Every now and then, people ask if they should move to take advantage of really cheap real estate prices out of state. In fact, some friends came over a few days ago who were agonizing over this very issue.
Sue has a small business that is in a slump. Jim, her husband, is unemployed. They live in a nice home but it’s expensive to keep up. They need a change.
Since the couple is in Los Angeles, prices are still relatively high. The house is worth about $675,000 and they have about $150,000 in equity.
They were thinking about moving to South Carolina, where real estate prices are lower and jobs are easier to come by – they hope. Rather than downsizing and buying a condo in their current neighborhood, they talked about buying a $600,000 home on the East Coast and getting a mansion.
What would you advise this couple? Here’s what I suggested:
A. Clarity
While moving might be a brilliant move, it would really be a shame to do so for the wrong reasons. These folks are struggling. They need to reduce their expenses. Their problem is cash flow. They don’t need a larger home.
While moving to a market with lower real estate prices does provide really attractive opportunities to upgrade, they can’t afford to do so right now. They need to buy a similar house or even a smaller one at a much lower price to reduce their expenses. That, my friend, makes more sense.
B. Income
Obviously, this couple should only seriously consider making this move once they find work in South Carolina. The fact that my friends were contemplating buying a larger home without first finding work worries me.
They are making decisions based on their feelings rather than what makes the most economic sense. Me no likey.
So when does it make sense to move to take advantage of cheaper real estate?
I can see doing this if you are retired and are downsizing. Or if you have work lined up and are in a strong financial situation. Or are looking for a different lifestyle. This move might make sense for my friends, but not the way they were contemplating it.
And making a move like this to get more home for the same money should never be done if your first priority is to get out of debt.
That is the case with these friends. They just don’t know it.
Have you been tempted to relocate to buy more real estate at lower prices? What decision did you come to? How?
Bucksome says
I’ve never considered moving because of lower real estate costs, but I’ve owned a home (or mortgage) in Southern California for about 30 years.
It did make me think about San Diegans who bought homes 40 miles away from work in Riverside county because they could get more house for their money. That market tanked with the economic downturn and most of my coworkers/friends that live there are upside down or left with little to no equity.
Mark Brian says
While the homes may be cheaper in South Carolina, the taxes might be lower or the cost of living better, I have to strongly suggest that you listen to the advice about finding employment BEFORE relocating. None of the positives about SC will mean a thing if you do not have a job!
Mysti says
We have been trying to relocate from Southern New England to Charlotte, NC(or maybe just over the border into SC) for 5 years. Due to my husband’s job, it just hasn’t happened.
Part of the impetus to move is pace of life. And part is cost of living. We can get a much larger (2-3x larger, and NEWER) than what we have now for the same money.
I would say your friends should definitely look to cut expenses, and I think they would be happy with a decent house in the 200-225k range. From what I have seen, they are nice.
No idea what part they are looking at, but True Homes is a builder that is focusing on alot of eco-friendly touches, TONS of options, and all around great value.
Lakita says
I agree with GoYanks….the fact that they wanted to be a mansion in a cheaper state was a huge red flag! All they’d be doing is getting a bigger house in a different state with no change to their financial situation.
Buying something similar to what they currently have (or smaller) would make the most financial sense.
Anthony says
I agree with GoYanks! You can buy a LOT of house for $150k in the South (assuming you’d call South Carolina a southern state). I live in Louisiana and bought a 1400 sqft house for $163k.
If it’s just the two of them, 1400 sqft is plenty! Personally, I am overwhelmed by the amount of space I have, even with myself, the wife, and a 7-month daughter.
I agree with you, Neal: I don’t think that their priorities are in order. Moving to another state in order to purchase larger property, while they are having financial issues, is itself another financial issue. They need to take a serious look at what they want in live before making such a big change in their lives.
Neal says
Mrs. White – Congratulations! And may I throw in a “well done!” too! Sounds like you really were clear about your priorities and made your decision pay off big time. Nice job!
I’m clearly w/Anthony and Go Yanks. My friends have to really reconsider the way in which they make financial decisions. The good news is, after we spoke, they went online looking for homes in the $200k range. Progress!
GoYanks says
Instead of buying a 600K mansion in Carolina, I would prefer to pay cash for a $150K house with the equity. That way, I never have to worry about paying Mortgage!
Mrs. White says
We sold our home several years ago and moved to a less expensive state. We already had work lined up for my husband. It has saved us a fortune in monthly expenses. We require far less money to live on now.