New job opportunities, ailing parents, and even “love” can all cause someone to consider moving – but in real estate, the fundamental reasons that people feel forced to sell are known as the four D’s: diapers, divorce, death and debt. The first three life events occur at a fairly constant rate, regardless of the economy. However, debt has risen to record heights – particularly since the great recession in 2007-09. If unemployment, illness or higher interest rates materialize – these high debt levels can end off being high risk.
I know a number of home owners who purchased during the past 5 to 10 years and are now considering selling. They are tired of income being unexpectedly “sucked” into maintaining their houses. Home ownership is more costly and less glamorous than they expected. They are finding themselves house rich and cash poor. These owners are hoping to sell, pay off their debts, and have a little more money left over for the finer pleasures in life. There’s the catch, though. After selling their homes, some of them will have little – if anything – left over. Between the expenses of selling and moving, paying off associated debts (such as HELOCs), these owners may be in no better financial shape that when they purchased their home. In at least one case, they regret having ever bought a house. Perhaps it is just easier to maintain the status quo: carry on paying the mortgage, barely having any money left over, and hoping that sale prices increase (building equity)?
With consumer debt (such as mortgages) having risen to a new record 164.6 per cent of after-tax income … this is where the other three D’s (diapers, divorce and death) can suddenly cause problems. With no spare cash or credit available – how do you deal with unexpected speed bumps in the road of life?