This is great. Good problem to have!
Consider your tax implications. MadFientist just came out with an amazing article around saving money through real estate taxes. Well worth a read. Could be instrumental in your decision.
http://www.madfientist.com/tax-benefits-of-real-estate-investing/Cons: In the current market, if I sell high, I have to buy high. Unless I choose to live really far out. Non-mustachian increase in commuting distance and car expenses.
This sticks out for me. This is a limiting belief. There are still good deals out there, they are just harder to find. If you're open to buying a real estate investment in another city and renting it out while you rent where you want to live it could be a massive way to start cash flowing and get some long term value appreciation.
Well worth a quick read of FrugalVagabond's blog, ebook and his real estate anaylsis spreadsheet. His blog is the best underground FI blog out there, especially around real estate.
frugalvagabond.com
My last part here is the most important to consider -- I think you have to consider your needs and wants for the next 3,5, 10 years. Do you want cash flow? Where do you want to live? Rent or buy?
What I'd do... (and my life is very likely different then yours so keep hold of your grain of salt)
I would sell the property. Collect the cash. Find a rental property to invest in outside of the area that meets or better exceeds the 1% rule. And I would let that churn out cash flow and value appreciation for the next 20 to 30 years.
If this is your looking to live in the current and future homes, then I've read the question wrong. Feel free to let me know, and I'll try to lend a hand :) Good problem to have. Good luck!