Thursday, January 24, 2008

strike three -- bases loaded

I missed the moon on tonight's walk -- partly because the damp is rising and there are clouds. I rushed Jiggs around the park. This was not a night for poetic thoughts -- no moon, desperate cold. Not even Emily Dickinson would have deigned to spin iambic pentameter out of such meager gruel.

But I did start thinking about Mexico -- a lot. Three separate articles in The Economist have got me thinking when I should sell my house in Oregon and buy a home in Mexico. (I know. Not until I rent and get to know an area. But the timing may prove problematic.)

Here are the three news items.

1. Everyone knows this one. The big R. The ski jump. The precipice. Pick your cliché. A recession is on the way. That will mean that housing prices will be depressed a bit longer. My home town already has a glut of unsold houses on the market -- some in my own neighborhood. But everyone knows this story.

2. This little piece of bad news is not as well-known. Buckle your seat belts for a series of mortgage insurance and bond insurance bankruptcies. The big banks may be writing off some debt, but all of those mortgage insurance policies that brokers scared young marrieds into buying will now come due. And too many were sold. After all, in an ever-expanding economy who is going to lose a job, and, if they do, they can live off of their windfall equity in their big home that their parents could never have dreamed of owning. Those insurance bankruptcies should start hitting in the next two years -- just about the time that the recession is waning.

3. But this is the big one -- and the most disturbing. All of we boomers have risen to the top of the economic pyramid with our big houses and big cars. We are now ready to retire. The kids are gone. All is well. But those darn big houses are so -- BIG. We will want somewhere with less space to care for. Maybe a 1 bedroom or a 2 bedroom. The trend has already started, but it will be in full swing in the next 3 years. The effect will be that a lot of big, formerly-expensive homes will come on the market. And who will be there to buy them? Remember all of those new schools built for boomers -- that needed to be shut down because boomers were busy having careers rather than kids? The long-range forecast is that big houses will drop in price because there will be no market for them. Opportunities for some, reversals for others.

Adding all of that together, if I time matters well, I may be able to sell my house in about 18 months or so. That will give me time to retire within the next year and to rent somewhere in Mexico for 6 months before I make the final move.

On the other hand, I could just play it by ear and enjoy even these nippy nights.

As I write, the moon has broken through the cloud cover.


Alan said...

I wonder if you have thought of putting your home on NOW and letting the market tell you what it is worth. If it sells, there are 5% CD's to pick up another 5% on your equity and be ready to go whenever you want to go! You will not then be dependent on timing of SAIF, the economy or trying to outguess Bernanke, Greenspan or even Obama. I realize you would lose the home deduction on your tax return, but that would simply mean putting more into that deferred account for a later rainy day. Remember the catchup provision on deferred which allows old people like we are to catch up on placing money into deferred, since some people could not be talked into it earlier in life! LOL Best wishes, but spend more time enjoying the moon and less worrying about $$$. Phil 4:6,7

Steve Cotton said...

Al --

Good advice, but I am not yet ready to make the final leap. The house is something of a refuge that will allow me to return to Salem after my major scouting forays. I suspect that within the next 18 months, there will be at least one break in the coming storm. As for losing the tax deduction, no big deal. It is almost paid off -- just a few more months to go. And I am taking full advantage of the both the over 50 and "three years within retirement" catchups. You taught me well. I am going to enjoy all God has provided.