Laura Rowley Money & Happiness

You were lucky enough to be in the right place at the right time. Is it time to bail out?

With prices declining or flat-lining in many markets nationwide, that's the question for homeowners who purchased before the real estate boom.

To Bail or Not to Bail

They live in cities like Riverside, Bakersfield, and Fresno, Calif., where the average home price has rocketed more than 125 percent in the last five years. Or in Ocean City, N.J., Baltimore, Md., or Honolulu, Hawaii, where average home prices doubled in that period. (See my blog for a list of the top 25 appreciating markets.)

While the troubles of subprime mortgage holders have dominated the news, just 5 percent of all outstanding mortgages are delinquent, according to the Mortgage Bankers Association's latest survey. If they haven't siphoned out their equity, homeowners in real estate hot spots have an opportunity to make a sizeable profit and escape the high costs associated with hot real estate markets. In Long Island, N.Y., for instance, home prices have risen 76 percent in the last five years to a median of $478,000.

Last year, 54 percent of Long Island residents reported in a study they were somewhat or very likely to move in the next five years to an area with lower housing costs and property taxes -- up from 45 percent of residents just two years earlier.

"People on Long Island are finding it increasingly more difficult to meet monthly housing expenses," says Anne Golob, director of the Long Island Index Project, a research group that conducted the study. "Property taxes have grown exorbitantly in the last few years." Other burgeoning costs -- including health care and college education -- may inspire a search for lower housing costs.

Appreciating Freedom

A 2006 survey commissioned by Coldwell Banker found affordability was the third most cited reason that leads people to relocate. The majority, 48 percent, moved for a job; 45 percent wanted a better community or lifestyle; and 28 percent sought a more affordable home or location.

"People are living in very uncertain times," says social psychologist Lois Vitt, Ph.D., author of "10 Secrets to Successful Home Buying and Selling: Using Your Housing Psychology to Make Smarter Decisions." "They don't know what's going to happen with national security, their jobs, health care costs, Social Security and on and on. It's a good idea to take an appreciated house and pay off debts and simplify your life a little bit. In some cases, you feel a lot more free."

Like the shareholders who sold Internet stocks before spring 2000, relocating can be the ticket to prosperity that might otherwise take decades to achieve. But selling a stock and moving a life are utterly different gambits. It's a much more complex decision, with larger potential consequences.

A Moving Experience

Kevin Manion has lived in California for 27 years; his wife is a native. This spring, they and their four sons are moving 1,000 miles away from their Foothill Ranch home to a town 35 miles outside Denver, Colo.

Their search began after Kevin's mother died, and his father wanted to sell the family home in Connecticut to one of his children. A move east was out of the question for Manion, who covered the western United States in his sales job.

"But it got us thinking about what we want long-term for our growing family," Manion says. "It became a quality-of-home-life issue. There's not enough room in our backyard to even play catch -- every third throw goes over the wall. Unless you feel like hopping over the wall and foraging in the bushes you just let it go; there must be 100 balls in there."

They looked first in California. "There are a lot of zero-lot-line homes with postage stamp backyards that are a tremendous amount of money, plus the taxes," he says. "Short of winning the lottery, it was readily evident that there wasn't anything in the area that was going to be acceptable."

Manion had always admired Colorado's friendly people and landscape, and his wife has friends and a brother there. The Manions sold the home they had owned for just seven years for $925,000. They're building a new place in a gated community on three acres of land for $800,000; the extra will go into the kids' 529 college plans.

Portable Job Security

Essential to the relocation decision, says Manion, was the ability to keep his job: "It was easy to inform my boss I was going to Colorado; he said, ‘Hey, that sounds like a great idea.'"

In some cases, the temptation to bail outweighs the desire for job security. That was the case for Kathy and Greg Marks, who moved to the San Diego area from their native Wisconsin in 1998 when Greg's employer offered him a transfer. At the time they had three children, ages seven and younger. They purchased a 3,100-square-foot home in Chula Vista. Greg was a plant manager and Kathy worked as a substitute teacher.

Six years later, home prices had tripled. "We thought if don't do it now, we'll never do it," says Kathy Marks. With nothing else lined up, Greg quit his job, and they sold their place in Chula Vista for a profit of nearly $440,000. They paid cash for a 3,700-square-foot home on an acre of land in Oconomowoc, Wis., and also paid off their two cars.

It took Greg six months to find a job, which paid less than his management position in California. But, says Kathy Marks, "I don't regret it for a second. The cost of living is less here for literally everything. And we live right between both sets of parents."

Resources for Relocation

Thinking of bailing? Web sites such as Sperling's BestPlaces, greatschools, and City-Data.com offer data on crime, environmental quality, schools, and cultural opportunities.

Meanwhile, aim for a destination close to family and friends; research in subjective well-being shows they play a decisive role in happiness. The University of Chicago's National Opinion Research Center, for example, found that people with five or more close friends (excluding family members) are 50 percent more likely to describe themselves as "very happy" than respondents with fewer friends.

Also consider a place that offers engaging employment and leisure opportunities, such as a college town. Mihaly Csikszentmihalyi, director of the Quality of Life Research Center at Claremont Graduate University's Drucker School of Business, is a leading researcher on creativity and happiness.

He has written extensively about a concept called "flow" -- that state of being when we are so completely immersed in a challenging activity that we forget the passage of time. Flow can be achieved through work, sports, spiritual practice and creative pursuits.

Trust Your Judgment

Meanwhile, you probably won't miss the weather and other background factors as much as you think. Princeton psychologist and Nobel laureate Daniel Kahneman has found that people are generally poor predictors of their own happiness.

In 1998, for example, Kahneman did a study that asked people in the Midwest if they would be happier living in California. Most people expected they would be, given California's balmy climate. Meanwhile, people in California thought they were happier than people who lived elsewhere.

But when the researchers measured the actual happiness of people in both places, they found no difference. When you live somewhere, Kahneman suggests, you don't think very deeply about the characteristics of the place. You just go about your day.

Vitt offers an interactive quiz on her web site that can assist home sellers in identifying their underlying values before they bail. "I think people by and large are wise in making housing choices," Vitt says. "My advice is to have a sense of adventure and trust your inner guidance. And if you find you've made a mistake, move again. You can put roots down again, and find wonderful people wherever you go."