Dealing With Falling Real Estate

I don’t mind moving, but the process of selling and buying homes is no fun. Keeping the home clean, inspections, appraisals, work orders… it’s all exhausting. But we’re doing it.

As I’ve written, my wife and I moved back to Texas a couple of years ago. We found a beautiful home on the water. It’s a little bigger than we need, but the location is fabulous.

Then Came Hurricane Harvey

We didn’t get flooded, but many neighbors did. Then came flood insurance. It’s manageable today, but the national flood insurance program will increase rates to market rates in April, and start charging market rates next October.

My home wasn’t cheap, so there’s no way that my insurance costs will drop.

And then there are taxes. I often write about shrinking your taxable footprint so that your city or state can’t tag you with rising costs to pay for failing services and over-burdened pensions. Today my taxes are at a reasonable percentage because we have two big box stores within the city limits.

But nearby communities are growing away from us, moving the population density further south. Those box stores won’t stay here forever, and when the sales tax goes away, the city will need someone to pick up the slack.

Finally, there’s real estate itself. Harry’s been screaming from the rooftops that real estate will roll over, and we’ve seen prices get mushy at the top end in many states around the country. The S&P CoreLogic Case-Shiller Home Price Index increased by a mere 2.4% in May over last year, down from 6% gains in 2018. It looks like price growth is decelerating, moving close to zero, if not through it.

On The Market

When I wrote about my situation months ago, several of you wrote back with a simple message – move.

You were right. The reasoning is sound, and we’re flexible enough to be able to do so.

But my wife isn’t keen on renting, so instead of staying on the sidelines, we’ll simply buy a less expensive home… and we already have one picked out.

If all goes as planned, we’ll move from open water to a golf course. The home is 30 years old and has good bones, but needs a lot of updating. It’s on the cheap side. We’re paying less than half the cost of the one we’re selling, and it’s for a weird reason… It’s big.

With Boomers trying to downsize and Millennials not yet purchasing for growing families, there’s little demand for 4,000 square foot homes. We were able to come to terms on one that had been on the market for seven months, empty, even though it sits on the tee box of the first hole, walking distance from the clubhouse, on a very nice golf course. The home is in a preferred zone, so no need for extra or higher-priced flood insurance, and by the time we’re ready to sell there should be many Millennials looking for more room for the kids.

I am certain that everything I’ve laid out, from higher flood insurance, to higher taxes, to falling real estate prices, won’t happen just the way I’ve forecast. But I think enough of it will to make this move the right thing to do.

Now, if we can just live through the process… and the remodeling.