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.
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.
They make the decision methodically. Warren is the author of "Retire
in Style: 60 Outstanding Places Across the USA and Canada." He
visited all 60 places mentioned in the book (and more cities that didn't
make the cut), ranking 12 criteria on a scale of 1 to 5, including climate,
cost of living, availability of health care and work and volunteer opportunities.
His favorite place is Portland (51 on a scale of 12 to 60); Ithaca (score
of 45) is in the running because the Blands originally are from Ontario,
Canada, and if they moved to upstate New York they would live within 200
miles of family -- close enough for frequent visits, yet still in the
United States. They don't want to move back to Canada, which they left
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.
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
The Blands might have kept the house longer, but they were
convinced that they were in a housing bubble and didn't want history to repeat
itself. Los Angeles housing boomed from 1988 to 1990, when values rose an average
of 49 percent, according to the Office of Federal Housing Enterprise Oversight.
Then came the bust: Home values fell an average of 20 percent over the five-year
period from 1994 through 1998.
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,"
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
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.