Author Topic: Buying a SFH without taking a long position in this RE market?  (Read 1196 times)

mattpew

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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?

Paper Chaser

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #1 on: April 09, 2021, 05:43:48 AM »
You can always just rent a SFH?

maizefolk

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #2 on: April 09, 2021, 05:51:31 AM »
I agree with Paper Chaser, the financial instrument to accomplish this is to rent or lease a single family home.

bacchi

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #3 on: April 09, 2021, 07:36:29 AM »
You can always buy a house and short the Case-Shiller Housing future for your metro area.

https://fred.stlouisfed.org/series/csushpinsa

Last I checked, there's a national index, with attendant futures and options, and an index for 20 of the larger cities.

mattpew

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #4 on: April 09, 2021, 09:19:51 PM »
You can always just rent a SFH?

I don't think this is a satisfactory solution for me - while it solves some issues (obtaining a yard/garage, no wall neighbors, etc), I still face hesitancy to buy quality furnishings/appliances and have no opportunity to build sweat equity.

Dicey

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #5 on: April 10, 2021, 12:19:58 AM »
Okay, I'll bite. Why do you not want to hold a long position in the US housing market?

sammybiker

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #6 on: April 10, 2021, 05:36:08 AM »
@mattpew

Buy something that you can put some sweat equity into and eventually create real equity.  This will help partially hedge against future downside, however temporary that may be in the long run.

Yes, the market is high right now.  But with sweat equity, mortgage paydown, fixed long term low interest debt and tax benefits, you're pretty well hedged, especially if you're holding for the long run.

Metalcat

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #7 on: April 10, 2021, 08:03:52 AM »
I don't really understand.

You want to own a single family home, but you don't want to buy a single family home?

If you don't want to buy in the current market, then while you wait it out, why don't you try renting somewhere less noisy. I share all but one wall of my small apartment and I never hear anyone around me because some buildings have much better soundproofing than others.


maizefolk

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #8 on: April 10, 2021, 09:07:39 AM »
Sweat equity in an increase in the value of your house from work you do on it, so it is inherently a long position in the housing market. The equivalent of sweat equity without the resulting increase in your net worth showing up as housing value is getting paid to work on houses other people own.

So you could rent a house and work at developing a side hustle in construction or the trades?

YttriumNitrate

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #9 on: April 10, 2021, 09:17:23 AM »
A 30 year mortgage with a minimal amount down in a no-recourse state may be what you are looking for. If there's a dramatic drop in housing prices you could just walk away

draco44

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #10 on: April 10, 2021, 10:58:15 AM »
You can always just rent a SFH?

I don't think this is a satisfactory solution for me - while it solves some issues (obtaining a yard/garage, no wall neighbors, etc), I still face hesitancy to buy quality furnishings/appliances and have no opportunity to build sweat equity.

I'm also confused by your question's phrasing but if your long-term goal is to both own your own home and fill it with nice stuff, I would prioritize directing my financial resources to buying the house, not the stuff.

I can understand a desire to not be living amongst only a pile of IKEA rejects, but there are way more strategies for obtaining quality discounted housewares than a house itself. Buy Nothing groups and persistence in sourcing things on Craigslist can take you further than you might think.

Dicey

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #11 on: April 10, 2021, 11:04:49 AM »
A 30 year mortgage with a minimal amount down in a no-recourse state may be what you are looking for. If there's a dramatic drop in housing prices you could just walk away
That's what I was thinking, too, but OP doesn't seem to be all that interested in our thoughts on this subject.

mattpew

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #12 on: April 10, 2021, 11:22:20 PM »
A 30 year mortgage with a minimal amount down in a no-recourse state may be what you are looking for. If there's a dramatic drop in housing prices you could just walk away

This is my first introduction to the idea of "recourse" vs "non-recourse" states.  Interesting stuff - I'll have to take some time to read up on this.

mattpew

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #13 on: April 10, 2021, 11:27:12 PM »
A 30 year mortgage with a minimal amount down in a no-recourse state may be what you are looking for. If there's a dramatic drop in housing prices you could just walk away
That's what I was thinking, too, but OP doesn't seem to be all that interested in our thoughts on this subject.

Dicey, how unfortunately rude of you to say.  Of course I'm interested in this forums input, otherwise I wouldn't have posted here.  Some of our peers have made good suggestions for me to think over, I'm unsure why you've come here to accuse me of this.

Dicey

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #14 on: April 11, 2021, 09:08:07 AM »
A 30 year mortgage with a minimal amount down in a no-recourse state may be what you are looking for. If there's a dramatic drop in housing prices you could just walk away
That's what I was thinking, too, but OP doesn't seem to be all that interested in our thoughts on this subject.

Dicey, how unfortunately rude of you to say.  Of course I'm interested in this forums input, otherwise I wouldn't have posted here.  Some of our peers have made good suggestions for me to think over, I'm unsure why you've come here to accuse me of this.
Hmmm, how unfortunate that you find me "rude". When one starts a thread wherein one is asking complete strangers for their free and voluntary help, it's bad form to ignore your thread and their responses, particularly the questions that are posed to get more information to serve you better.

roomtempmayo

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #15 on: April 13, 2021, 09:56:33 AM »
do not want to hold a long position in the US housing market.

You don't need to believe a house will increase in value in order to have buying one be worth it.  The idea of being "long" in your house is a product of your attitude.

A primary house is not an investment.  It's a place to live.

You say you want a house for lifestyle reasons, which is understandable.  Look at the difference between your ownership costs and rental costs as the price you're paying for SFH ownership.  If that price is worth it, then buy the house and pay it.

But don't get sucked into the idea that your house is your nest egg.  Primary houses suck as investments, and most of your sweat equity (labor + materials) will underperform the market, too.


Aegishjalmur

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #16 on: April 14, 2021, 11:00:48 AM »
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. 

Metalcat

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #17 on: April 14, 2021, 11:16:35 AM »
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.

Dicey

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Re: Buying a SFH without taking a long position in this RE market?
« Reply #18 on: April 22, 2021, 02:39:36 PM »
Last active:  April 12, 2021, 05:40:58 PM