Oh Mooseman I feel your pain. You're questions are excellent because there are no easy answers here. But for what it's worth here are my lessons learned from living in Seattle since coming to Seattle in 1989 with $100 in my pocket, raising a 14 yr as a sometimes single mom, working my way thru a tech career in a very lucky window and being on the brink of FI.
I find it's helpful to sort situations out with a couple of diagnostic questions....
- Do you see yourselves happily living an FI nomad's lifestyle in the next 7-10 years? If so, I would second the vote that you stay renting and keep your powder dry for a move to a lower cost of living area.
- Do you see a clear path to shifting both of you to a telecommute role? Or one of you staying home with kids and the other shifting to a telecommute role? Getting a big city wage while living in a small town cost appears to be one of the fast paths to FI. It's shocking how expensive everything becomes when a city has a high cost of real estate... it drives costs into all sorts of things, from restaurants to plumbers. If you can improve your Salary to Cost of Living ratio in a smaller town that's a magical position to be in.
- Do you have a job skill that doesn't depend on a robust technical community, like say Medicine? I'm guessing by your salary and Eastside location that you might be in tech, but if you happen to be in healthcare you've got a lot better chance of maintaining a relatively high salary and finding a much lower cost of living. I saw some unbelievably happy Nurses and Docs in Salem Or, Whitefish MT and Bellingham.
- Do you loathe the idea of ever being a landlord? It will cost you 8% to sell a Seattle house (6% in agent fees and 1.8% in taxes) so if you know you might move and you know you hate land lording that could be a good argument for renting. (But see below on why I heart buying.)
But that's not everyone and there are a few good reasons to stay in Seattle...
1) You plan to have kids, you have a good support network of friends or family here and won't want the kids to be too far away from that support. My only family was in Portland and even that was too far away in retrospect. I have had friends pack up the family and move to Bend or Idaho and happily put down new roots but you should think thru how much you do or don't rely on your social network how happy you'd be parenting independently. For some people it's a total non-issue and for others it's a source of decades of martial friction. And Seattle has some great public schools in neighborhoods with condos in the price range you quoted, a fantastic PEPs program for new parents and some neighborhoods that are amazing places to raise kids. (That's a shoutout to you West Seattle, Ballard, Montlake, Sunset Hills, Greenlake and Greenwood.)
2) You both like your jobs, they aren't conducive to telecommute, and the other cities you could be in don't have a much better cost of living to average salary range. Portland has always tempted me (partly cause I was raised there and it's an amazing quality of life) but the job market is 1/3 the size and salaries and promotion opportunities are proportionally smaller and all the data I've seen on wage to housing ratios show's Seattle to be actually stronger if you've been blessed with a high paying career. But man do I have my eye on Portland for retirement.
3) You really like Seattle and you're in a career like Tech that's a little harder to reproduce in cheaper cities. For lots of people it's an unbeatable sweet spot of nice quality of life and great job market- both of which help with the FI plan immensely. I've had co-workers fall in love with Colorado Springs but then struggle when their job dried up and the number of other options was limited.
So just for kicks, if you decided that you like Seattle, my thoughts on rent vs buy is mostly driven by the 30% rule... f you can't buy without committing over 30% of your income to housing I'd stay a renter. It's just hard to get ahead when you're buried under that much housing costs. But that doesn't appear to be an issue- you're in great shape.
If you can own for 30% a month or less of your income, I've become a believer in the value of real estate for those with enough cushion to sustain it. Double check that total costs (condo fees, taxes, insurance, maintenance) are less than 30% of your net. If you plan to have someone stay home after the kids come, look REALLY HARD at that. I see young couples with stars in their eyes buying the max house for their future child, and then I see a lot of strained families desperately trying to bring one parent home and caught up under a 4Br/2 ba house payment. But it looks like you've already thought through that and your plan allows for excellent continued savings.
I've been a home owner since 1987 and I've seen booms and busts but as I've just landed on the brink of FI it's offered:
a) a deeply reassuring ability to lock in the majority of my housing costs. Taxes and insurance still float up but if you plan to stay in the city (or any big city) while you're saving up your stache it's an amazing feeling to have a paid off home.
b) a potentially nice stream of rental income if you pay it off in 15 years and then decide to take up the RV lifestyle. Long distance land-lording isn't ideal but I've known several people who happened to have a high value paid for home in places like San Fran and Seattle and they can be a lovely source of 2-3k a month income, while still chugging towards an average 6% gain. (with the associated land lording headaches, I can say after having managed a duplex for 20 years.)
c) a deeply reassuring diversity in my net worth. Housing markets, like stock markets, go up and down but they often cycle differently. Historically the real estate gain is lower than the stock markets but I'm ok with the trade off in exchange for the diversity. I've also observed both my mom (in Portland) and dad (in Salem) sell their single family homes to fund the last 15 (very expensive) years of their retirement via buy ins to CCC (continuum of care) retirement facilities.
d) I hate to even bring this one up but I suspect there's a reasonable chance that Seattle might prove to be a much better than average long term investment. I generally try to ignore this factor, and my FI plan doesn't count on it but I see some long term advantages here. Real estate will swing up and down. We are clearly heading towards a correction. It could be 8-10% or it could be another whopper. But if you see you see a path to owning a home long term either as a Seattle resident or a long-distance landlord, I think you could do well. As my favorite redneck Dave Ramsey says, you only get hurt on a roller coaster if you have to jump off.
Lastly, I would respectfully disagree with posters who promote trying to time the market. If you plan to stay in Seattle I'd just start a very sensible, slow and steady house search. There is indeed a remarkable wad of new multifamily housing coming on line in 2018 and 2019 which should cool apartment/condo sales, and yes both San Fran and NY are cooling which can be an indicator of spread up here, but like with the stock market the human record of timing isn't great. Buy in a place with a good public school (see Great Schools), buy the most modest footprint you can see your future family fitting into (but not so tight or illocated that you feel compelled to move after kids come), and if possible buy a place built after 1990 with some terrible paint and ugly carpet ;) And given your Eastside/Seattle commute, consider something in Montlake (easy hop to 90 or 520), Greenlake/Greenwood (weirdly quick access to 90) or on the light rail so you are poised to take advantage of the eastside light rail in a few years.