We bought a house in the Bay Area before our first child was born, in 2015. It was a four-bedroom house in a quiet neighborhood. At the time that was more than enough for us because it was easy to travel to work.
Since then we have welcomed two additions to the family and things have changed. We need more space with two children, and now that the first is almost ready to start kindergarten, we also want to move to a nicer neighborhood with a better school district.
But the problem is we’re stuck. We’ve visited open houses and real estate agent sites, but larger homes are very far away from our offices, and homes with better schools are significantly more expensive.
We don’t want to lose the equity we’ve built up on our current home that we think could come in handy. That is why we are against sales. Our current house has a value of € 1.5 million. We are considering renting out the property, but our agent said it would be difficult to find tenants.
What are our options? What do you recommend?
‘The big move‘ is a MarketWatch column discussing the ins and outs of real estate, from searching for a new home to applying for a mortgage.
Do you have a question about buying or selling a home? Do you want to know where your next step should be? Email Aarthi Swaminathan at TheBigMove@marketwatch.com
It is remarkable how closely housing is linked to education. Where you live largely influences where you go to school. And that has profound implications for a person’s future – from future income to community ties and so on. Many parents like you end up making sacrifices at this point because they want their children to go to good schools, have good opportunities, and have a good foundation for their future.
Your desire to move is common, but what isn’t common is the housing market you will face when you buy. With housing supply unusually low as people rush to buy homes during the pandemic, there are few homes left for people to sell.
So finding tenants and renting the property is indeed your best choice. This will help you with your monthly mortgage payments and ensure that you can keep the home as it appreciates over time. But the reason why your agent doesn’t have confidence in this plan is because you’re not the only one trying to make this happen. Many homeowners are choosing to rent rather than sell in an effort to hold on to homes they bought during the pandemic, and that has reduced the number of available homes, according to John Burns Research & Consulting.
“Your desire to move is common, but what isn’t common is the housing market you will face when you buy. ”
However, there are a few other options, given your need for space and a better school district.
First, you can attract some equity in your current home to boost your budget. While that comes with risks — including the fact that home values may change over the next few years, and also because you’re putting your home on the line — it can help you spend more money on your second home, lowering your second mortgage interest rate. can decrease (if you finance the purchase with a mortgage). But this may not be an attractive option as the rates are quite high.
Two: you could wait. Patience can pay off when interest rates drop. During that time, you can also continue to search for homes and work with your agent to identify through their networks if certain homeowners are close to listing. Perhaps your real estate agent, who is very familiar with the local market, has some methods that can help you find a hard-to-find home that isn’t that expensive, or even a home that hasn’t yet hit the market.
And third, if you need to act quickly, just bite the bullet and sell. I know it’s hard to give up the equity you’ve built on a million dollar home, but that home has done its job for you by appreciating significantly in value over the years, and it sets you up able to move to a larger and more expensive house. . By selling, you can free up your equity and be free to move to the school district that is best for your child (provided you can buy there).
Your concern about buying a more expensive home when the housing market is in trouble is understandable. It may be worth talking to your real estate agent about the dynamics of your local market and seeing what your strategy should be.
But based on my conversations with homeowners living in the Bay Area in recent weeks, most of them said they felt more or less overwhelmed and worried when they first moved and bought a more expensive home. In the longer term, they secured better, higher-paying jobs, making payments much more manageable over time. And a house that may have doubled in value during that period.
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