Southern California Housing Market

[Michelle German]

The Southern California housing market is going crazy right now. Houses are selling for well over asking price. My husband would like to take advantage of this market right now and sell our house and live in an apartment until the market slows down. We could probably approximately make $500k from the sale. 

Our original goal was to pay off the house (less than 10 years left on mortgage), retire, rent it out and travel the world. I am concerned, that even if the market goes down, we will never be able to get back into the Southern California housing market. Some of our retirement depends on the equity in the house. 

Is my husband being too risky or am I being too conservative? We are both in our mid 50s and don’t want to make a bad decision.

Thanks.

[Tony Kim]

Originally posted by @Michelle German:

The Southern California housing market is going crazy right now. Houses are selling for well over asking price. My husband would like to take advantage of this market right now and sell our house and live in an apartment until the market slows down. We could probably approximately make $500k from the sale. 

Our original goal was to pay off the house (less than 10 years left on mortgage), retire, rent it out and travel the world. I am concerned, that even if the market goes down, we will never be able to get back into the Southern California housing market. Some of our retirement depends on the equity in the house. 

Is my husband being too risky or am I being too conservative? We are both in our mid 50s and don’t want to make a bad decision.

Thanks.

My flooring contractor had the same idea and sold his house and moved his family into an apartment....back in 2016! Poor guy... I knew it was a dumb move the moment he told me.

So is your husband's plan to cash-out on the current housing craze, lay low in an apartment for a while, and then re-enter the Los Angeles market at a later date? Since you say that you are worried about the future entry-costs of the So Cal market, I'm assuming the plan is to repurchase at a later date? If that's his plan, I think he's chasing fool's gold.  

While it's true that RE goes in cycles, and we've been talking about the next cycle for 5 years now, it's usually a gradual slow-down and not the kind that happened 15 years ago. Since you're in LA, I'm going to assume your house will sell for at least a million. Your transaction and moving costs alone will creep into 6-figures. Also, when you purchase a home later on, you will lose the benefit of Prop 13. Depending on how long you've held your current home, you are probably aren't paying anywhere near $1,041 per month in property taxes. However, if you buy a house later on for around a million, that's around how much you will be paying.

We held on to one of our condos in a prime LA location because we bought it at a very low price at the height of the GFC and the property taxes we pay are unbelievably low. When we retire, we plan to make this our primary because we will be out of the country 6 months out of the year.