Should we get out while we're ahead?

[pnw_guy]

Here's the backstory:
My wife and I bought a home in Seattle early in 2020. We just moved to the area to start new jobs, which at the time, required us to go into a downtown office everyday. We really like the area and thought that we might as well buy since we had no intentions of moving. We bought a SFH for more than $750K (I know it's a lot, but that isn't outrageous for a SFH in Seattle proper). Good commuting, schools, etc. We can afford the mortgage pretty easily, but it definitely was a non-Mustachian purchase.

Fast forwarding to today, both of our jobs have now been re-classified as remote. We're kicking ourselves a bit because the house we bought isn't exactly our dream house, but it was the best we could buy without going completely overboard. For example, we don't have much of a yard and wish we had more space to play with our child and dog. If we had known COVID was going to happen and that we'd be re-classified as remote workers, I don't think we would have bought in Seattle proper. Instead, I think we would have bought something cheaper in a more rural outpost around Seattle. Another development is the realtor that we used to buy the house reached out to let him know if we ever wanted to sell. It sounds like we've picked up some appreciation in the past year and things are selling quickly and without contingencies in Seattle. This narrative is consistent with what I see when I look at our home's estimated value on sites like Redfin.

My question:
Should we walk away from our house while the market is up? We're not completely trying to move ASAP, I do think our long term goal would be to take advantage of our remote work situation and move to a cheaper residence with more space. And while it feels silly to sell a house after 14 months, I just wonder if it's a prudent thing to do while the market is so high. Who knows if it will crash, and if so, we might not have the chance to sell for a gain for a long time. Lastly, I feel like Mr. Money Mustache, if I could ask him directly, would say "Get out of that f*ing expensive house while you have the chance!". Just wanting other opinions on the situation.

[SwordGuy]

What are the odds that your "remote" jobs will be reclassified as "in person" jobs after covid is under control?   How long do you have to put up with a "wrong" situation before you FIRE and can move where you want?

[pnw_guy]

What are the odds that your "remote" jobs will be reclassified as "in person" jobs after covid is under control?   How long do you have to put up with a "wrong" situation before you FIRE and can move where you want?

The chances of me being re-classified is less than 1%, though I think her being re-classified after COVID is under control is substantially higher. That being said, she's less in love with her employer and is flexible in terms of changing jobs etc.

I think the earliest we'll FIRE is 8 years. The reason for this distant date is (1) we're making conservative assumptions about the real return of our index funds moving forward and (2) we're overshooting our FIRE number a bit to account for anything unexpected that could come up (e.g., increased healthcare costs, a family member in need, etc).

[travel2020]

Seattle area housing market has been insane for as long as I remember. About the only time I remember house prices declining was during the Great Recession. Of course, that could change but hard to predict.

Some questions that come to mind:
- Is your long term goal is to move to a place outside Seattle proper because it’s a better fit for your lifestyle?
- Is the remote work situation at your current employer permanent or is there a possibility the pendulum might swing back to in-person?
- If either of you decide to, or need to, change jobs for any reason, would you be able to find another remote job or are the other employers in your field likely to ask you to come in to work?

The big challenge you might have is finding a reasonably priced house in areas near Seattle. We are outside Seattle and there are very few houses on the market compared to past years. And houses that do list are going quickly, often @ 5-20% over list. You could probably move 40+ mins out of Seattle and find better house value for your $$ in some of the newer developments / more rural areas but if the company policy changes and you have to start commuting to work, that probably would make for a long day in Seattle traffic.

[Mr. Green]

Surveys of CEOs are already showing a major reversal in "remote" work intentions once the pandemic is in the rear view mirror. I suspect that in the near future there will be a ton of people dumping country homes they just bought because suddenly remote isn't an option anymore.

[clarkfan1979]

Here's the backstory:
Lastly, I feel like Mr. Money Mustache, if I could ask him directly, would say "Get out of that f*ing expensive house while you have the chance!". Just wanting other opinions on the situation.

I think MMM would approve of your home purchase. It's not about being cheap. It's about being efficient. Many people on this forum own very expensive houses because they value location.

[pnw_guy]

Some questions that come to mind:
- Is your long term goal is to move to a place outside Seattle proper because it’s a better fit for your lifestyle?
- Is the remote work situation at your current employer permanent or is there a possibility the pendulum might swing back to in-person?
- If either of you decide to, or need to, change jobs for any reason, would you be able to find another remote job or are the other employers in your field likely to ask you to come in to work?

The big challenge you might have is finding a reasonably priced house in areas near Seattle. We are outside Seattle and there are very few houses on the market compared to past years. And houses that do list are going quickly, often @ 5-20% over list. You could probably move 40+ mins out of Seattle and find better house value for your $$ in some of the newer developments / more rural areas but if the company policy changes and you have to start commuting to work, that probably would make for a long day in Seattle traffic.

- Yep, we're thinking of moving out of Seattle for lifestyle reasons. We've even thought of moving as far as Bellingham.
- I'm 99% sure that I'll stay remote in my job (lots of the company has already relocated), but her job feels less permanent. However, she's less tied to her job than I am.
- I work in tech so I'm pretty sure that remote is more likely to stick around in this field. Again, a bit less sure about her job.

Good point about perhaps not being able to buy in the surrounding Seattle area. We're also open to renting for while and being opportunistic next time we buy (e.g., waiting for a market dip). Renting in Seattle, compared to buying, is a screaming deal.

[pnw_guy]

Surveys of CEOs are already showing a major reversal in "remote" work intentions once the pandemic is in the rear view mirror. I suspect that in the near future there will be a ton of people dumping country homes they just bought because suddenly remote isn't an option anymore.

Interesting. I don't doubt it.

I just know that many at my company have already disbanded and moved across the U.S. I'll be surprised if they're able to fully roll that back, but you never know.

[pnw_guy]

Here's the backstory:
Lastly, I feel like Mr. Money Mustache, if I could ask him directly, would say "Get out of that f*ing expensive house while you have the chance!". Just wanting other opinions on the situation.

I think MMM would approve of your home purchase. It's not about being cheap. It's about being efficient. Many people on this forum own very expensive houses because they value location.

Our place is very efficient. Close to work etc. I just know that MMM also has advocated for people to move to cheaper places if they are able. We now find ourselves in the able category.

[Mustache ride]

Be aware that if you sell the house before living in it for two years, you won't qualify for the capital gains tax exemption.

[EricEng]

Be aware that if you sell the house before living in it for two years, you won't qualify for the capital gains tax exemption.

This is important if you have appreciated a lot.  If you held out for the 2 year mark (2022?) you would better know how certain your work is to stay remote or find spouse new (remote?) work.

[Samuel]

If you bought in early 2020 you haven't really experienced true Seattle area rush hour traffic yet. If there is any reasonable chance a commute into or through Seattle could be in the cards for either of you I would think long and hard about moving.

[windytrail]

Here's the backstory:
Lastly, I feel like Mr. Money Mustache, if I could ask him directly, would say "Get out of that f*ing expensive house while you have the chance!". Just wanting other opinions on the situation.

I think MMM would approve of your home purchase. It's not about being cheap. It's about being efficient. Many people on this forum own very expensive houses because they value location.

Our place is very efficient. Close to work etc. I just know that MMM also has advocated for people to move to cheaper places if they are able. We now find ourselves in the able category.

Actually, I think MMM would oppose you moving. MMM advocates for living in walkable/bikable communities, and against living in areas where driving is required.

Here is a reminder (from https://www.mrmoneymustache.com/2013/09/04/how-and-how-not-to-buy-a-house/):

Location: Next you choose your location. You need to do this before you start looking at houses, because it is way more important than the details of the structure itself. Beginner buyers often say things like, “Oh, I’ll just live somewhere near the interstate, so that way it’s easy to get anywhere”. Instead, I suggest starting with the assumption that cars don’t exist, and designing a life around that assumption instead. You’ll still have your cars, of course. But your level of need for them, and thus the quantity of money and time you waste sitting on your ass in them, will be completely different.

With a bit of planning, it’s almost always possible to put work, grocery store, school, library, and anything else you need right within the area you live. By looking for public amenities, you can get many of the benefits of a country house right inside the city, as shown in the picture above. The more things you live near, the fewer things you need to own yourself.

[Dicey]

Can you quantify "some appreciation" please?

Have you any estimate what it will cost to sell the house and move?

Do you know the extent of the tax liability selling now would create?

Also, what exactly is "unmustachian" about your house, other than the price, which doesn't seem outrageous for Seattle proper?

According to other forumites with very current experience, finding quality rentals in the area isn't as easy as it may appear.

I'd wager you wouldn't exactly come out "ahead" after all factors are considered.

[WanderLucky]

I really don't think the prices in Seattle are going to go down in the next few years. If I were you, I would wait at least another year - you will very likely see even more appreciation, you'll have a better idea what will happening with remote work, and you'll be able to take advantage of capital gains exemption.

[partgypsy]

I don't understand this fascination with constantly moving. It's expensive and a pia! I think you need to elucidate your short term medium (5 years) and long term goals. Any moves that would satisfied medium and long term goals?  I guess if I was in your situation, and felt comfortable with potential of being able to remotely work, look at houses that you would like to live in, medium long term (aka retirement). If so, then I would move.

except if/when a tsunami hits, don't see Seattle area going down in price any time soon

[Roland of Gilead]

You will have to pay the agent fees and the excise tax that Washington charges (something like 1.6%?)

[waltworks]

Surveys of CEOs are already showing a major reversal in "remote" work intentions once the pandemic is in the rear view mirror. I suspect that in the near future there will be a ton of people dumping country homes they just bought because suddenly remote isn't an option anymore.

For an average office drone, sure.

I know a LOT of high end engineers/coding guys/research scientists in industry/etc. Like, people who Google would at least think about hiring. People probably like the OP.

Several of them have told me the following story, with minor variations:
-HR has a Zoom meeting to tell everyone about plans to come back to the office.
-75% of more of the talent says, "If you do that, I quit."
-Radio silence for a week or two while gears turn.
-HR emails everyone that they can work remote forever.

These are people who can get another job working remote at another company any time they want, and their employer knows it. They are also often flush with cash from home/stock appreciation over the last year. The boss has zero leverage.

-W

[kenmoremmm]

As someone who lived in Seattle and nearby for the past 17 years, I have pulled the plug and am moving to an 8000 person town in the Canadian Rockies. Permanent WFH status.

While I love the North and Central Cascades probably more than just about anyone you will ever meet, the drawback of a massive population center, homelessness, trail crowding, and the clusterfuck of traffic everyday at all hours put the nail in the coffin on the region for me. (sidebar: US vs Canada ideologies is a huge factor for me).

Seattle has no plan for homelessness. No plan for traffic. No plan for anything really. I don't see quality of life being a term you associate with Seattle anymore. That ship has sailed.

[srad]

Seattle has no plan for homelessness. No plan for traffic. No plan for anything really. I don't see quality of life being a term you associate with Seattle anymore. That ship has sailed.

Sure they do, its called "Tax the rich"  (then everybody else at a later date). 

[robartsd]

I'd be inclined to wait for now. Reevaluate in 10 months when you qualify for capital gains exclusion and have a better idea of the post-COVID picture. If many jobs return to in office, demand in Seattle proper will increase relative to demand in more remote areas.

[ChpBstrd]

Need the following info:

1) What profit would you clear on your existing house after closing costs, agent fees, taxes, yada yada, but before any possible capital gains taxes? What does Zillow say it's worth now?
2) How much cheaper is the exurban house? $125k, $250k, $500k?
3) Would you play enough hours of backyard games in the next 2-3 years to make up for the hours spent trading houses and moving? Note that the vast majority of people with large back yards don't even enter those back yards in a typical day and only use it when the grass needs mowing. Lawns are a "look" for most of us.

I reluctantly agree with @robartsd and @partgypsy that you probably have at least as much time as it would take to grab the capital gains exclusion. And that's coming from a person who wouldn't touch PNW bubble real estate with a very long stick and who suspects that mortgage rates will be 1-2% higher in a year or two.

If you have $250k in gains, a 15% long term capital gains tax would amount to $37.5k. I think the odds of your house dropping at least $37.5k in the next year are a tiny bit less than the odds of your house appreciating by more than that. I would not want to go long on the housing bubble at this stage, but I would probably take this 10 month bet (hell, closing will consume 2 of those months). I would especially take it if my only other option was to gamble a smaller amount on another piece of bubble area real estate.

Suppose the chance of a 50% market crash is 20% in the next year.
Suppose the Seattle house is now worth $1M.
The risk of the Seattle house is $500k.
Suppose the exurban house is now worth $600k.
the risk of the exurban house is $300k.
Thus, for $37.5k in taxes you get:
  -$365k (1M-600k-45k) equity extracted and invested elsewhere, minus closing/moving costs.
  -$200k (500k-300k) in housing bubble risk reduction. The PV of this $200k at 20% odds is $40k.
  -40% less leverage if housing prices continue to go up. The PV of 400k less leverage at 80% odds of prices going up, let's say, 5% is $-16k.

I wish there was a way to hedge the risk of the housing bubble popping and staying in the local market, but there's not. The only way to escape the bubble is to move to a LCOL area. I suppose you could also use futures to short treasuries or options to short TLT, because if rates increase substantially the housing market and long-duration treasuries are toast.

[partgypsy]

Here is another option i would contemplate doing in your situation. Sell house, rent a place that gives you more what you want, if you can rent a place that's less expensive than owning. And, buy a piece of land where u are intending on retiring. People i know (creative class)who live in Seattle complain about 1) storied and historic businesses closing, being torn down, and b) being priced out of housing, so make sure there are rentals that are actually out there that fufill your criteria (less expensive, more space, etc).

[Dicey]

Hmmm, no input from @pnw_guy since April 3rd.