Hi All,
I've been reading here for some time; this is my first post. As a disclaimer, I recognize that real estate markets can be highly contextual, so I'm going to try to provide as much context as I can, but please let me know if you need more. My goal in posting here is to figure out if I should access the equity in my house due to a massive spike in home price over the last year.
I live in a suburb of Dallas, TX, and my wife and I bought a home last September for $255k. We put 10% down and secured an interest rate of 3.375% on a 30 year mortgage. This house had a lot of cosmetic issues due to the previous owners letting their teenaged sons live their unsupervised after a messy divorce. We were able to fix it up a bit, especially by putting new flooring throughout. The house is 2500 sq ft and a 5 bed, 3 bath. It is a monster, I know. We are planning for a large family and I wanted to buy while interest rates were low and before our local market started to get hot.
Over the last year, home values have soared. We are regularly seeing houses in our neighborhood sell for $330k+. In particular, a house just down the street from us just sold for $338k. It was a 4, 2.5 with less square feet and a slightly nicer finish out. I would estimate that we could get at least $330k if we were to sell. Doing some back of envelope math, this would be a profit of $~90k [330k (sales price) - 224k (loan amount) - ~8k (closing costs/selling fees)] - ?? taxes on sale since we lived less than 2 years here]. I'm not including the amount we have put into repairs and flooring (maybe 20k? at most) because I haven't been thinking about this as an ROI situation, but instead the benefits and risks of keeping the house and what I could do by cashing out my equity.
On the one hand, we love this house. It could be the last home we ever need to buy. We locked in a great rate, and like the neighborhood a lot. On the other hand, if we sell we can make a killing and use that money elsewhere. Additionally, after buying, I think that we are able to better estimate our needs and could see ourselves in a smaller home, living with less overall expense.
I want to sell to access this cash so it can be invested (some in rental properties, some in our stocks/bonds). We would rent until we accumulate cash to buy outright or see a downturn in our housing market. My wife wants to keep the house because she is afraid we will be priced out of the market eventually, assuming things will continue here as they have been.
Can we expect a housing market downturn? Job growth is massive here and demand far exceeds supply. Should we sell and access this sudden growth in value of our home to put that money to work? Will selling now mean that we forfeit the opportunity to buy in the future as prices continue to grow?
Would love your advice. Thanks for reading this wall of text.