DW will be here several more years for various commitments, then we’ll hightail it to a less expensive area. We both turn 68 this year and expect the equity to really jack up our retirement savings.
At some point, a bird in the hand may be better than waiting for that bird to fatten further before plucking. That’s one reason why we are selling our rental property and banking the profit. We are likely leaving money on the table in terms of collecting escalating rents, but we are also selling into an attractive market. There are developments coming on line and expanding inventory in a year or two, as well as a probable change in zoning that would make our property more attractive to an investor, but would require investment and work to realize that potential. And of course, while inflation makes the house prices go up, it butts heads with rising mortgage rates as well, both suppressing affordability as does the ever escalating property assessments and higher taxes. This market is great, and next year’s is projected to be even better, but who knows? And how about the severe weather events, which seem to be increasing in number and intensity?
This does not get us out of real estate altogether, but it does lower our exposure to this type of investment, without impacting our personal life other than to lower our workload and fatten our bank account. As retirees, it makes sense to lower our risk in investments.
Real estate can be a great investment if the market you sell into is a good one. I never want to have to sell a property quickly, always want to chose my timing to put it on the market. Make sure you don’t miss a good market, particularly if you might not be able to wait for the next good market to arrive.
In 1997, I paid $215K for this house; per Zillow it went to $600K a year ago and is almost $800K now.
I would point out that your CAGR through early 2021 (up through $600k) was about 4.5% with an increase of 33% in the last year. Even a 4.5% CAGR is significantly above the 2% - 2.5% (depending on which inflation measure you use) inflation that occurred during that time. Typically, housing appreciates at or slightly above inflation. The higher increases in Austin might be sustainable since Austin has seen a lot of growth.
We both turn 68 this year and expect the equity to really jack up our retirement savings.
Hopefully, that expectation will hold for you. I certainly wouldn’t be counting on the last $200k if I were you. In most areas of the country, the price increases until the pandemic seem mostly sustainable, even if they were above inflation. The price increases in 2021/22 seem to be driven mostly by a supply problem and are likely unsustainable. Depending on how the supply gets back in balance with the demand (i.e. how much is demand decreases vs. supply increases) and if they actually get back into balance or if they overshoot, we could see either a soft landing, where we see some volatility in the prices, but they mostly even out at current levels for a while, or a hard landing, where prices drop back down to pre-pandemic levels, if not below. Given that inflation and supply chain issues are driving other costs of living up faster than wages have increased, in combination with interest rate increases, I would expect that demand will actually drop pretty hard, as fewer people will be able to afford houses. I would further expect that since every developer seems to be announcing new developments (as evidenced by your article and additional commentary), that supply will shoot up just at the time demand is dropping and we will end up out of balance the other way, with too much supply and not enough demand. That’s the hard landing scenario, IMO - which is why I caution you to not count on that last $200k.
we are very, very fortunate to have hit the housing market just right.
I would further point out that you can’t say you’ve hit the housing market ‘just right’ until you actually sell.
Joel was very lucky, and he admits it. He bought in 2012, which was at/near the bottom for the Seattle area, and managed to catch this uptick when he was ready to sell.
Well, the craziness has been somewhat deflated. Joel’s common wall neighbor put their mostly mirror image townhouse on the market. They had made some changes that made their unit less desirable, IMO - in particular, they had made some structural changes to the kitchen and the 2nd floor that added about 80 square feet to their unit, but that required support columns in the garage that effectively turned a 2 car garage into a 1 car garage, albeit with extra room for storage. Their unit had also been rented out for about 3 or 4 years, and wasn’t as nicely updated as Joel’s was. They put theirs on the market for $950k, and ended up closing at $905k, 2 months after it went on the market. In comparison, Joel’s went on the market for $889k and closed for $1.21MM about 3 1/2 weeks after it was listed. Their buyer used a mortgage, while Joel’s paid cash. Here are the two listings:
Joel’s 13223 NE 89th St, Redmond, WA 98052 | MLS# 1894278 | Redfin
Neighboring unit 13219 NE 89th St, Redmond, WA 98052 | MLS# 1963016 | Redfin
My granddaughter has been looking around here for many months. She’d pretty much given up… crazy prices, nothing new on the market. Suddenly she had three houses to look at.