Is it smart to hedge my bets in the California Real Estate market?

Asked by Isaac Reyes, Moorpark, CA Mon Nov 3, 2008

My wife and I bought our second and only home 4 years ago. We owe less than what its worth, but I'm thinking that since it that margin of equity is ever shrinking. Would it be smart to sell now for a below market price and get a larger home with more land for about what I owe on my current property?

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Barry Shapiro, Agent, Camarillo, CA
Mon Nov 3, 2008
Hello Mr & Mrs Reyes,

I am reading over your question very carefully before replying with my answer...

I would imagine that you purchased your second home in Moorpark in 2004, just as the market was approaching it's peak. The local real estate market hit a plateau in late 2005 and early 2006. I would also imagine you utilized the equity you realized from selling your first home to buy the home you are in today.

My consultive question(s) to you, if we were sitting across the table from each other would be the following:
1) Are you concerned about the "margin of equity" you have "shrinking away"? Actually, all homeowners share in the same "plight" -- which is nothing more than an overdue market correction. We are generally returning today to values equating to levels last seen in 2003. If your particular neighborhood is fairly stable -- not a lot of sales from '03-'07, then you pretty much do not have to worry about losing a lot more equity.
2) If the market was different, for instance rising gradually or even stablilizing, would you feel differently about selling now?
3) Do you need to sell? Can you afford your payment?
4) Is your present home satisfactory?
5) Do you need a "larger home with more land"?
6) I am reading what you are saying and have a suggestion ONLY if you answered YES to Q #5:

Sell now, take a hit. RENT for as long as the market takes to recover, possibly until the year 2012. Then, when you do buy back into the market, I am certain your property tax basis will actually be lower. As you say, you are hedging your bets. If you buy and sell in the same market, you do not truly take advantage of the market. However, if YOU feel prices and the trend in market values will continue south, you should get out and wait for the market to show signs of bottoming out. I realize this step make not be practical for various reasons -- family, kids in school, etc. So, you still have some homework to do as far as studying the market and determining your best "move" (or no move at all).

Read The 2009 California Real Estate Market Forecast ( 134 pgs./October 15, 2008) attached below - it may take a moment to load.... It's a REAL (estate) EYE OPENER:

I will be happy to email you the LINK to Leslie-Appleton Young's (CAR Vice-President and Chief Economist) recent videotaped speech on the forecast for 2009 and beyond.... Stay informed!!
1 vote
Keith Sorem, Agent, Glendale, CA
Mon Jan 26, 2009
You pose a very good question. And you have some great answers.

My suggestions would be:
1. Talk with a REaltor that knows local market trends and values and get a realistic idea of your home's current market value.
2. I believe that you measure twice and cut once. That means analyzing the entire move. Figure out how much you would owe (or net) after the sale. Then figure out what you could buy, and how much that would cost.
3. There are generally more people that can afford less expensive homes, and fewer people that can afford expensive homes. That means when trading up, there will be fewer qualified buyers. So in most cases more expensive homes decline more in value.

That means that all things being equal, you may lose a little when you sell, but you'll save more when in buy...if you are planning to buy and hold.

Good luck.
0 votes
Barry Shapiro, Agent, Camarillo, CA
Mon Jan 26, 2009
Hello Isaac,
I hope you don't mind if I send you the recent Market Snapshot for homes in your area. You may want to sit down face-to-face with a realtor who cares about your best interests, not theirs. This real estate market can be pretty brutal, as we see in the number of local short sales and foreclosures. I feel a large percentage of homeowners may need to analyse for themselves their own short- and long-term goals while they are still in a position of choices. I will happy to meet with you, along with a 25+ year resident Realtor from Moorpark, to assist you in making a prudent for your family's future. Here's the Market Snapshot:
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Glen Mitchell, Agent, Half Moon Bay, CA
Mon Nov 3, 2008
Isaac, If you ask any real estate investor the worst investment they ever made you will most often hear it was the one they sold. So with that said, if you could swing it, my advice would be to rent out that house and then go get another. There are some good bargains out there. If you can't financially swing it then yes it still makes sense if that's the type of property you want. (More land does typically mean more work and more expense) I live in a smaller house then I would like, but at the same time I have multiple properties and want to be sure I have resources to keep the empire running :) My parents were great examples and on a single income (state job, so not a big salary) accumulated multiple properties including vacation rentals which they now get to enjoy in their retirement years. I got a front row seat to how this works so it probably comes easier for me than the average person. Read some of the Rich Dad Poor Dad books for further and better explanations. Best of luck with your next purchase! Glen
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0 votes
David, , La Jolla, CA
Mon Nov 3, 2008
Many consumers are taking full advantage of the current market and selling what they have and upgrading.

Just keep in mind your property taxes will more than likely change and dont forget the supplemental tax..
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