Moving up in house..

[AME]

We have been looking to move up in quality and size of house for over a year. Our house is just too small for our family. We have 4 kids and a dog. Our current house is 1600 sq, 3 bed, and 1 bath.

We have watched prices come down and believe they still will come down a lot more. With that said though.. that means our house value will go down with it. And if it goes down another 15% in value in a year or two, we would either 1) Break even, or 2) be reversed on our mortgage.

So this is what my spouse and I have been discussing.. Should we sell our house today (priced to sell quickly) and come out ahead about 35K after all said and done and rent until we find a house we can live in for at least 10 years that we like and that would be an upgrade for us. We would only rent an apartment or house that would roughly be what we are currently paying on our mortgage.
My train of thought would be is to invest the 35k plus the 100K we have saved in something that would give us a return of at least 5%. That way our money will grow some more to help us get into a better house at a better price in a year or so.

The other option is that we stay in our current house and not move up.

Thoughts?

[rose-colored-coolaid]

That's a tough spot. It's unclear how much down payment will be required in the near future. Perhaps you'll need 20%, in which case $40k wouldn't get you very far. Have you looked into what it would take to add on to your current home? It wouldn't be cheap, but it might be cheaper than selling and buying after you consider real estate commissions.

[sniglet]

[Charles Dean]

[AME]

Thanks for the responses so far. We are just starting this process of figuring everything out. I have been checking out the rental market in the area we would move into and I was pleasantly surprised to see there were houses within our budget that would work for our family until we find something. Even though these houses would be a downgrade in quality (just seriously outdated) we could swing it. We already have 100K saved to put towards a down payment.. the main dilema was to sell our house now to get out the remaining equity before we are reversed. And if we went reversed it would only mean we would have to wait a lot longer to move up.

I thought about the whole lease option thing too.. but I just see too many people out there doing the lease option thing which the investors/home owners are taking advantage of people by over inflating the value of the house only to increase the value if you wait an additional year. If the lease payments were in line with FMV of todays rental market then that would completely different.. but the lease amount is just crazy high. I also know a few RE investors who are doing these lease to own deals because they are in over the heads with ARMs about to reset and they don't seem to care that they are leading sheep to the slaughter house to save their own hides.

[Charles Dean]

And also if you're looking for a lease option specifically, you're severely limiting yourself as to what kind of house you end up getting.

[AME]

Just to clarify,.. I am not looking for a lease option. I am not very fond of them.

[ira s]

I think your plan is a real good one, AME. Even a year from now you should be able to find that prices will have continued to drop, and possibly fairly significantly. and that's the same reason you should sell now, especially if you price it to sell.

[Markor]

AME, I decided to sell and rent in the process of switching houses. I'm in sniglet's camp, with the exception that I'm betting only that prices will fall more than enough to have made selling & renting worthwhile. I'll keep my assets in cash and as safe as I can while still trying to earn some interest, until the house price bottom is apparent. For those of us without money to burn, I think there's just too much risk in being a homeowner now. There's still opportunity in Seattle to sell at a decent price, because most sellers here still list for peak bubble prices (no competition for you).