Almost one year ago, we purchased our long-term family home. It was a major milestone and the accomplishment of my biggest personal goal. I wrote at the time that I believed the endowment effect impacted the seller and how we negotiated a fairer price. I also disclosed how we used a HELOC and a 401k loan to buy the house before selling our old one. We needed time to get the old house ready for sale, and I couldn’t imagine showing a house while living in it with two little kids.
The new home prior to moving in.
We planned to list the old house in the late spring but didn’t get it on the market until mid-June. This was terrible timing. New Orleans has one of the hottest summers on record. It was over 100 degrees almost every day for three months. Typical highs in the summer are in the low 90s, so this was extreme. June is the beginning of hurricane season when any buyer would be nervous about acquiring a new property. No matter how good the AC unit and insulation are, old homes don’t cool efficiently. There was no rain. Most buyers in New Orleans like to check out the street after a heavy rain before buying. I do, at least. Many streets flood, and there’s nothing worse than finding that out after you’ve bought the house.
I’m not trying to make excuses. We overpriced the house. Even though I understand the endowment effect, I could not avoid it. The combination of higher interest rates and high prices pushed many buyers to wait or reconsider. To add insult to injury, we never upgraded the house’s kitchen or bathrooms. I will never make this mistake again. If there’s one thing I’ve learned from this experience, it’s never to try to sell a house unless you’ve upgraded the kitchen and bathrooms. Buyers literally lose their minds over it. I have empathy for these buyers. It’s shocking to see the monthly cost of owning this house versus my monthly payment. I understand that they might not have an additional budget for renovations. However, the kitchen and bathrooms were fully functional and in good working order. I also think Americans are spoiled in their desire to have homes that look like HGTV.
The offensive kitchen that no buyer could possibly live with.
A third factor here is specific to New Orleans and other storm-prone areas. Our homeowner’s insurance rates have doubled in the last five years. The triple whammy of higher prices, higher rates, and higher premiums put a stop to the housing market in New Orleans in 2023. We were simply unlucky in our timing. The only homes that sold were perfectly move-in ready (read cheap HGTV white kitchens) or were all cash purchases. Our two-bedroom home on a busy street didn’t meet either of those criteria. One additional mistake I regret was marketing it as a three-bedroom. The nursery we added is a bonus room, not a full bedroom.
We took the home off the market in December and decided to do some upgrades. We figured we might as well give the buyers what they want. Interest rates have declined; hopefully, they will continue to do so before we relist it. The insurance market is easing. Should we have sold it for the lowball offers we received? Probably. Hindsight is 20/20.
Do I regret buying the new house? Not for one minute. I wake up in my new bedroom every morning and love it more. The layout is perfect. The yard is huge. The street is quiet, wide, and lined with live oak trees. The neighbors are wonderful. We’ve hosted several parties. We’ve now made our first Christmas and Mardi Gras memories there. This will be our home for many years.
Fingers crossed, we can finish the renovations and get the house back on the market before the summer. We can always rent to college students in the fall, but I am ready to let it go to the next owners and don’t want the hassle of maintaining two properties. Oh, and I’m still committing the original sin of repaying my 401k loan with after-tax dollars. Life is not an optimized spreadsheet but a balance of prioritizing today while saving for tomorrow.
