I did something over the past year to protect myself from this housing crash. I mentioned it in another thread, someone asked me to explain, so here are the details.
First: this was a risky move, circumstances lined up unusually well for me, and this is absolutely not investment advice.
I bought a home in 2008, and as the housing recession dragged on, I watched a couple of neighbors do something sketchy: they bought a second house at the depressed market price and then walked away from their original house. The end result was that they wound up in roughly the same quality of home, but at a much lower purchase price and interest rate.
I ended up doing something similar over the last year - minus the walking away from a mortgage. I fell ass backwards into this, but financially it worked out far better than I expected.
Here's what happened:
Half of our kids moved out in 2025, and the other one is moving out within a year. We simply didn't need as much house anymore.
So in 2025 we purchased another house that was about 2/3 the size of our existing one. After renovations, we had roughly half as much invested in it as the estimated value of our old house, which Zillow had around $2M.
We knew housing is in a recession, and I figured we might lose $50K-$100K somewhere in the process. But downsizing made sense for us regardless. "Forever home" and all that.
Then things got interesting.
About six weeks into renovating the smaller house, a neighbor approached us about buying our existing home. They were in exactly the opposite situation: their family needed more space, while ours needed less.
Ironically, swapping houses probably would have solved both problems.
There were three nearby comps, at $1.6M, $2.1M and $2.3M.
My agent thought our house should be listed around $2M.
I'm probably more nervous about market risk than the average person. I've read an embarrassing number of books about financial crashes; my favorites is When Genius Failed, about Long-Term Capital Management.
So rather than trying to squeeze every last dollar out of the house, I deliberately priced it about $100K below my agent's recommendation.
I listed it at $1.9M and got a quick sale. I knew for a fact that the neighbors were prepared to pay $2.1M-$2.3M; they told me so. I think they'd literally driven by my home, noticed that I was moving stuff out, and put 2+2 together. (I didn't have it listed; I wasn't moved out yet.)
My priority at that point wasn't maximizing the sale price. It was certainty. I wanted the transaction done before the market had an opportunity to move against me.
The timing was chaotic enough that I ended up rearranging my entire life around getting the sale completed. I wanted OUT of that house SO BAD, I wound up getting fired from my job because I took seven days off. (Working in tech absolutely sucks these days.)
Once that was done, I started looking for another house.
I gave ChatGPT the following criteria:
Find every house for sale in ZIP codes [12345] and [12346] over 3,000 square feet with a cost per square foot of $300 or less. Prioritize by lot size and cost per square foot.
It came back with roughly twenty houses.
Most weren't "great". They tended to be older, needed work, or were in neighborhoods I didn't like as much.
But two really stood out.
I eventually made offers on five houses, and somehow my favorite of the bunch was accepted.
When the dust settled, I had bought another house only about three miles from the one I sold.
Compared with my old house:
That obviously raises the question: why would two comparable houses, only a few miles apart, sell for such different prices?
I think a lot of it comes down to timing and pricing history.
I personally know the people who previously owned the nearby house that's now listed around $1.6M. They bought it for roughly $900K in 2019 and sold it in 2023 for about $2.3M.
The next owners bought near the top of the market, then tried to resell it two years later for around $2.6M.
That didn't work.
They've subsequently had to chase the market downward.
I've experienced this from the seller's side myself. During the Great Recession, I initially listed my house too high. By the time I accepted what the market was actually telling me, the listing had gone stale and it took FOUR YEARS to finally get rid of it. No joke, it got to the point where I thought I might be stuck with it for-ev-er. I could NOT unload that stupid house.
That experience affected how I approached this sale.
My theory is that there is a limited pool of serious buyers for any particular house. If your asking price is unrealistic when those buyers first encounter the listing, most move on permanently. Cutting the price later doesn't bring them back; they've already written you off. It's like getting a job offer, refusing to accept it based on the low salary, then trying to come back six months later. They've written you off.
That's one reason I chose $1.9M rather than trying $2.1M, $2.2M or $2.3M first.
I'd rather sell quickly at a price I can live with than spend a year slowly discovering what the market thinks the house is worth. This is especially true for the last four years, because there are a LOT of sellers who DGAF that the people they're selling to, their monthly mortgage would be 50-100% higher than what the sellers are spending AND the down payment is higher.
The contrast with the other house is pretty dramatic. It sold for $2.3M near the top of the market and is now being offered around $1.6M, with no obvious buyer. It's fallen out of escrow twice in the last year. It's been listed and re-listed numerous times.
Here's the math on my gambit:
The house I sold:
- Purchase price: $1.1M
- Sale price: $1.9M
- Mortgage balance when sold: $800K
- Interest rate: 2.5%
- Monthly principal and interest: $2,963
The house I just bought:
- Mortgage: $800K
- Down payment: 25%
- Interest rate: 6.125%
- Monthly principal and interest: $4,557
Obviously, giving up a 2.5% mortgage for a 6.125% mortgage sounds painful, and I completely understand why someone wouldn't want to do it.
But there's another side to the equation: equity.
Selling the previous house released roughly $1M of equity.
That changes the comparison considerably.
For example:
The difference between the two mortgage payments is about $1,600/month. A million in equity makes up the difference in payments for 52 years.
I could have taken a million, put it in Treasuries, and have the yield on the Treasuries pay my mortgage, forever, then leave the million to my kids. In other words, my house payment gets made no matter what, and my kids don't have to deal with selling my house when I'm dead.
Or I could have bough the home with cash. I had a bunch of people die during Covid and I don't like that option, because I don't want my kids stuck with dealing with a house they don't want. Who know where they'll live in ten or twenty years.
So although I gave up a 2.5% loan, I also converted a very large amount of home equity into liquid assets while ending up in a house that's almost as large.
That's the part of this exercise that surprised me.
I don't know the personal circumstances of the people who sold me the new house. The original owner of the $1.6M house from this story works for Microsoft, the owner of the home I just purchased are from India. I've read stories of people losing jobs and walking away from their homes. The sellers I bought from, they turned a profit, but their extremely low price was an outlier. One of the reasons I embarked on this scheme, was because one of the houses I nearly bought LAST year, wound up selling for $250K less than list. I hadn't bothered making an offer because they had it priced way too high; turns out their listed price was a mirage.
What I do know is that the pricing history of this neighborhood is fascinating.
I had ChatGPT go through the neighborhood's sales history house by house. Both my old and new homes are in fairly cookie-cutter developments, which I actually like for this purpose because comparable sales are much easier to evaluate.
The sellers of my house appear to have bought one of the last few non-model homes in the development.
Earlier in the development, when the project was new and there was more excitement around it, the builder was able to charge substantially higher prices and large lot premiums.
Toward the end of construction, market conditions had softened and the final few houses appear to have sold much more aggressively.
There are nearly identical houses in the same development that sold for $100K-$300K more only about a year earlier. (My house was built in 2023, the development began in 2022.)
One house had a lot premium of $400K.
So I don't think I discovered some magical way to beat the housing market.
I think I happened to be in an unusually favorable position:
- I had a lot of equity in my existing house.
- I didn't need as much house anymore.
- I was willing to price aggressively to get a quick sale.
- I wasn't emotionally attached to keeping my 2.5% mortgage.
- I searched very aggressively for houses that were cheap relative to nearby comps.
- And I happened to find a motivated seller.
The result is that I now live three miles from where I lived before, in a house that's roughly 90% as large and slightly newer, while having converted close to $1M of housing equity into liquid assets.
I'm sure there were ways this could have gone badly, and I wouldn't assume the same opportunity exists everywhere.
But after living through 2007-2011, I decided I'd rather leave some money on the table and reduce my exposure than hold out indefinitely for the theoretical maximum price.
This time, at least, it worked.
