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Moves to make


Always dreamed of being in the right place at the right time? You may be right now.

Is it time to cash out?
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"As a rule, most people don't buy a house as a short-term proposition," says Peach. Because this is more than an investment, it's a lifestyle choice, "people don't take buying and selling lightly," he says. "Because of that, it's pretty impractical to try and time the peaks and troughs in home prices."

When values dip, many "believe that the period of negative equity will be short," he says. "And the cost of moving is high. So they continue to make the payments and hope for the best -- which I think is the rational thing to do."

You might also want to take the long-range view. "Over the long term, home prices fairly steadily tend to go up -- about 3 to 5 percent a year," says Retsinas. "It's not tech stock. But over the long term it turned out to be a pretty good way to build assets.

Bottom line: If your house feels like home and you can afford it, why move?

2. Are you already planning a move?
One of the times it might make sense to try to get out before prices go down is if you're already planning a move.

"Suppose you're in a market that has some of the characteristics of a bubble, and you are otherwise thinking of relocating or making a lifestyle change," says Tyson. Then it's "certainly a good time -- when there are inflated prices in some of those markets -- to think about cashing in your chips."

"The secret to cashing out equity is to move from a high-cost market to a low-cost market," says Retsinas. But only if you were planning it anyway, independent of equity issues.

Or, if cashing out your equity and downsizing was always part of your long-range financial plan, an impending bubble could be your signal to investigate starting the process a little early.

And include the transaction costs when you run the numbers. "Selling and buying back can gobble a large percentage," which means they have to be expecting a major market correction, says Tyson. Selling "really makes more sense for people who have other reasons to think about selling, like relocating or downsizing."

3. Do you have a manageable mortgage?
Can you afford your mortgage payments? If you're barely making it now and might have trouble if rates went up, you might simply want to refinance to a fixed rate. You may also want to rethink your mortgage if you've got an interest-only or reverse-amortization loan.

Your ability to ride out a bursting bubble or a bad economy "has to do with the mortgage product you're carrying," says Retsinas. "With a fixed-rate mortgage, you have some insulation from interest rate increases."

-- Posted: March 1, 2006
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