Hey all - new forum user here, wanted to run a quick question by some like-minded folks:
I'm desperate for a SFH for lifestyle reasons (tired of listening to my upstairs neighbor play indoor fetch, want to invest in quality home furnishings, etc), but do not want to hold a long position in the US housing market.
Are there any readily available financial instruments to accomplish this?
What do you mean by 'Not hold a long position'? Three years? Five? Ten?
I'd say you have three options:
1).If it's a shorter timeline, renting a house might be the best option. Especially if you can do a longer lease.
2). But if talking 5-7 years, at that point you may want to consider a 7 or ten year ARM where the initial rate is low and then adjusts up after the initial period is over. If you do this, make sure you are fully aware of the risks involved. a). When does the rate adjust b). what is the rate adjustment capped at? c). does it have a limit on how much it can adjust at once? d). Can you afford the payment at the highest level? e). If you do an interest only(I/O) loan, if you go to sell, are you willing to either just break even or sell at a loss?
3). If you are concerned about the housing market tanking and being unable to sell I'd look at the longest term loan you can to spread out the payments.
Exactly.
The value of your house only matters when you try to tap it's equity, either in terms of refinancing, getting a HELOC or selling.
Otherwise, the hold period depends on how long you want to live there, not really on what the market does. Because if you decide to sell in an up market, you have to move out of that market to really benefit. You have to give up your home and all equivalent homes in the same location.
If you are looking for the flexibility to be able to move, then owning makes little sense in the first place.
You don't buy if you don't plan to stay put for awhile, and if you plan to stay put for awhile, then what the market does is pretty much irrelevant.
We bought while people were prices were insane and people were screaming that it was a bubble. We didn't care because we bought the specific place we knew we wanted long term and the price was readily affordable and much cheaper than renting something equivalent. If the markets did tumble, it wouldn't matter because this specific place would unlikely be for sale. It was for sale because the owners wanted to cash in on the market.
Well, nearly two years later and the prices are still climbing and people are still screaming that the bubble is about to burst, and neither a price rise nor a price fall will affect us much other than affecting our property taxes, so we don't care. We have no predictable reason to consider moving until DH retires, which is over a decade away, so the only thing that impacts us is how easily we can afford our payments, which we locked in at a very comfortable rate.
So figure out what you actually want a property to do for you, and work out what the investment actually means for YOU.