Housing Markets Up or Down-Part I

Let's ask ourselves this simple question and we'll know whether or not home ownership is right for us:

Are housing prices going to go up or down over the next thirty years?

On the face of it the answer to this question is obviously yes.  It seems funny that today the media seems very concerned with whether or not housing prices are going up or down on a month to month or even an annual basis.  We don't generally buy and sell houses at these intervals.  So why should we care if short-term home values go up or down?  There are many possibilities but the point is we shouldn't.   The average homeowner/family moves every four to seven years and the average housing crisis occurs every eight to fifteen years.  So it would seem prudent to be very concerned with what housing prices are doing five to six years from when we bought our home.  The problem with this is that even if we did extensive market research into schools, jobs, population growth, our timing could still be off and that may cost us significantly when it's time to move.

So back to the original premise here: home values will go up over a long period of time but in the short-term who knows?  Therefore  if we don't want to sell at current prices (and we have to move) then why have the house on market for three, six, or even twelve months?  Prices are not going to skyrocket in twelve months.  And hoping that the increase in the interim will more than pay for making two mortgage payments is ridiculous not to mention impossible considering how much we have saved up in the bank!

The answer to this conundrum is simple (at least conceptually):  If we don't like where housing prices are when we want to sell then don't.  How are you going to make the monthly principle, interest, taxes, and insurance payments?  Easy rent it out.  Of course there are a slew of issues that can arise here:

• How much should we rent it out for?  What if that doesn't cover our monthly payment?!

• What if the tenants destroy the house?  We won't get what could have when we finally sell!

• I don't want to fix leaky toilets at four in the morning, especially from the next city/state over!
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Most of us regular homeowners have these very concerns about renting our home to others.  So let's answer these questions like regular homeowners and see what happens.

-How much should we charge for rent?  The first thing that comes to mind here is we would like to be able to cover our principle, interest, taxes, and insurance plus expenses.  So that means the rent should be whatever we are paying every month to the bank plus a little extra.  Right?  Well, maybe not.  If the house down the street is renting for x and our monthly housing cost is x plus $50 then we have a monthly pitfall.  If we set the rent at our personal figure no one is going to rent.  Which is better rent it out at the market level and take the fifty dollar hit or wait until the market meets your price?  Remember we are only doing this because there are either no buyers or we would lose money a sale right now.

Next week continues with Housing Markets Up or Down Part II