Two sides of moving: downsize or ladder up

When his children and stepchildren moved out of the house, Jim Geiger and his wife decided to downsize.

The empty-nesters sold their 2,800-square-foot home that sat on 1½ acres on the north side of Crystal Lake and opted for a smaller, cozier abode.

Watching the market spiral downward, Geiger asked himself some all-important questions: Should I stay or should I go? Do I hold onto the house in the declining market, or do I jump ship now before things get a whole lot worse?

The Geigers were in a big, expensive home with a high monthly payment and watched the value of their home continue to drop.

That’s when, earlier this year, they sold their home, purchased in 2001 for $283,000, for $272,500. They spent about seven or eight years renovating the home.

“We sold it for less than what we bought it for,” he said. “We had equity in it. It didn’t matter.”

The Geigers believe that they can achieve more by having less. They have no plans to buy a new house anytime soon.

“I’m going to rent until [the market] stabilizes,” Jim Geiger said. “The value on my house … is going to drop even more than when we bailed out and got out of there.”

It wasn’t just because the kids were off to college; Geiger, an electrical contractor, saw home values declining.

“It wasn’t just because the kids were out,” he said. “I thought it was going to drop even more.”

Geiger was spending $2,200 a month on his mortgage. Now he’s spending $1,600 in rent.

A big bonus for renting is his ranch-style home is relatively maintenance free, or as he put it: “When something breaks, I make a phone call.”

People like Geiger are not uncommon.

“You’ve got to get out while the getting’s good,” Prudential First Realtor Paul Hespen explained. “For some folks, it just makes sense at this point to sell before things go lower, and [the Geigers] were a perfect example.”

But there’s another side of this coin: the young couple looking to ladder up. Many sellers are taking a big hit when they sell their starter home, but now with a growing family, those families are able to get a lot more house for a whole lot less.

Hespen, who represented Geiger, remembered a young family to which he recently sold a house. The family had outgrown their starter home, but lost more than $100,000 upon the sale of that home.

But unlike many others in today’s market, they were not upside down and were able to realize gains from that hit.

“They were savers, and they were disciplined,” Hespen said. “They could afford to get out, and now they can afford to buy so much more house.”

Now could be a good time for those looking to do more with less, but the way Geiger sees it, the market still has a long way down to go.

“The market is still dropping,” he said. “It’s a big black hole. Nobody knows how far down it’s going to go.”

Hespen agreed, saying that the market hasn’t even seen the inventory from homes in the process of foreclosure but not currently on the market, also known as shadow inventory.

“There’s absolutely a shadow inventory,” Hespen said. “[Housing experts] are showing that Illinois has a two-year supply of distressed homes. That’s going to force the prices to drop even lower yet.”

But to turn the market around, it takes a lot of confidence that is missing in the housing market today.

“With prices so low and historically low interest rates, homes should be selling like it’s a three-for-10 sweater sale, but nobody has any confidence in the immediate future.”

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