As a general rule, it’s a bad idea to try to time a market, and housing is no exception. But some homeowners who’ve been sitting on the sidelines watching their home values soar have decided that now is the time to cash out before a downward slide takes hold.
Rather than swap their old home for a new one, they’re putting their newly minted nest eggs in the bank and renting apartments until, they hope, the market cools and they can buy again once home prices come back down to Earth.
The choice is a risky one. No one can predict what the future holds, especially as interest rates soar and the economy wavers.
“On paper it sounds OK,” said Jonathan J. Miller, the president of Miller Samuel Real Estate Appraisers and Consultants. “But every step is fraught with a lot of unknowns.”
Mr. Miller laid out a host of scenarios that could make such a move foolish. What if a homeowner sells their house at what they think is the peak of the market, but prices are actually higher by the time they’re ready to buy again and now the money they’ve banked doesn’t go as far? Or what if rents continue to climb, eating into whatever savings they’ve accumulated?
“What you’re risking is essentially investing in a rental for a period of time until the market does what you hope it will. That seems fraught with problems,” Mr. Miller said.
But if these homeowners bet right, and home prices drop significantly, they could see their money go much further than it does right now when or if they end up shopping in a buyers’ market. A small, but sizable, cohort of homeowners are taking their chances, accounting for 19 percent of sellers in 2021, up from 15 percent in 2019, according to Zillow.
And, after years of being homeowners, they’re learning to live like renters again.
John McAchran is one of them. Last January, he decided the time was right to sell his house in Redmond, Wash., a suburb of Seattle. He knew that at some point, he would have to relocate to the East Coast for his new job in Delaware. But with remote work, there was no deadline and no pressure to move. He considered renting the house, but didn’t want to deal with the pressures of being a landlord. And the Seattle housing market seemed to him like one about to crest. “I really did feel like the market was peaking,” he said.
Mr. McAchran, 51, who works in digital strategy for a consumer lender, had bought the property in 2019, paying $750,000 for the five-bedroom house on a wooded lot. In April 2022, after making $100,000 in improvements, he put it on the market. Five days later, a bidding war ended with an all-cash buyer willing to pay $1.365 million and close within two weeks.The week after he accepted the offer, inventory in the area spiked and traffic from buyers slowed. “I think the appreciation out there was pretty much destined to slow down,” he said. “We pretty much timed it by luck about as perfectly as we could have.”
Now, Mr. McAchran is renting in Philadelphia, with no immediate plans to buy. He’s browsed the housing market, looking at homes in southern New Jersey, the Philadelphia area, Maryland and Delaware, but the volatility gives him pause. “It’s a little too uncertain to make a move like that unless I found something that I absolutely loved,” he said.
Instead, he’s adjusting to being a renter, paying $2,200 a month for a two-bedroom in a 16-story building in Center City, Philadelphia. He likes that he can call the super when something breaks, but other aspects of renting have not gone as smoothly, like downsizing from 3,000 square feet to 1,200. He’s also had to get used to sharing walls, elevators and the mailroom with neighbors.“It’s going from being out in the forest where there’s people around, but you don’t even see them if you don’t want to, to every time you go anywhere there’s going to be people,” he said. “It’s good and bad.”
But for John Tanzosh, who sold his Staten Island home of 35 years this spring, the transition from homeowner to renter has been transformational. In May, he and his wife, Barbara Tanzosh, both 71, moved to Station Bay South Amboy, a new rental development in New Jersey. Within a week, Mr. Tanzosh, a retired electrician, bought a bike, and now he cycles from his apartment to a park that leads him to a path along the Raritan River. “My wife was shocked,” he said. “She said, ‘You haven’t been on a bike since I’ve known you.’”
Once Mr. Tanzosh retired, he and his wife knew the time had come to sell the family home and move closer to their grown children and grandchildren who lived in New Jersey. But the only urgency for Mr. Tanzosh was an unpredictable housing market. He worried that if he waited too long to list his property buyers might be scared off by rising interest rates. So they listed their home, which had a swimming pool, in January, selling it for $850,000, the list price. “I got the price I wanted,” Mr. Tanzosh said.
The couple moved to South Amboy in May, renting a two-bedroom apartment for $3,200 a month, in a building with an outdoor pool with private cabanas, yoga and spin studios, a movie theater and fire pits.“I look out my balcony everyday and I look at a pool that I don’t have to clean,” Mr. Tanzosh said, adding, “I feel like I’m on vacation.”
For now, the couple is enjoying the freedom from responsibility. Mr. Tanzosh says he does not miss getting his garden ready for summer, and is enjoying a transitional period. “We don’t know what we want to do,” he said. “Right now we’re just enjoying what we have. We have time to think about our next move.”
After living in his father’s antiquated brick, midcentury home in Maplewood, N.J., since 2014, Michael Ghee is relishing the newness of new construction. “Everything is just so clean and neat and shiny,” said Mr. Ghee, an IT project manager at Rutgers University. By contrast, the house where his parents had lived since 1965, and where he had spent the past eight years caring for his aging father, had not been touched in decades. “It was out of date. It was worn,”he said, “I just got tired of looking at it.”
And so, in January, he looked at the Maplewood housing market and decided if he wanted to sell the house without renovating it, he should do so quickly. If there was ever a time to cash in on a fixer upper, early 2022 felt like the moment. Within three days, he had 19 bids, selling the three-bedroom, two-bath house for $710,000. He had listed it for $525,000.
But Mr. Ghee wasn’t ready to own again yet. He’d spent most of his adult life worried about hisresponsibilities, first for his sister who had schizophrenia — he had assumed he would eventually become her caretaker, but she died in 2012 — and later for his father. For the first time in his life, his path was uncharted. “I’m free, I’m free as a bird now,” he said. “I definitely miss my family like crazy, but at the same time it is kind of exhilarating. I’m starting my second stage of life here.”
In search of a rental where he could live for a few years, he first looked in Maplewood, but with rising rents, the area was out of his budget. In May, Mr. Ghee, 60, moved to Citizen Linden, a new development in Linden, N.J., paying $2,150 a month for a one-bedroom. “It looks like a freaking hotel. It’s unbelievable,” he said. He’s looking forward to next winter when he won’t have to shovel snow off his car now that it is parked in the building’s garage.
He might one day like to buy a townhouse, he said, as he bristles at the building rules, like guest parking restrictions and a requirement to subscribe to cable television even though he prefers streaming services.“It’s different going from living in a free environment to a corporate-owned one,” he said. But for now, he’s enjoying the lack of commitment. “It’s a new fresh start for me living here,” he said.
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