The Bubble Sitters: Warren and Sarah Bland
The last thing you want is for a housing bubble to pop just when you're ready to sell your house and retire to someplace tranquil.
Such a fate would be mortifying if you were the author of a book about how to
decide where to relocate in retirement. Happily, the author in question acted
on time: He and his wife sold their house in Los Angeles for $720,000 more than
they paid 25 years earlier, and they're renting while they decide where to move
permanently when they retire.
Warren and Sarah Bland cashed out in 2003 when they sold their house in Brentwood. They parked most of the money in certificates of deposit and signed a three-year lease on a house in Studio City, just north of the Hollywood Hills. Warren, now 63, is gradually winding down his career as a geographer at California State University, Northridge, as he and Sarah weigh the pros and cons of moving to either Portland, Ore., or Ithaca, N.Y.
One good reason to relocate in retirement, Warren Bland says, is to live in a place with a lower cost of living. If you have a paid-for house in an expensive place, such as Los Angeles, much of your retirement funding can come from what he calls "equity take" from the home's sale. He figures that, if the timing is right, you might as well grab the money while you can.
"I think we are in a bubble," he says. "For someone planning retirement and thinking about relocating, a bubble is a good time" to sell and move. And that's what the Blands did.
They sold their Brentwood home for $889,000, after having paid $170,000 about a quarter of a century earlier and making $30,000 to $40,000 in improvements in the intervening years. With the proceeds of the sale and other savings, they have about $800,000 in certificates of deposit, and the interest helps pay their $2,200-a-month rent during the transition to retirement elsewhere.
L.A. bust: The
Selling in 2003, the Blands sold in the middle of a boom in which Los Angeles home prices rose 53 percent from 2002 to 2004, according to the Office of Federal Housing Enterprise Oversight. Prices kept rising this year. The Blands left some money on the table, then, but Warren isn't looking back. They had to choose a time to sell, they made their choice, and that's that.
Warren believes home values will head south when mortgage rates go north. He believes values could drop 20 percent to 30 percent in coming years as higher rates erode purchasing power. "We sold mostly because we wanted to get the money out when the money is good," he says.
As the Blands sit on roughly $800,000 in cash, they are confident that they will live comfortably, no matter where they move. A house that's comparable to the one they owned in Brentwood would cost about $300,000 in Ithaca and $500,000 in Portland.
Either way, they'll live in a place with cleaner air, less traffic and a lower cost of living. And they won't worry about a housing bubble.