I sold my house, but fell into the trap of rising interest rates and inflation. What is it now?

She brought home $2 an hour plus tips and a job waiting tables at a nearby restaurant, and I worked at a marine store for $500 a week. We rented a very small manufactured home in a mobile home community and paid $800 per month in rent. We had a year to save to take the next step toward homeownership in 2018.

We found the house through my wife’s former co-worker. It was a 1,400 square foot home with 3 bedrooms and 2 bathrooms on 1.53 acres. It received an asking price of $145,900 from the seller. We were approved for an FHA loan with 3.5% down and a 4.625% interest rate. This was all we had saved, but we took a leap of faith and agreed to move forward.

A single father who pays all the bills

We closed on our house and lived there for three years. We had some relationship problems along the way. It was mainly a financial issue. We decided to get a divorce because we were currently paying $1,053 a month in mortgage costs. As a single father at home, I was left with all the bills. With hard work and dedication, I won. It was difficult, but not impossible.

In 2021, I changed jobs and started working over 60 hours a week making $23.10 per hour! Life seemed great. I was able to save money, fix up my house, and give my kids Christmas. I met a woman and we had a blended family with six children. At the end of 2021, we moved into a house together.

Last year our world turned upside down. My second wife was laid off from her manufacturing job and began working in the only field she could find: door-to-door sales. Although she has an associate’s degree in accounting, she hasn’t been able to find a job for months. So the bills started piling up. Our credit card debt was mounting and we were starting to drown.

‘We’re stopped in our tracks’

We decided to sell our house and walk away with more than we needed to put 20% down on our new home. So we listed the house for $300,000. We sold it for $296,600. We began our journey to purchase land to build our dream home, a barndominium. But our joint income was not enough and we were stopped dead in our tracks. Moving in with my parents was the only option.

We are now saving every dollar. Selling your home due to rising interest rates is one of your biggest regrets. Because we know that finding a single-family home on an acre for $150,000 is a thing of the past. We make more money now than ever before, but we can’t afford to buy a house big enough for our blended family. We will have to almost double our annual income.

The home we sold is now up for foreclosure, but it’s well out of our price range. To say the markets are disappointing is an understatement. Our dream of home ownership is getting further away every month due to rising interest rates and prices. Our American dream has turned into a nightmare. Yes, we learned that nightmares are also dreams.

What do you suggest to us?

living with parents

Related: My husband will abandon me and our two children and won’t pay the mortgage. What is it now?

Dear Life,

Think of this time as a chapter in your life, a chapter that won’t last forever. Since you can’t live with your parents this time, think about something else while you’re saving and working and waiting for interest rates to drop. They will fall. It’s just a matter of when. Many economists predict interest rates will likely fall to 6% in mid-to-late 2024 and closer to 5% in 2025.

However, it is difficult to predict a decline in interest rates. “Most experts expected the first rate cut to happen by now,” said Robert Seltzer, founder of Seltzer Business Management in Los Angeles. “There are serious doubts that interest rates will get into the 2% to 3% range that existed in 2020 and 2021, but I think rates could return to the 4% or 5% range.”

I got a good price on it when I bought it in 2021, but it wasn’t in good condition either. The interest rate on a 30-year fixed mortgage rose to 16% in the 1980s. Some economists say 5% is the “magic number” that interest rates must reach before more sellers feel comfortable making the move and more buyers feel it’s time to make the jump. Historically speaking, this is a pretty good ratio.

Alternatives to Buying a Second Home

Time moves slowly when you want something to happen and when you think you’ve missed an opportunity in the real estate market. You are not the only one caught up in rising interest rates and inflation, and you made the best decision you could at the time. The advantage is that it saves you money so you don’t have to start from scratch. If you did it before, you can do it again.

Bryan Kuderna, CFP and author of “What Should I Do with My Money?” Looking back, he says he could have kept his home, gotten a HELOC, and paid off his credit card debt, but that was already done. He, too, said he should live at home or rent until he has more cash available to make a larger down payment. “We hope interest rates will fall later this year and home ownership will become more affordable,” he added.

Housing is a long-term prospect. “I always advise my clients: ~ no You should buy a home unless you plan to live there for at least five years. I hope to hold on to it much longer,” he says. “It should be viewed as an illiquid asset with many hidden costs to own and maintain. “In time, it can become a major asset, but it should not be considered an investment in your financial plan.”

If you’re an only child, you probably won’t say it, but you could probably use your savings to renovate your parents’ house instead of looking for another home. It’s unfortunate that your wife lost her job, but with luck she’ll be able to find a better one, and considering you’re saving her rent and probably not paying for childcare either You’ll be amazed at how much money you can save.

Larry Pon, a CPA based in Redwood City, California, recommends putting the money you earn from your first home sale into a money market account so it can earn interest while you plan your next move. “As interest rates rise, you need to be able to earn more interest income to save money for a new home,” he says.

Compromise on your next home

Real estate is a long-term investment. Especially considering that most people end up paying 6% in real estate agent fees, attorney fees, and other closing costs. “Put together a budget and find out how much you earn and spend each month. This will help you figure out how much you can save each month,” says Pon.

“Instead of getting a fixed mortgage, consider an adjustable rate mortgage, which has the potential for interest rates to go down,” he added. “Instead of building a barndominium, why not look for an existing property that’s perfect for your family? Children must share a bedroom and sleep in bunk beds. No one will get their own room.”

Accountant jobs are in high demand, he says. In fact, the Bureau of Labor Statistics projects that accountant and auditor jobs will grow 4 percent over the next decade, which is broadly in line with the average growth rate. “If your wife puts her accounting education to good use, the additional income will definitely improve your situation,” says Pon.

Forgive your past choices and don’t give up hope of having your own home again.

If you have any financial or ethical questions, you can email The Moneyist at qfottrell@marketwatch.com and you can follow Quentin Fottrell on X, a platform previously known as Twitter.

Moneyist regrets that we are unable to answer questions individually.

Quentin Fottrell’s previous columns:

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‘I gave up a career I loved passionately’: My husband secretly set up a trust containing our home and his own investments. What should I do?

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