Homeowners Consider Cashing Out of Hot Markets

Many homeowners in the hottest housing markets, primarily in the West and Northeast, are wondering whether they should sell and reap the benefits of rapid price gains.

Some are downsizing to devote more money to retirement, while others are finding that they can get more house for their money in lower-priced markets. Experts urge homeowners to consider the cost of living and wage potential before making the decision to move, however. Others are unsure that cashing out makes financial sense.

"Anybody who has more equity in their home than liquidity should be assessing their mortgage and equity in the context of their whole financial structure—investment strategy, tax strategy, diversification strategy—and err on the side of liquidity," says Kevin Daum of Alameda, Calif.-based Stratford Financial Services.

Those who do cash out are urged to safeguard their profits, rather than use them to pay off short-term debts and spending more.