would have waited some time? Or is it that you get used to it and stop checking the estimate after some time?
Happened to my townhouse here in the Bay Area. Bought in ‘08. Was later underwater which wasn’t cool. But I also wasn’t looking to sell. Ended up selling it later at a profit. It all worked out

rage_phish
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Re: Bought a home a year back, thinking of selling now

Post by rage_phish » Wed Aug 28, 2019 6:12 pm

whodidntante wrote:
Wed Aug 28, 2019 12:41 pm
I've noticed that people who spend a lot of money on a house tend to call it a home. I don't think I could stand to tie up that much money in a house. The economics of the bay area fascinate me in much the same way that it can be fun to watch a huge hornet's nest, unless you're too close and it gets disturbed.


Honestly, it just seems normal to me since it’s all I know

veindoc
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Re: Bought a home a year back, thinking of selling now

Post by veindoc » Wed Aug 28, 2019 8:04 pm

starter wrote:
Wed Aug 28, 2019 12:14 pm
This has been my concern - prices going down, impending recession. I can say I worry a lot but in this case may be because i can see through the next few years being rough - recession, drop in home price. I see a lot of good suggestions but I wonder for folks who have seen their home prices go down -> How can you ever enjoy being in a home you know you could have got cheaper if you would have waited some time? Or is it that you get used to it and stop checking the estimate after some time?
We overbought. A realtor in this neighborhood sends out quarterly reports on sales in the neighborhood and we realized our home was $50-$75k over the last previous sales on similar sized homes. Interestingly it appraised for a little bit more than we bought. In any case, we got the sinking feeling in our stomach for a week or so and then moved on. We bought the house to live in, raise our family, and to enjoy the community and school system. It was never meant to be an investment. And the money didn’t change that. I suppose if there was some reluctance to buying the home in the first place we would have been left with that bitter taste in our mouth for longer. This is why I always respond to threads on home buying where people are seemingly buying the home because they feel like they should buy a home. Or they want to buy a home before they get priced out. It will never live up to the expectation.

We bought a home because I wanted to be able to decorate my home to my liking. I wanted central air and heat. I wanted a garden. My husband wanted an attached garage, a dry basement, and land. So the price dip was a secondary concern. We got everything we wanted!

I suppose one way the price dip affected us is that we didn’t pour a ton of money in remodeling initially. The house was nice enough with a few things not exactly our style or desire but certainly liveable. Knowing our home probably would not sell for what we purchased if dampened our enthusiasm to install a 25k patio or get the cooktop out of the island but the enthusiasm to change those things was not so high to begin with.

naples09
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Re: Bought a home a year back, thinking of selling now

Post by naples09 » Wed Aug 28, 2019 8:35 pm

I think you should sell the house. Some people are not wired to be homeowners. You might be one of them.


Good luck!

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sunny_socal
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Re: Bought a home a year back, thinking of selling now

Post by sunny_socal » Wed Aug 28, 2019 8:52 pm

There might be a recession looming - or there might not! The media is highly biased and motivated to achieve certain outcomes, what makes you think they're not making up stories about the 'recession'?

Bogleheads guard themselves against recessions/depressions by diversifying and saving. Financial hardship becomes a buying opportunity :beer

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starter
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Re: Bought a home a year back, thinking of selling now

Post by starter » Fri Aug 30, 2019 5:22 pm

veindoc wrote:
Wed Aug 28, 2019 8:04 pm
starter wrote:
Wed Aug 28, 2019 12:14 pm
This has been my concern - prices going down, impending recession. I can say I worry a lot but in this case may be because i can see through the next few years being rough - recession, drop in home price. I see a lot of good suggestions but I wonder for folks who have seen their home prices go down -> How can you ever enjoy being in a home you know you could have got cheaper if you would have waited some time? Or is it that you get used to it and stop checking the estimate after some time?
We overbought. A realtor in this neighborhood sends out quarterly reports on sales in the neighborhood and we realized our home was $50-$75k over the last previous sales on similar sized homes. Interestingly it appraised for a little bit more than we bought. In any case, we got the sinking feeling in our stomach for a week or so and then moved on. We bought the house to live in, raise our family, and to enjoy the community and school system. It was never meant to be an investment. And the money didn’t change that. I suppose if there was some reluctance to buying the home in the first place we would have been left with that bitter taste in our mouth for longer. This is why I always respond to threads on home buying where people are seemingly buying the home because they feel like they should buy a home. Or they want to buy a home before they get priced out. It will never live up to the expectation.

We bought a home because I wanted to be able to decorate my home to my liking. I wanted central air and heat. I wanted a garden. My husband wanted an attached garage, a dry basement, and land. So the price dip was a secondary concern. We got everything we wanted!

I suppose one way the price dip affected us is that we didn’t pour a ton of money in remodeling initially. The house was nice enough with a few things not exactly our style or desire but certainly liveable. Knowing our home probably would not sell for what we purchased if dampened our enthusiasm to install a 25k patio or get the cooktop out of the island but the enthusiasm to change those things was not so high to begin with.
Thanks for your comment. We may have overbought too and i can totally relate to your experience. hoping that sinking feeling will go away, it already has to some extent.

fareastwarriors
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Re: Bought a home a year back, thinking of selling now

Post by fareastwarriors » Fri Aug 30, 2019 7:31 pm

starter wrote:
Wed Aug 28, 2019 12:14 pm
This has been my concern - prices going down, impending recession. I can say I worry a lot but in this case may be because i can see through the next few years being rough - recession, drop in home price. I see a lot of good suggestions but I wonder for folks who have seen their home prices go down -> How can you ever enjoy being in a home you know you could have got cheaper if you would have waited some time? Or is it that you get used to it and stop checking the estimate after some time?
could've, would've, should've. So what if home prices drop 20/30%.

You can enjoy it because of the people in it. Build that big emergency fund and get a HELOC. These cushions will help you feel more secure.

fareastwarriors
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Re: Bought a home a year back, thinking of selling now

Post by fareastwarriors » Fri Aug 30, 2019 7:42 pm

whodidntante wrote:
Wed Aug 28, 2019 12:41 pm
I've noticed that people who spend a lot of money on a house tend to call it a home. I don't think I could stand to tie up that much money in a house. The economics of the bay area fascinate me in much the same way that it can be fun to watch a huge hornet's nest, unless you're too close and it gets disturbed.

Perhaps initially. If the person maxes out their 401k and do their IRA over the course of their career. Then retirement funds will likely be many times bigger than their 1-2 million house .

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