I am not so sure about this....here is why. If I sell my house, fine. If I am wrong and the market continues to get stronger, well then I miss out on additional profits. But if I then rent, I am doubling my bet. I am now really short, because as time goes by,.I am not only losing possible appreciation on the house I sold, but I am eventually going to have to buy at a higher price down the line. So I lose both ways. If I just hold, I think eventually I will not be sorry, because even if my house goes down in value, it will eventually recover. The quandry seems to be that I am in the kind of home that is least likely to get hit by a break in the market. I am not in a high end home or in a low priced home. I am in the safe middle. The more I think about it, the more I think I should just hang on. Also, I am in an area that has no real economic vulnerability due to any industry. Still, I would love to know of a way to "short against the box" so to speak, if there is such a RE strategy. My house has been appreciating almost as fast as my stocks went down
anytime u can borrow at 5.5% take it.....if rates go up then you will be happy u did.....eventually the money in the bank will earn you more than the cost of the loan....
What about the fact that the mortgage interest is deductable? Doesn't that make the real returns on these numbers completely different?
Good point. I tried to take taxes into account by comparing mortgage rates to a muni bond fund which is tax free. But with mortgage interest deductible, the net rate isn't 5.5%, it is maybe (1-28%) x 5.5% = 3.96%. So now it looks like borrowing at 3.96% to keep your cash available for trading/investing <i>is</i> the better choice. Thanks, rs7 and Dustin.
No because we all know that all traders lose money so the deduction will have no benefit as there will be no income to deduct it from. Stick with Aaron's original advice.
Sorry to hear that it is that way for you. But the truth is, you can't speak for the rest of us. Trading has treated me quite well for a lot of years. And if you feel that way, why do you even bothering coming on this site?
It seems that no one has figured out how to actually short their house. Selling your house and renting is really only a shift from a long position to a cash position. With renting, your personal net worth does not increase as RE prices drop. In a true short position, your wealth would actually increase as RE prices drop. To actually short RE, you must somehow use cash to borrow RE, sell it at the current price, and re-buy it at some later low price. The closest strategy that I can think of is to short an equity position that is tied RE. You would want an equity whose decline in value tracks the decline in value of local RE (e.g., a local home builder or building owner). So, sell your house (to go from long to cash) and then pour the proceeds into a margin account and short an RE-affiliated equity. It is risky, like any short position, because if RE prices rise you will have even less money with which to buy the even more-expensive houses. -Traden4Alpha
here's a snippet from <a href="http://www.elliottwave.com/features/marketwatch/default.htm">EWI</a>... There's conflicting PR coming out about housing. Some says people are scared and dumping (and the stock charts bear that out), others, like the above, say it's still a mania. Perhaps this is due to geographical differences and/or that smart money is dumping so that stock prices lead; people rushing out to get licenses is probably a roughly coincident indicator.