Is this sell and rent strategy happening nationwide? I can tell you that this is my personal strategy - sold in July 2005 for 100% gain, and rented vacation rentals since for 50% or so of the cost of ownership.
I really think this is going to be important for the soon-to-retire baby-boomers. Could you sleep at night knowing that 80% of your net worth was in one asset (your house)? That'd be like 80% of your net worth being in copper, or Cisco.
Two things - do this calculator from CEPR on owning vs. renting. The key variable they're using is the assumption that housing reverts back to the mean (which of course one day it will). But do the calculator - it's freightening if correct.
http://www.cepr.net/calculators/hb/hcc.html
Next, here's the article from the Arizona Republic today on this sell and rent strategy. Read the whole thing. I don't believe the media is causing the crash, but I do believe that awareness via stories like these plants seeds of doubt, and also seeds of wisdom.
Kurt Nishimura is taking a calculated ride on Arizona's real estate wave. He sold his home in the Willo neighborhood, believing its value has topped out, and is renting an apartment in the Arcadia area for a year, hoping to buy something after the wave has crested.
Nishimura is not alone. A few people are cashing in, some for good, others to sit it out for a while, hoping to beat the market.
They're betting on a crash, on the belief that the market will soon cool, and there will be bargains for the picking.
The idea: Get your money out near the top and, if you're near retirement, keep it; if you're not, wait until the market drops to get back in.
January 15, 2006
Gotta know when to hold 'em, know when to fold 'em: Homeowners cash in, hope market cools off
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I hope I don't see my rent going up because of this. I got outpriced in the housing market, I hate to see myself outpriced at rent. That will be a big mess for my family.
Excellent link. I checked out the home we sold in one of the most anemic real-estate markets in the country. It turns out even there where a nice 1000 square foot 3BR home sold for $120,000... the person who bought it would have been better off renting unless they _knew_ they would keep it for at least 10 years. Who has the kind of job security these days? Think back 10 years, how often would 1 or both partners of a working couple have to relocate to keep their career?
--Outsourced myself out of the rust belt
I agree with the analysis that there is a bubble and it is bursting. However, citing CEPR really detracts from anyone's credibility. Seriously, do the research before you cite to someone. CEPR is a liberal political organization that has been latching onto any way it can for the last four years to try to somehow claim the President is tanking the economy. Their "experts" are mostly Democrat hacks, their analysis usually borders on laughable, and their housing "calculator" has one fixed depreciation factor for each area that appears to be tied completely to inflation.
There IS a housing bubble, but CEPR is a joke--you might as well be citing to Ralph Nader's stock market predictions or the AFL-CIO's unemployment forecasts!
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