Don't Gamble on Your House

I found an interesting piece today at CNN/Money that talked about the following phenomenon happening as part of the current "housing bubble":

"The biggest gamblers are attempting an extremely tricky maneuver, according to Christian Coleman, district director for Zip Realty, a publicly traded real estate broker with offices in 10 states. They're selling their houses with the intention of buying back into the market at a lower price in a couple of years or so -- after the bubble bursts, they believe.

The advice from the real estate industry pros is: Resist this temptation. It's almost impossible to time this market."

Have people lost all common sense? Does this really sound like a good idea to anyone?

This is one time I agree with the "experts."

Really, when it comes down to it, money management is very simple. Stick with the tried and true principles of spending less than you make and doing so over a long period of time. That simple advice will steadily increase your net worth over the years and you won't have to try something crazy (like the idea above) to get rich.

Comments

[Sandeep]

I read in couple of finance websites that in some markets it makes more sense to rent rather than buy at this moment. Don't you think selling your house (which is probably overpriced right now) and renting till market cools down a little could actually be a good idea for those markets?

[FMF]

Sandeep --

There are circumstances under which almost any financial move makes sense. However, timing the housing market is like timing the stock market -- it's nearly impossible to do. So someone who sells today and wants to wait until the market cools down a bit may be waiting for a loooooong time.

FMF

[OL]

Besides the timing issue, there is major cost involved in doing this. It's not a simple stock commission. You have to pay for two moves plus commissions and taxes. Not to mention the fact that when you buy back in you will probably incur additional expense to get the new house how you want it. I doubt most people factor these costs in.

People forget that your primary residence is a home first and an investment second.

--OL
http://optimizedliving.com

[Hazzard]

It would be interesting to see some statistics that show how much real estate has lost value in the short term and long term. From my understanding, it's only been in some parts of the overall market, and they've always started heading north again.

I personally wouldn't bet on the market coming down that far, or that fast. No doubt that some markets might be overheated, but if you are going to live in an area for a long time (or at least you think you are), waiting might not work out for you.

If you are a pretty "mobile" person and tend not to settle in one area, renting probably is the right move. I guess it's just a personal decision.

Hazzard
http://elym.blogspot.com

[jim]

If anything, the "better" way to cash out is to sell when you're in Cali and move to Pennsylvania. :)

[Dr. Fager]

OL

The first lesson in Real Estate Appraisal 101 is that real estate is the first thing to suffer in a major economic downturn and the last thing to recover.

Bear in mind that we haven't had a MAJOR economic downturn in a long time.

[nick]

Following a budget with surplus is the rule of survival, exploring new opportunities is the road to the rich.

Although I don't agree with the tactic discussed here, but trying to earn more is at least as important, if not more, to wealth building.