MM fail- losing money on a house (Update- bought new home)

[shaynaatl]

No real question here- this is more of a MM rant.
 
We moved from the city to the suburbs in 2017, after having our second kid. We were originally targeting a specific suburb, but we ended up buying in a new growing area about 10-15 min further out. That new area had a bunch of new construction homes, and I'll admit we got sucked in by the allure of a big shiny new house at a reasonable price. And the schools were great. So we convinced ourselves- "it's worth being a little further out to have this house".

Well fast forward to today- we now have the house up for sale. We realized we don't really care for the area. I know the suburbs have a reputation for being soulless and bland, but this area is especially bad in that sense. Zoning is not ideal. It's just a bunch of new construction subdivisions next to storage facilities next to car washes, etc. For example, after we moved in, an auto body shop was built right outside our neighborhood entrance. Whereas our original targeted suburb actually has a walkable downtown and a sense of character (we are house hunting in that area now).

We are also open to downsizing a bit. DH especially wants to reduce square footage.

The unfortunate thing about all this is that we're going to lose money. Even if we sell close to listing price, we're losing money after commissions. And if we have to cut the price a few times, then we could be looking at a fairly sizable loss. I know we could wait a few years to build more equity, but we'd rather move now while the kids are still young (and mortgage rates are still low).

The frustrating part is that I've always been MM, and feel like I've always made smart financial moves. So this feels like a big fail. I guess it's a very expensive lesson learned.

[babsbunny]

Can you rent it out?

I appreciate seeing other's perspectives on what they value in their home decision. We are in a suburb where all we could walk to are fast foods, car mechanics, and chain conviences (pharms, wallymart). I feel priviledged to have those because neighborhoods just a mile further are too far to walk (and no sidewalks).

[wildrice]

Ugh, I'm really sorry! That sucks a lot, but I do think you are right to make a decision that is best for your happiness.

H and I are considering moving to a nearby suburb from the city, and I fear this may be our situation too. I am anxious to buy a house and start actually getting equity (we are perpetual renters) and I'm tired of moving every 2 years, but I worry we will miss the city too.

[goldengirlz]

DH and I have a catchphrase: “we’ve spent money on stupider things.”

Look, sometimes people make bad financial decisions because we’re not infallible. We all like being MM, but it’s a reminder not to beat ourselves up over money, especially money that we can make back and will be a distant memory when the dust settles.

(And I also get buying a home in a suburb you don’t love. If I could do it all again, I would have definitely picked somewhere else.)

So sometimes we just look at each other and sigh and say, “We’ve spent money on stupider things” and silently vow to make the next thing count.

Hope you get a strong offer!

[simpsongal]

ditto goldengirlz, if you can afford it, life is too short to remain in a place you don't want to be. No need to beat yourselves up over it.

My own F' it story w/money is taking out a HELOC to finally do some house projects. I've been complaining about it for years (search me on H&G) and we're finally doing it! Bad purchase decision - the dance lessons we took before our wedding - we should have just set the money on fire and saved ourselves the hassle of driving to Alexandria once/week.

[onomatopoeia]

You bought a nice new home (minimal upkeep) at a reasonable price (you weren't house poor) in a neighborhood with great schools (typically a great investment). Don't beat yourself up, it was actually a pretty solid decision when you look at it that way.  You're in a position where you can increase your happiness factor and absorb the financial hit (I'm assuming) so clearly it wasn't a TERRIBLE decision. Just a decision that didn't pan out the way you'd hoped. You could have picked another house in a different neighborhood and regretted it for a million other reasons.

I always tell myself in situations like this that I made the best decision I could with the information I had at the time.

I do get it though. DH and I way overpaid for a tiny house in 2003 (at the height of the market) that needed a ton of work (and an additional LOC). The market tanked, life happened (ie. a lay off), and we had no choice but to wait it out for years. We were finally in a position last fall where we could sell and recoup enough equity to feel financially comfortable in upsizing.

[lolalolalola]

I'll commiserate. We seem to make very bad house decisions.

We bought in 2007 at the peak of the market, put $65K into a renovation and sold in 2017 for exactly what we purchased for (so we lost money, after commissions, not even taking into account the renovations).

The new home we bought in 2017 has dropped in value by at least 10%. It sucks.

The good news is, you can 'cut your losses' and move on. Good Luck!

[protozoa]

Hindsight is 20/20. You made the decision you thought was right at the time, you can't always know how you will like something! I wouldn't call this a bad financial decision, just inevitably not everything works out. Hope your house sells quickly and you find a new place that you really love.

[sakura]

We did the same exact thing as you, except a few years ago. We move from the city to the burbs in 2015. Realized it was not for us and moved to the city life in a different state in 2017. We downsized and lost a little money on the house, but we have not regretted it one bit! It has given us the opportunity to hone in on what we really want, and it turns out that it’s not exactly the ‘have kids and move to the burbs’ mentality that was all around us. Personally, I’m proud of us that we were willing to make that leap, even though where we were was just fine. It just felt like we were settling and we had the courage to change that, even though it wasn’t the most MM thing to do.

[imojoebunny]

In a few years, you could have more equity, or the economy could tank, and you would have even less or be unable to sell. We held off on moving at one point in 2010, in large part because we would have lost money, the market we were in was still recovering from the 2008 crash, and while we could have gotten a bigger house where we ended up moving in 2010, we still ended up in a plenty big house (talking the difference between a larger yard and 4200 square feet vs. 3900 square feet with a small yard, but 2 parks within 1 block, either direction), not a huge difference), in 2014, for the same price as the bigger house in 2010. In the meantime, our house appreciated $150K over those 4 years, so we were that much better off waiting to move, and by then, knew what out kids needed school wise.

If you are somewhere, where they can just build more, your house is unlikely to appreciate, and could continue go down in value (houses depreciate, land appreciates), if the market overall, drops, or interest rates rise, which historically, they are bound to do. We seem to be at the top of a cycle, so I would not expect interest rates to stay so low, or real estate to continue to appreciate, as it has done in many places in the last 8-10 years. I would take my loss, if you really hate it, and go settle where you think you will be happier. There is being MM and there is living. This sounds like both, over the next 10 years. I should say, we loved the neighbors we had in our old house, so we were not miserable there, just the house and some other external things, were a lot less desirable, long term.

[wanderlustmom]

Yes not everything will be entirely factual. We bought in 2007 and paid top price for an old house that needed too much work over the 12 years we lived in it. But, it became such a piggy bank for us so staying would have been the best financial decision as it was almost paid off.

No mind, we moved this summer to our dream house. Nine months later I still can’t believe how much I love it. But now we have a bigger mortgage. Still don’t regret it. Money is not everything

[boiler717]

Chiming in because we also moved to the suburbs and built our “forever dream home” and are now moving. We miss the city, we want something smaller. The timing is right. I think maybe we should hold out another year and see if we can get a better ROI. I worry we will regret it and want to move again.
I keep telling myself that there is nothing wrong with changing your mind and that it’s very rare for decisions to be irreversible. You have the ability to make a change and live somewhere great! It stinks to lose money but it’s better to be happier elsewhere.

[farfalla2011]

I just want to share where we are as well. We moved into our "dream house" in December 2018. I love our house and the neighborhood and we are in the suburbs as well. We actually are not city people although we both work in the city. DH's commute from our new house is horrible and his quality of life has gone down tremendously. I'm trying to help him brainstorm different career moves which will likely result in a significant pay cut and thinking about proposing to sell our house, move and work no where near the city for a lot lower COL and totally change our lifestyle. We can't move too far away because of my step kids, but since they moved an hour away, used to only be 20 minutes, 3 years ago, it wouldn't be terrible to consider totally getting out of the city, although jobs would have to change to make that happen.

I don't know what we will decide to do, but I totally understand the internal conflict making such a hard, but likely rewarding decision.

[Gato]

I'm here to commiserate. I have always been pretty cautious with money, but when we bought our first house (actually a condo), I thought we bought it at the bottom of the market (2009). Why I was confident I could predict that, I don't know. :S We thought we were settling there, so we put $30K into the house for new windows, new floors, and a new kitchen.

Cut to 4 years later, I want to move back to Maine and it can't wait because my dad is sick with cancer. The market had not improved at all! We got a little more money for the house because of all the improvements, but after commissions we ended up losing the entire $30K sunk into the house, and had a lot less with which to buy our new house here. I was pretty pissed at myself.

The happy ending, though, is that the next house appreciated significantly. Just four years later, we sold it for a $50K profit, and we had learned not to make a lot of expensive improvements right away, so we made back what we lost. Which isn't great from an investment standpoint... no ROI in 10 years... but we feel "whole" again, and we now have the house we want in the place we want. I hope the same happens for you!

[SusanBAnthony]

In 2012 we spent a year looking near our town's downtown and everything we could afford was a heap of crap. We finally said F it and bought in a non walkable new subdivision.

We hated it.

After two years we sold it and rented for awhile while we figured out what to do. We ended up moving back to the city.

Although we didn't lose money on that house, we did lose 60k on the house we bought in 2005 and sold in 2012. Then between 2012 and 2017 it increased in value by 100k. That one hurt.

Whatever. We love our current house and won't move until we downsize. No one can predict the future so you can't always make perfect decisions.

[bdubs419]

We bought a house back in 2015 that we thought might be our forever home. Our kids were super young though and we just needed a bigger house to fit everyone. However, fast forward to 2018, we realized we were not happy where we were. We really wanted to relocate to another state. We put our home on the market and flew down and bought our new house during a 3 day trip. Sadly we had no idea we would then have to drop the price of our home many times before selling. We took a huge hit (over 100k after realtor fees). It still hurts when I think about the details but I still wouldn’t change it for the world. We love our new house and our new life, and we know we wouldn’t be where are now if we didn’t take that hit. For me it was just like ripping the band aid off and moving on...

[shaynaatl]

Thanks for the insight everyone! I'll definitely keep MM posted when we find a new home.

[Accountingcat]

Houses are not investments, it's a roof over your head. I'll add my bad house story to the list... bought in 2017, the house was the worst on the block. I've spent way too much money to improve it (windows, siding, roof, floors, new bath & more). I just talked to a realtor last month and she said I could list it at the same price I bought for.   I'm going hang on to the house but I get the feelings of wasted money and poor financial choices from this. 

Another great one is everyone always told me how horrible renting is, waste of money, blah blah. Yeah...my city rent was pretty close to what I pay in property taxes now (chicago to chicago suburbs). Still a waste of money because I don't have children attending these schools! I'd rather rent and cut the maintenance worries out.

[shaynaatl]

So update on this- we sold! The timing was pretty nuts, as we went under contract right as Covid started hitting the US. It was a strong offer and higher than we expected, so we were nervous that the buyer would get cold feet or perhaps the house may not appraise. Fortunately, it all went smoothly. And we basically broke even after realtor commissions.

If there is a housing correction, we got lucky as our house value definitely would have been negatively affected (it was a buyer's market in our area even pre-Covid).

The flip side of this is that DH lost his job, so we are putting our house search on hold. We've leased an apartment, and will wait it out to see how the economy and housing market is going forward.

[shaynaatl]

So a final update- we closed on a new house! DH's company started up operations again in July and he got his job back. We started the house search again, and a home in a subdivision we were targeting got listed. We were going out of town the next morning, so we went that night and put in an offer. We had to pay $5k over list to get it. But at least we got 2.875% on a 30 yr jumbo. It's crazy how timing works out- if that house gets listed just 1 day later, we are out of town and don't get to see it.

The house-->apt-->house move process was definitely a hassle (all done during quarantine), and we did lose some money due to transaction and lease breakage costs. But I'm happy we went through it, as we love the new home, and more importantly the location.

[farmvillelover]

shaynaatl That rate on a jumbo is REALLY good. I know people right now that aren't getting that on a 30 year non jumbo. Congrats.

[ellipses84]

Congrats! Even if there were some MM things that could have been better, the rates are so low right now so it will be fine in the long term and you will be happier in your new neighborhood!

[fryjack2]

Woah! Congrats!!

How did you get that rate?!! The best I could find was 3% with closing costs and thought that was pretty good!

[macmars45]

Congrats shaynaatl !
My family is doing the TH to duplex rental to house all during this pandemic as well. The sale of our TH was finalized last month and we just made an offer on a great house in a great neighborhood. We'll find out by Monday if it gets accepted. *fingers crossed*

[wanderlustmom]

Congratulations, I am so happy you found a house you love AND that you got a fantastic rate!