Are you STUCK where you want to be?

Once upon a time, I sold a house with a pool at break-even for about $100K in Florida and moved to Hawaii. Mike and I were setting up a new home there, and we started house shopping in the town where he was raised.  It was 1992, and the housing market had been booming.

We looked for something “affordable” in the $350K range, and I learned why people moving to Kailua needed a box of tissues when they looked at homes. The houses were old (mostly 1950-1960’s range), small (roughly half the size of the house I’d left), on lots that were small with houses no more than about 10 feet apart (roughly ¼ the size of the lot I’d left. They were single-wall construction (look it up), mostly with flat roofs, and were at best remodeled in the 1970-1980’s.

On Sunday, we visited an open house in a neighborhood we couldn’t afford ($400’s) and found a house that was much more suited to our needs. Everything in it was white, but that was much better than the avocado or goldenrod of the homes we’d seen so far.  It was on a corner, and there was no yard, but it did have a covered lanai (porch) AND a pool.  The kids could walk to the local (and best) elementary school. BUT… we couldn’t qualify for it.

We showed the home to Mike’s parents, and they agreed it was “the” house and offered to co-sign on the loan for us.  It was a stretch… We would barely be able to make the payments, and our number ONE goal was to start earning more so we could refinance and get them off the loan.

Fortunately, we worked hard and were able to do that within a year, partially because the value rose just a little and partially because the interest rates fell from over 8% to close to 7%. It was just enough to make the difference, and we got our own loan as soon as we could.  Which was fortunate.

Because the next year the market hit the skids and prices flattened and started to fall. By the late 1990’s, the house was worth $100K less than we paid for it.  At least the in-laws weren’t on the loan with us… but now…we were STUCK.

Sounds awful… but THIS is what I want you to hear about this situation:

If we’d bought what we could afford, we’d still have been STUCK, but in a house that was not the right house for our family. We may have only been $80K upside down vs $100K, but we’d have been JUST AS STUCK.

I was GRATEFUL to be “stuck” in a house I WANTED to be stuck in… rather than a house I didn’t want to be stuck in.

Right now, people are worried about the market. We have been on an “up” cycle for a long time, and I’ve never seen one that didn’t end at some point.  We are basically FLAT on prices, which means we are likely at a peak. What does that mean for you? A few things to consider:

1. When you sell at the Peak, you make the most money possible from your home, cashing out on the biggest equity position you are likely to be in for a while.
2. When you buy a replacement property, you get to CHOOSE where to get stuck in if the market does fall in the future, rather than be in one you don’t want to be stuck in.
3. Interest rates are lower, and if they go even lower, you can refinance. If they go up, you’ll be glad to have today’s rates.

Moral of the story:

IF you are in the house you WANT to be stuck in, great. Stay.

If you are NOT in a house you WANT to be stuck in – it’s too big – it’s too small – it’s in an area you want to change – for example, it has features that don’t work for you (big yard/small yard/stairs/lack of amenities, etc)- then change that now.

Go get stuck where you want to be stuck… not where you DON’T want to be stuck.  The time is NOW.