Expert: Jessica Bryan - 9/19/2008

Question
QUESTION: Hi Jessica, My husband and I live outside of Mesa, AZ. We bought our home for 216,000 in 2005.  It is now only worth 150,000.  We know that we will need a bigger house in 5 years.  If we stay in our current house, then we will probably only hope to break even in 5 years and then we'll have nothing to put down on a new house.  Or should we short-sell it now- Rent for 5 years- Save money for a down payment (since our rental payment will be so much less than mortgage payment) and buy a house in 5 years?

ANSWER: Hi Samantha;
You are assuming that real estate will continue to stay flat.  I can't see into the future but I do know that what goes down in real estate usually comes back up in a short time.  We are facing a huge financial crisis in the nation right now and I think that this is probably the worst time to make a financial decision about selling your home unless you absolutely must sell to get out from under a financial burden. Is there any chance that you can refinance and get lower payments? Interest rates are incredibly low right now and that helps with large house payments that might be otherwise debilitating.  I do not recommend renting for the next five years.  I would say that you will probably recover your initial cost of the home and perhaps even make a profit.  I could be wrong of course since as I said before, I can't see into the future...but historically things tend to "right" themselves after a few years.

Good luck and best wishes.

Jessica Bryan

---------- FOLLOW-UP ----------

QUESTION: Thanks for the reply Jessica.  Unfortunately we cannot refinance since our house is upside down.  And our lender won't work with the new Government sponsored refinances.  I just feel like we're throwing money into a black hole.  I just felt that if we rented for 1,000 a month instead of 1,700 a month that we could save money each month and have more saved at the end.  It's not immediate that we have to move.  I just didn't want to waste my time.  Thank you for the input.  i definitely agree that we shouldnt rush into or out of anything.  Thanks again

Answer
You are welcome Samantha;
I am not sure about this advice anymore.  However, with the financial market in upheaval I think that we should all sit tight and wait to see what happens next.  Real estate is still a great investment. It might take longer than 5 years for the value to come back but owning something is better than owning nothing unless you absolutely cannot afford to.  Remember, you get the benefit of tax write offs too.

~Jessica Bryan