Selling Sucked But Renting’s Grand

Written by Kristen Kemp’s husband Johan Svenson. He admits he’s not a writer, but he works in finance:
In the Fall of 2008, we tried to sell our large, lovely house at left. We wanted to move from busy Bloomfield Avenue to a quiet and kid-friendly neighborhood. We had no idea what we were doing, and we made big mistakes. We listed the house crazy high–$675,000–at the suggestion of our then broker. We also waited too long to put it on the market thinking the summer would be slow. We did it in early fall.
Mind you, this was 2008. The first bit of advice I want to give is this: Contrary to popular belief, there is no ideal season to sell a house. Data shows that a consistent number of houses are sold each month in Montclair. Our house could have gone up for sale in July, instead we waited until after Labor Day.
We had no bites because–duh–the price was too high.

We reduced it by 7.5 percent. Then we had three offers close to asking, but it was too late. While in attorney review, the Dow fell 700 points in one day, and our buyers were “no longer in the market.” I couldn’t blame them. We took the house off the market until the environment stabilized somewhat.
In the spring of this year, with the housing market devalued but more stable, we went for it again. We were determined to move. Our new strategy: Choose a highly ranked broker, price aggressively, and get the house on the market ASAP. An energetic and enthusiastic Candi Schwartz showed up on our door step. She advised us on pricing strategy and how the house should look. Our house was on the market two weeks later (Kristen freaked, but she pulled through), and we had three solid offers within days.
We lost money on the house, selling at $550,000. That sucks, but it’s done.
Meanwhile, we found a beautiful rental on Kristen’s favorite street in the Estate Section. Recently, on an Indian Summer evening, our three kids rode their bikes up and down the driveway, and they walk to preschool every day. I never thought I’d be renting again, but here I am, loving it. I’m not in a hurry to buy.
After being burned in the housing market, we plan on renting for a few more years. Where are the taxes headed in Montclair? Is a house with $25,000 per year in taxes going to go up to $35,000 in the next few years? Is the worst of the housing crisis over, or is there a second leg down, which I suspect? Regardless, I don’t see house prices sky-rocketing any time soon, and there’s no urgency to jump in and own right away.
So I’m going to relax in my backyard without a lot of maintenance concerns. It’s an exciting position to be in: I can buy when I am ready, and I don’t have to sell first.

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  1. You are probably wise. But it all depends on what happens. Some economists are suggesting that we’ll have very high or even hyperinflation. In that scenario, debts inflate away as does the value of cash. Then only things like houses (or gold) will keep value.

  2. Good for you for getting out when you did. Prices are still depreciating and will probably do so for a long time. Better to take your loss early and be done with it. People are so afraid to take a loss that they hang on and hang on keep marking down the property as the market falls and end up below where they would have sold it if they had just bitten the bullet in the beginning. It is interesting that when you do take that loss, the pain is never as bad as you thought it is was going to be and huge weight gets lifted.
    IMO hyperinflation is a low risk scenario, at least as far as real estate is concerned (I can see it happening wrt foreign goods). I think we will most likely go the way of Japan and we will have a double dip recession since we have nothing on the horizon that will provide the growth needed to get us out of this thing. Enjoy yourself and bide your time.

  3. There is no way to predict the real estate market. Do what feels right. elnino – in the early 90’s I did the same thing you suggest with a co-op. I took a hit on the co-op to buy a house because everyone said co-op market would never make a big comeback in NYC. Banks didn’t want to make co-op loans unless the buildings and the apartments met many stringent conditions. Hindsight is great. I could have kept it 5 years, rented it, and sold at a tidy profit. If I had rented a home instead of buying one at the same I sold, thinking the market would keep sinking, I really would have made out much more poorly on the deal. You never know.

  4. True, jerseygurl, you never know, but there is something to be said for cutting your losses in a declining market. I don’t know when you sold your co-op, but if you look at the 1990s, prices fell for 7 years before bottoming. Why should we expect prices to rebound sooner this time? The economy is in worse shape, and we don’t have a driver like the internet revolution or 125 ltv or no-doc loans to propel it up. There will be plenty of time to get back in when prices bottom or at least decline at a slower pace. Keep in mind that we are only 1-2 years into this thing and there is still a lot of deleveraging that needs to take place.

  5. Was there any thought of not moving. Perhaps waiting a year or two?
    Or did you have to leave because of space or something?

  6. We are renting and are watching the Montclair homes which are overpriced just sit there. Currently, most sellers are in total denial about the asking price. But are facing the same dilemma…do we even want to purchase with the taxes extraordinarily high. Baristanet should do more stories on residential properties and really track the differences in the three bedroom versus four bedrooms and how long multi family homes are all on the market before sold…..

  7. “Currently, most sellers are in total denial about the asking price.”
    I see the same. I am watching the market too. The reductions come frequently. On, you can sort by “Price Reduced Date” to get an idea. In the late summer, when there was good news about house price declines leveling out, you saw people put their houses on the market like there was a complete recovery or something.
    I love Montclair, but the taxes are so high and likely to get higher unless the town council and board of ed start acting like there is a recession and cut spending and reduce debt. I will also bide my time and rent until there is a clearer picture.

  8. As painful as the real estate component of this recession has been to date, it is far from over. While it is not the sub-prime crisis, it does share several key features with that well publicized debacle. The problem stems from an over reliance on easy credit combined with the availability of complex mortgage products that were designed to be refinanced and predicated upon a borrower’s ability to continue to obtain financing. Much of that capability to refinance has evaporated. Absent financing, home prices gravitate to levels at which transactions can occur. Sprinkle in those who absolutely must sell, and the effect is quite depressing As a result, many homeowners are effectively stuck. The rules changed in the middle of the game. Unlike sub-prime, many of these Alt-A and Option ARM loans have yet to re-set, and while the borrowers typically have higher cash reserves the avg balance of the debt is larger. It will get ugly. But hey, there are those granite counter tops.

  9. Where are the taxes headed in Montclair?
    Is a house with $25,000 per year in taxes going to go up to $35,000 in the next few years?
    Is the worst of the housing crisis over, or is there a second leg down, which I suspect?
    I wouldn’t count on it, but I have no special insight. Certainly prices won’t rise much in the near future.
    When to buy a house is not just an investment decision, however; it’s also a personal decision. If your family is going to stick around for a while, then I wouldn’t try and time the market too closely. Look for a good deal on a place you like, buy it, build the tree house in the back yard and get on with your life. If you don’t find it, keep renting and don’t sweat that either.

  10. We did what wallerloo suggests having just sold in the knick of time beginning of ’09 out of cedar grove and buying in Montclair. Somehow we got out of our house just before the market really tanked & were able to take our equity, put it towards the necessary down payment, get an unreal interest rate on a 30 fixed — and buy a beautiful home in montclair for a fantastic price (we low-balled them on our bid & they needed to move) I am still pinching myself.
    We debated whether to rent, but we have small children and the thought terrified us of all the upheaval and a possible double move. We know we’re not moving (barring a transfer or some major event we can’t foresee) & plan on staying put for 20+ years. And I am happy to say, the value of our new home has risen quite a bit according to real estate tracker sites.
    It’s a crap shoot — we sold by pricing aggressively — asking for the amount we’d be happy with, not what we really think our home should have been worth. Meantime, several neighbors in our old neighborhood, clearly over-priced their homes & they now have been sitting almost a year.
    My experience, if you’re selling, list it at the absolute LOWEST price you can & pay attention to the comps, be realistic. I think now is a good time to buy if you know where you want to be for the long haul. I think one day we’ll look back & thank our lucky stars we got out & in as we did.

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