“It’s my home and I don’t care about the market.”
You may be one of the thousands of fortunate people who have said this and meant it from the bottom of your heart. To you I say, “agreed and understood.”
For the many people not as fortunate or for those that were not able to financially plan out the next 10 years in clear sight, there are considerations to be faced, including in many cases, “how will I make my payments and pay my taxes from my retirement and social security?” If you are among the fortunate, it may be difficult to understand the pain of needing to let go of the family home after being turned down for an equity line or refinance.
Of course, the reverse mortgage is another consideration, but it is not as perfect of a remedy as it might appear after looking at it from all angles. If it becomes apparent that sooner or later you as a homeowner could be up against a wall, at least you will probably be blessed with a huge equity from which you can invest well and live off the income from your investment. Now the important consideration is timing and where to relocate; whether to rent or buy a place in a less expensive location.
First and most important is timing. Everyone’s gut will tell them, hold on as long as you can. This is only natural. The question is why? Instinctually we feel the longer we wait, the more our homes will appreciate, not to mention that procrastination is natural and common amongst most people.
The reality is that the home values have declined many times, and they will again. No one knows exactly when that will happen, but usually the writing is on the walls and warning signs are generally easy to read. Call your financial planner or other trusted advisors to discuss the warning signs and also the strategy that fits best for you. The “bury your head like an ostrich” approach is definitely not advisable.
A friend of mine with three young children just decided to sell their home and move to an area where he could pay off his existing mortgage and pay all cash for a home with a lower price point. Another client decided to sell now and put his million dollars to work with his investment broker, in the mean time renting a comfortable but less extravagant home. The old expression of “A bird in the hand is worth two birds in the bush” is a good one to think about when the market is going crazy. When the market is being artificially driven by foreign money, developers investing with other people’s money (not their own money) and investors investing pension money and reorganizing portfolio funds, it’s time to pay attention. People will not be able to sustain these payments if interest rates go up and with tax deductions eliminated. The refunds that were anticipated and previously received will take a big bite.
Again, if you are perfectly set, I agree…the market is what it is! Sometimes it’s up, sometimes it’s down. But for those who are not set for life…please pay close attention. I’m always happy to answer questions and make referrals.
Call me at (310) 963-9944 or email me without obligation ron@ronwynn.com.
