Americans are extremely mobile and move many times during their lifetimes. While some individuals may be born and raised in one county and stay there for the rest of their lives, this is becoming increasingly uncommon. According to the U.S. Census Bureau, 12.6% of the 37.1 million people who moved in 2009 moved into a different state.
Of course, there are a variety of reasons why this may happen. People may want to move closer to family, especially if they are starting families of their own, some people move for a new job or a job transfer, and others move to stretch their dollars further by moving from a high cost of living area to a more reasonable cost of living location.
Whatever the reason for your move, if you are moving from a high cost of living area to a lower cost of living locale, think twice before selling your home.
The Cash Benefit of Selling Your Home
If you sell your home in a high cost of living area and you have been there for a long enough time, you may get a pretty penny for your home. One woman I know, Barbara, moved from Naperville, Illinois to Kalamazoo, Michigan with her family because her husband was transferred. Naperville is a desirable location for many Chicago professionals; in fact, in 2006 Money Magazine named it one of the best places to live. The median income for those in Naperville is $112,258, and the average home is valued at $329,000.
Because Barbara and her family had been in their home for 15 years, they had built quite a bit of equity, and their home had also appreciated during those years. They sold the home easily because the market there lends itself to quick sales, and they walked away with a nice profit.
Selling your home in a high cost of living area can see you flush with cash, which will stretch even further when you move to a lower cost of living area as Barbara and her family did. Kalamazoo, Michigan, also on Money Magazine’s 2006 list of top 100 best cities, has a median income of $46,059, and the average home is valued at $91,950. In other words, homes in Kalamazoo are 2/3rds less expensive than those in Naperville. Barbara’s family moved into a large home with an in-ground pool, which they never could have afforded in Naperville. This type of move can provide a nice bump in your lifestyle.
The Drawback of Selling Your Home
There is one primary drawback to selling your home in a higher cost of living area when you are moving to a lower cost of living area–if you later decide to return to the area, you may find that you are priced out and can no longer afford to live in that city.
That is exactly what happened to Barbara and her family. After three years in Kalamazoo (and earning the subsequent lower salary), they did not have enough money to reenter the Naperville, Illinois housing market. As much as they wanted to move back home, they couldn’t afford to.
If there is any possibility that you may want to return to the high cost of living area, you may be better off renting your home instead of selling it. Yes, you will miss out on the nice bump of cash you would get if you sold, but if you make enough in rent to cover the house payment, you leave the door open to return. Otherwise, you may never be able to gain a foothold in your old town.
What do you think? Is it better to sell or rent in case you change your mind?