Notice to Vacate

We must have gotten too comfortable, because we just got tossed into the Savagely Unhealthy Housing Market. 

It was May 17th, 2022 and the day was going about as perfect as I could have asked for.   We recently returned from a national park we wanted to go to a couple of years after shutdowns canned our first trip. Spring finally warmed the water and I hit the beach with my surfboard at 6:30am to enjoy a sunrise surf with a rare spring swell and a few hours before the wind was going to turn the water into chop.   I had a little momentum going with my side hustle and found a small addition to our kitchen finally on clearance at Costco after eyeballing it for a while.   We took our pup to the dog park where we’d developed a number of acquaintances, including a couple of early retirees out in the wild.

Then we got the bombshell:   Notice to vacate.  Our annual lease that rolled over into a month to month lease would be terminated in 43 days.  There was no warning, heads up, options for higher prices, or an extension; it was a termination notice.  Once I got hold of the landlord to ask “what the heck”, he told me he was selling his home and needed to move into his rental property.

Status?   Not great Bob. There’s a laundry list of reasons this situation was less than ideal:

• We liked the area (Charleston, SC), but weren’t quite there on loving it enough to commit to buying a home there.   Home prices increased 60% to 80% in the area over the last four years.  We were basically priced out of the two areas of town that we wanted to buy in, homes that were selling for $500,000 to $600,000 started approaching seven figures.   We had been considering some other places for a while, but now we were presented with a set timeframe.  

• Rental inventory in the market was tight.  Very tight.  Rental homes either went right away with tons of applicants or were asking 35%-50% above market and willing to wait until August / September to cut prices.  We already are fighting an uphill battle on a rental between having a dog and not having a W2.    The municipality we lived in passed a moratorium on new apartment construction creating a shortage in the town and investors have been unloading their rental properties at 200x monthly rent in the area. Paying 35% above market for a one additional year of renting in this area wasn’t something we wanted to do.

• The area is a big tourist spot through mid-August for families enjoying summer break, so there were no viable short term rental options in the area to bridge the gap.  

• We had agreed to a house sit / kid sit for friends starting on July 1st.  This was after their parents bailed on them and they had already invested a lot of money for a trip.

• The middle of the summer is the last time I’d choose to move.  It’s the absolute peak of the moving season with shortages of everything:  Movers, moving supplies, storage.  This forced us to make decisions and schedule stuff early or we wouldn’t be out by the deadline. 

The conclusion:  Our Summer of 2022 was going to be a challenge.   I’m writing this in August after we lost nearly two and a half months of our life and spent a bunch of money for the economic benefit of someone else.   

We put a temporary solution in place: We moved most of our possessions in a pod and rented a furnished place in a beach town in Florida where the housing market has a little less pressure than the Charleston market.  The question I’m debating now is what’s next?  

How did we get here?  Recovering from burnout.

The low stress choice that we did in our last move was rent a house in 2019.   We had been homeowners for almost the entirety of the 15 years prior, including the last two houses which were built in the 1950s and constantly needed some ongoing maintenance. The place we found to rent mostly fit our needs and was owned by a generally handy and reasonable blue collar landlord.

Fortunately (or unfortunately), our rent remained the same for three years even though the real estate market took off.   All the reasons I had found in my research about the Charleston, SC area and this town within the metro area turned out to be accurate.   Home prices were soft in late 2019 and it gave us the sense of time until things just took off, rising almost 80% in three years.

In addition to the national trends driving real estate like demographics and near 0% interest rates, the locality passed stricter density rules (no new apartment complexes, limitations on ADUs) at the same time they ran out of land.   Throw in a great school district and a massive amount of people relocating from northeast metro areas due to the WFH trend, and homeowners in this area experienced a near doubling of their money in four years.  Looking back at 2019 I was wrong not to buy.

However, we were comfortable.  Our landlord had historically bought an owner occupied home, moved into it for a few years, then moved out and rented it.   He owned three rentals and his single family home in the neighborhood.   We were enjoying the low stress life. Until we weren’t anymore. In the words of the modern day philosopher Michael Gerard Tyson:  “Everyone has a plan until they get punched in the face”.    

So What Do I Do Now?

I need to figure out something with housing between now and January when the short term rental expires.   I could rent a place again, but I’m not sure I want to risk that level of life stress again with guaranteeing another move.  I’ve come to the opinion we have resources that should prevent us from being saddled with someone else’s timeframe.    

The market to buy a house is still brutal.  The only glimmer of hope is there’s some inventory again, but we aren’t anywhere near 2019 levels.

Total inventory data is currently 1,260,000. 2007 peak was roughly 4,000,000 https://t.co/DI0hZdElfq pic.twitter.com/RFS0muaPxa

— Logan Mohtashami (@LoganMohtashami) August 6, 2022

As we look around here, both listings and sales are declining. The area saw a nice spike in Q1 2022 and now many sellers are anchored to those prices. The difference is those closings were when interest rates were 2-3% below where they currently are.  On a $500,000 mortgage, that 2% equates to $833/mo difference in interest costs.

This beach town full of 1950s to 1970s single family homes and the inventory seems familiar to buying my last house in DFW.  The houses that are complete guts (or get torn down for lot value) sell at a fair price.   The houses that are properly updated both cosmetically and with the big ticket maintenance items sell at a fair price.   The stuff that’s been partially updated are mostly stuck on the market with a disconnect between seller and buyer.

There are also a handful of attractive duplexes in this zip code, but I think I’ll have to start soliciting owners directly to try to buy them.  Listings of these properties have been few and far between with similarly unrealistic sellers.  The idea of having a two unit place and keeping half of it as our own beach house / second home or being able to rent both sides for a decent return on our money is an appealing idea. 

The wisdom may tell me “don’t rush, wait, you’ll get something”, but it’s tough to take that strategy again after I was burned by rising housing prices, rising rental rates, and a tightening of the rental market after three years.   Moving is stressful, to the point where I think we have enough money to never be forced to tolerate moving on someone else’s timeline.

In addition to spending some time where we moved, further complicating this is the desire to try Hawaii for a longer time than just a vacation visit.  We briefly looked at rental options on our compressed timeline, but it wasn’t going to work given the competitiveness of the market along with having a pet.   I get the sense their housing inventory was crushed by the sub 3% mortgage rates due to second home buyers enjoying nearly free mortgage money over the past two years and that issue will require some time or a solid recession to get resolved.

As I’m contemplating what to do next, I look back on the last 3.5 years of early retirement.  So far we’ve survived two bear markets, government shutdowns, raging inflation, and a forced move.   Fortunately, low expenses and a small side hustle means we still have more resources than when I retired almost three and a half years ago.   In fact, it feels like financial resources available to deal with housing are snowballing:  Decent investment growth over the last 3+ years, growth in accessible funds thanks to Roth conversions, and both cash and borrowing capacity with the growing side hustle.   The reality is we could buy a place that has everything we want at our current location, have it go down 25% in value, and it wouldn’t change our life other than being a little irritated as failing to time the housing market (again).   We would still have money, still be retired, and own some land and a house within a mile of the ocean that’ll probably be worth more in 20 years than it is today.  

So my question to the readers is this:  What option do you think is best?

• Rent for one more year and see how the market shakes out?

• Hustle and try to buy a Duplex off market? (even if it feels like work)

• Buy a house that meets all of our wish list (either by paying full price or taking on a renovation project)

Those are our decisions we’re weighing now that we have some time and space away from the abrupt move.  What would you do?  Looking forward to the feedback!