Andy, I live and work in Baltimore, Maryland, just 30 miles or so north of Gaithersburg/Bethesda. I am in the title/real estate business. In terms of your original question regarding your car loan, think of it this way...in the amortization schedule of payments, you are at a point now where each payment you make is largely going to pay off principal. The effective interest rate on your current payments is much lower that the 5% on your note. You are in effect enjoying a very-close-to-interest-free-loan right now. This would be an argument for NOT paying off your auto loan. Having said that, you also need to consider your cash flow and what that payment COULD be doing for you in an account at Smith Barney or another investment house. You will certainly be able to "beat" 5% with a good investment adviser, and with your impending move to one of the most expensive counties in the country, your cash flow will become all-important. This is an argument for paying off your auto note and investing what you normally would have paid each month along with your $70K from your home sale. Most investment houses have some sort of automatic debit program where a certain amount is automatically debited from your checking account each month and invested in your Roth IRA for you. Take advantage of that type of program. You won't miss the cash, it will be an atuomatic debit, and you will enjoy the benefits of dollar-cost adveraging as you buy additional shares each month. In terms of the housing market in suburban Maryland, GadgetRick hit the nail on the head. There is tremendous job growth in this section of the country and housing values have continued to escalate (though not as rapidly as over the past 2 to 4 years with rates creeping upward) as more people move to the region for new jobs. Housing is in limited supply...basic economics then takes over. Rates are increasing, however, they are still quite low. The feeling here in this area is that for at least the next 12 to 24 months, values will continue to increase, but at a slower pace as long-term rates continue to increase. Job growth is the single-most important factor in keeping the prices where they are now and protecting against a down-turn in housing values in this market region. The general rule of thumb is that if you plan to be in any new area for at least 5 years then you should consider a home purchase in lieu of renting. The other feeling is that you may not want to "sit this one out" as the US stock market has been lack-luster recently and a real estate investment that you can also live in could earn more over the same period of time. In the very least, you will be investing the bulk of the proceeds from the sale of your current home and should ask your financial advisor these same questions as he or she will have the whole picture and be better-able to help you decide what is right for you and your family over the next copule of years.
Tony
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