Author Topic: This Seattle market is nuts!  (Read 7947 times)

Mooseman2000

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This Seattle market is nuts!
« on: July 08, 2017, 11:04:02 AM »
Hello Mustacheans,


I've been lurking around here for some time, but this is my first post. We're about to make a giant financial decision, and I was hoping to collect some wisdom from this community before we did.[/li][/list]

My SO and I currently live in Seattle and are now at the point where we'd like to purchase a house. We seem to be entering this mindset at a very challenging time, as the current Seattle market is insane! Especially in range of homes we're looking at. There are still some communities we can afford to live in that are near the city, but the rub comes with our current employment setup. MY SO works in downtown Seattle while I work on the east side of lake Washington. This puts a total drive distance of about 12 miles between our respective employers, but with Seattle traffic, that can quickly turn into a total driving time of well over an hour during rush hour. Although I would love to also consider employment downtown, my current salary is enough to keep me in my current role for the foreseeable future. And my SO can only work at her current institution without leaving Seattle for another large city. So in order to keep both of our commute times down and income where it currently is, the neighborhoods we can conceivably purchase in are rather limited if we both want to keep our commutes to under 30 minutes.

So here are our numbers:
    Combined yearly income (pretax): 280k
    Current savings in retirement accounts: 220k
    Current savings in Individual accounts: 190k
    Current savings accumulation rate: 100k+ per year
    We currently have no outstanding debt and two (old) cars which are paid off
    Current rent: 3k a month
    Current Mustachean lifestyle score: 75/100
    Current Family situation: No kids, but would like to have one in the next 2-3 years


Current cost of condos/town homes/houses in the area we'd need to live in to not hate our lives:
    2 bedroom condos: 600k + HOA fees
    2 bedroom townhomes: 680k+
    2/3 bedroom single family homes: 650-750k+
    *These prices are up 20% from this time last year.... :(


At a minimum, we'd like to purchase a 2 bedroom condo. At a maximum, a 3 bedroom single family home. We're also fine with continuing to rent, but here is where my knowledge on the best path forward begins to break down. In a seller's market like this, one that isn't looking to subside for at least another 2-3 years given the city's population and salary growth, and given we're locked into this city for at least another 4-6 years for SO career reasons, does it make sense to jump in now and gut our individual accounts on a down payment? Or should we continue to save at our current rate and miss out on the housing market in this city, then FIRE in 5-6 years somewhere more reasonably priced? I've ran the NYT buy or rent calculator with different numbers, and if I drop in an average of 7% home value appreciation over 5 years, it's a no-brainer to buy. But I'd still rather gather some feedback from some smart people who aren't algorithms.


waltworks

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Re: This Seattle market is nuts!
« Reply #1 on: July 08, 2017, 11:51:34 AM »
Rent indefinitely. The housing crash (or at least very long stagnation) will come eventually.

-W

Ocinfo

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Re: This Seattle market is nuts!
« Reply #2 on: July 08, 2017, 12:06:51 PM »
Rent indefinitely. The housing crash (or at least very long stagnation) will come eventually.

-W

+1

You won't need things like stability and good schools for at least another 7+ years so renting is a safer bet. I'm in pretty much the same position but in DC. Would cost at least $800k to buy what I want but can rent a decent place for a bit under $3k. I see no need to take a risk on appreciation when it would cost me more per month to own.


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Mooseman2000

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Re: This Seattle market is nuts!
« Reply #3 on: July 23, 2017, 11:18:16 AM »
Thanks for the replies.

We had to put our house hunt on hold for a few weeks, but now that we're back to it I'm still torn on this and would love some additional advice to consider. The more conservative estimates estimate 500 new people moving here per week and only infills providing new housing options. If we can spend 3k a month on a 620k condo/town home as opposed to 3k a month on rent, does it make sense to do so? Another new bit of info is we would be receiving 20k in gift funds toward a down payment if we choose to buy.

Again, FIRE being the ultimate goal, any other advice or experience on what makes the most sense is greatly appreciated.

Mr. Green

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Re: This Seattle market is nuts!
« Reply #4 on: July 23, 2017, 11:33:10 AM »
Thanks for the replies.

We had to put our house hunt on hold for a few weeks, but now that we're back to it I'm still torn on this and would love some additional advice to consider. The more conservative estimates estimate 500 new people moving here per week and only infills providing new housing options. If we can spend 3k a month on a 620k condo/town home as opposed to 3k a month on rent, does it make sense to do so? Another new bit of info is we would be receiving 20k in gift funds toward a down payment if we choose to buy.

Again, FIRE being the ultimate goal, any other advice or experience on what makes the most sense is greatly appreciated.
I suppose it depends on how you feel about the chances that prices in that market are in a bubble, and whether that bubble might pop some time soon. It's a dual edged sword. A continued rise in prices gives you equity to cash out eventually but a drop in prices could put you in a bad spot if you want to move away from the area after FIRE. I live in the DC area and our home prices still haven't quite fully recovered from the crash in 2008.

If you're going to be taking a 30 year loan, also consider that you will be paying very little toward the principal in the beginning. If you ever sell the house, expect to lose 5% of the sale price to commissions. So you'll pay the mortgage for a number of years just to build up the 5% equity you'll lose in the sale of the place, assuming prices remain constant.

All of these things depend on what your plans for the future are. If you think you might want to leave the city in less than 10 years, a bubble pop might really hamstring you. But if you intend to stay for life it probably isn't that important.

Dicey

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Re: This Seattle market is nuts!
« Reply #5 on: July 23, 2017, 01:43:42 PM »
I'm very pro-Real Estate, but in your case I vote with Walt and Mr. Green. How will you feel if this turns out to be a bubble? Keep renting and use this time to shop wisely. Learn the market, chose your preferred neighborhoods, ratchet up your mustachian score and keep saving. You won't regret taking the steps to make the most informed decision possible.

A tip to help when you're torn: set another goal and focus on that. Even if the goal is related to the purchase, such as increasing your down payment, or improving your credit scores, it will help. Also, try to find people who bought at the top of the last  bubble and ask them about their experiences.

Tezz24

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Re: This Seattle market is nuts!
« Reply #6 on: July 25, 2017, 04:36:59 PM »
I’ve been lurking around here for waaaaaaaaaay too long. Mooseman’s post is quite similar to my question, so I’d like to piggyback on it.

SO and I debating buying a house in San Francisco. We had debated leaving the area, but SO’s job is awesome and has more room for growth, and mine is stable. We have a decent amount of family and friends nearby as well. And after having kids a few years ago, the thought of keeping them in the city is appealing. As everyone knows, home prices here are crazy. This may be dumb, so I need some advice.

Approximate Numbers:

Combine annual income: 300k
401Ks: 450k
Roth/HSA: 80k
Taxable accounts: 480k
(SO also has about 100k of equity that vests on a 4 year schedule. We basically ignore this and think of it as free money)

Rent: 3,100 /month (3BR, 2BA apt)
Spending Avg: 3,300 /month
Mid 30s with 2 kids (0 and 3)
Solidly mustachian (lots of bike riding, walking, make 95% of our meals, have a really old car we never drive, etc.)

While our situation is similar to the one above, we also have an investment property out of state. We had bought it with the thought of moving, but are rethinking that option. It does NOT cash flow, but has a significant amount of equity in it. (Worth 600k, we owe 325k) This kick started the idea actually. Additionally we have the potential for a free “loan” of 100k from our parents. Houses could be at least 1.2M. This seems quite crazy, but when I factor in we may not need to touch our stache to put in a down payment, I rethink the idea.

Anyway, we are open all ideas. Just looking for some smart advice. Thanks!

Dicey

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Re: This Seattle market is nuts!
« Reply #7 on: July 25, 2017, 05:04:47 PM »
Ooh, SF is historically harder to predict than some other places. The downturns seem pretty short-lived and the highs seem to last forever! You appear to be in a good portion to do either, which is nice. I dunno, wait for the next earthquake? Only half joking. Best question to ask yourselves is "How will we feel if the market dumps within a year or three of buying?"

Tezz24

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Re: This Seattle market is nuts!
« Reply #8 on: July 25, 2017, 06:05:05 PM »
Dicey, thanks for the response. You at least made me feel better for feeling so torn about the decision.

I've thrown out the earthquake idea before! My field is actually earthquake related, but I'd never root for that. I think if the market dumps in 1-3 years I'd feel slightly bad, but not if we kept our jobs (not the best assumption, but a somewhat reasonable one).

sol

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Re: This Seattle market is nuts!
« Reply #9 on: July 25, 2017, 06:12:02 PM »
How will you feel if this turns out to be a bubble?

I remember when people were asking that question about San Diego, and LA, and the Bay Area.  Prices are still higher than in virtually any market in the country, for well established reasons that I think translate well to Seattle.  Large west coast metropolises with stable SFR inventories but growing populations of affluent people probably should see prices higher than the rest of the country.  It's the same reason Detroit is cheap, but in reverse.

None of that is helpful for making your decision, of course, I'm just saying it's not necessarily a bubble unless you also believe California has been in a RE bubble for the past 40 years.

Paul der Krake

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Re: This Seattle market is nuts!
« Reply #10 on: July 25, 2017, 06:27:02 PM »
Similar situation as yours, but lower rent, and both work downtown.

The only way I could justify buying is if we committed to staying a long time. We're not willing to commit for a long list of reasons, so we're renting within walking distance of both our jobs. The idea of commuting by car gives me goosebumps.

waltworks

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Re: This Seattle market is nuts!
« Reply #11 on: July 25, 2017, 06:30:44 PM »
To be fair, CA/the west coast has been in a boom/bust cycle for the last 40 years. Yes, prices are generally always higher than in flyover country - but they're also super volatile. It's certainly possible to have a RE bubble, even in a place with lots of hip urban professionals.

That said, I have no opinion about whether there's a Seattle RE bubble or not. I don't know squat about Seattle real estate.

-W

Dicey

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Re: This Seattle market is nuts!
« Reply #12 on: July 25, 2017, 07:40:49 PM »
How will you feel if this turns out to be a bubble?

I remember when people were asking that question about San Diego, and LA, and the Bay Area.  Prices are still higher than in virtually any market in the country, for well established reasons that I think translate well to Seattle.  Large west coast metropolises with stable SFR inventories but growing populations of affluent people probably should see prices higher than the rest of the country.  It's the same reason Detroit is cheap, but in reverse.

None of that is helpful for making your decision, of course, I'm just saying it's not necessarily a bubble unless you also believe California has been in a RE bubble for the past 40 years.
Sol, I asked the question because many people don't have the stomach to handle a downturn. A few months ago, I asked the same question of someone who was asking about buying on the Peninsula. They had thought it through well, weren't over extending themselves, had done their homework on the market, and had found a specific property to suit their needs. They chose to buy at a price that would shock people in flyover states. If the market dumps, they'll be fine.

We live in an area that's currently way above 2006 levels. We also own rental property in another part of the CA where we are still buying at 2004 prices.

Last week we were in Colorado. We happened to see our exact rental condo in the Real Estate section of the local paper. Asking price was $420k. The sellers paid $485k for it in 2004. Curiosity piqued, we found another one with virtually the same stats. A third unit sold for $747k in 2007; they're currently asking $399. All markets fluctuate.

My concerns about Seattle mostly have to do with the dependence on a limited number of industries and the massive amount of building we observed on our last visit. Supply & Demand is a delicate balance and some areas are historically more prone to fluctuation than others.

When the market crashed, there was a ton of criticism of people who bought at the peak, as if they were ill-advised for having done so. How the heck did they know? IMO, buying at peak prices is risky, period. If one has the resources and the nerve to ride out a market dip, and a solid desire to remain in the same area for a decade or more if necessary, even as prices are dropping all around them and they can't get what they paid for their house, they should feel free to jump into the market any time they can afford it. But many, many people cannot. For them, renting, saving and waiting might be a more prudent move.

Another Reader

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Re: This Seattle market is nuts!
« Reply #13 on: July 25, 2017, 07:59:13 PM »
How will you feel if this turns out to be a bubble?

I remember when people were asking that question about San Diego, and LA, and the Bay Area.  Prices are still higher than in virtually any market in the country, for well established reasons that I think translate well to Seattle.  Large west coast metropolises with stable SFR inventories but growing populations of affluent people probably should see prices higher than the rest of the country.  It's the same reason Detroit is cheap, but in reverse.

None of that is helpful for making your decision, of course, I'm just saying it's not necessarily a bubble unless you also believe California has been in a RE bubble for the past 40 years.

Forty years?  The Bay Area has seen under building and rising prices since WWII.  My parents had a tough time finding a place to rent around 1950 and had to grab one of the few houses for sale in August of 1963 when their landlord sold the house they were renting then to an apartment developer.  It's not a bubble, although Waltworks is correct.  It is cyclical.

sol

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Re: This Seattle market is nuts!
« Reply #14 on: July 25, 2017, 08:06:38 PM »
Dicey,

I didn't mean to target your post explicitly, you just had the most concise statement of the point I was trying to address.

I agree with you that there has been a worrisome building boom in the Seattle are, but it's been very concentrated in condos.  Single family homes are now a finite resource, which is why the prices have gone through the roof as the population has grown.  I think condo prices are only as high as they are because the only alternative is wildly expensive SFRs.  Eventually, I think the condo prices will level off a bit because there will be such an abundance of them that they won't command quite the price premium parity with SFRs that they have recently.  Since the OP is condo shopping, that's probably a legitimate concern.

mkl

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Re: This Seattle market is nuts!
« Reply #15 on: July 26, 2017, 04:26:03 PM »
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.

RangerOne

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Re: This Seattle market is nuts!
« Reply #16 on: July 27, 2017, 02:30:51 PM »
I sympathize being in San Diego. I am grappling with similar home prices and operating on a single income at about half what you are pulling in.

On your primary residence absolutely do not speculate. If you even find yourself thinking about appreciation in home value as a buying point then you are speculating. No one has any idea where that market will go from here. Long term like 30 years down the road we may all agree a Seattle home will probably be worth far more, but over 1,5 or even 10 years its anyone's guess.

The actual value of your home if it is your primary residence is no all that important. The best way I have heard someone describe how you should think about purchasing a primary residence is, you are buying as a hedge against potential future costs. There is certainly potential to on paper at least gain extraordinary net worth through a leverage investment like a home but is highly intangible since you always need a place to live and therefor, unless you plan on retiring far from the city and family you will likely never have access to that money for living. It is purely a means of controlling the cost of having a home.

Based on your income I would say you can certainly comfortably carry a $700k home annoying as it may be to pay such a high price. What you need to do is consider your future needs.

Would you want to stay in this home for 10 years at least? If not maybe you should keep renting. If the market craters in 5 years and you have to move will you be comfortable selling for less than what you paid? If the home value craters and you wanted to trade up in 10 years could you stick it out in that home another 3-5 years to wait for the value to recover?

If in the back of your head you are considering leaving your jobs and selling in 5 years you are taking a big gamble buying a home. The looming possibility we may see a steady increase in home interest rates within the next 5-10 years makes it unusually likely we may actually see a prolonged period of depreciation in home values as the monthly cost to own increases due to rising rates.

That sort of quandary is water off a ducks back for someone who is happy with the home they bought and can afford to pay it down. But it is shitty if you planned to cash out early or trade up.

Also I don't know your other expenses, but have you considered a 15 year or 20 year mortgage? You could buy with a plan to own far sooner than 30 or even 15 years if you have the income to pay it down fast. Which could be a boost to FI if you planned to stay in that area. Aside from a likely somewhat heinous property tax.

One last thought, if the diff between a SFR 2-3 bedrooms and a 2 bedroom condo is only about $100k then it is a no brainier to get the SFR, unless you hate yard work or those homes are also coming with massive HOA and Mello Roos.

Dicey

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Re: This Seattle market is nuts!
« Reply #17 on: July 28, 2017, 05:45:16 AM »
Excellent points, R1!

Jon Bon

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Re: This Seattle market is nuts!
« Reply #18 on: July 28, 2017, 06:22:59 AM »
Honest Question:

How old are you guys looking for your first house? I assume the MMM demo skews a little older to the late 20's and 30's. I am just betting trying to understand your situations.

To be completely candid I cannot understand your predicament at all, prices that crazy make my head spin.

Best of luck out there.

schneider

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Re: This Seattle market is nuts!
« Reply #19 on: July 28, 2017, 08:52:01 AM »
I should probably have replied to this thread instead of posting my own! https://forum.mrmoneymustache.com/real-estate-and-landlording/notes-on-a-permanent-housing-shortage/

There's not a lot in there that hasn't been said here, so let me chime in in agreement with sol and mkl: if you want to stay for life, it's not obvious that there's a real estate bubble in the neighborhoods you'd be happy living in. But "not a bubble" and "7%/year appreciation" are very different!

If I were happy renting and pretty sure that, as a renter, I could be FIRE in a lower cost of living area in 6 years, I wouldn't take the risk.

Cwadda

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Re: This Seattle market is nuts!
« Reply #20 on: July 28, 2017, 09:01:39 AM »
Keep renting.

IllusionNW

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Re: This Seattle market is nuts!
« Reply #21 on: July 28, 2017, 10:17:04 AM »
We live in Seattle and are in a very similar financial situation as you.  We just had our first child and luckily, we bought our "starter" home seven years ago during the Great Recession.  We've been debating whether to renovate to add an addition or to move to a slightly larger house and have been paralyzed with indecision.

We had an architect draw up some plans and bid it out to a mid-level contractor only to find out that the work we envisioned would cost more than what we originally paid for the house!  Which seems totally crazy pants.  But I definitely don't want to get into the real estate market right now.

I have a friend who bid on a house that was listed for $650k.  His offer was one of 40 other offers and had an escalation clause up to $750k.  They did not waive contingencies and were told that their offer wasn't even in consideration for the top bids. 

I'm pretty financially conservative and am not willing to waive contingencies and try to outbid 40 other people, so I think that for now, we are going to sit tight and just watch the market.  If something really good comes up, we'll jump in.  Even if we hit a huge recession, I don't think that the housing prices will go down as much as other parts of the country, but hopefully the market will cool off a bit and we won't be offering 150k+ escalation clauses into our offers.

Good luck!

SisterX

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Re: This Seattle market is nuts!
« Reply #22 on: July 28, 2017, 11:52:38 AM »
I've got a slightly different perspective, as we just bought a house in Seattle. Our circumstances are different so I won't go into specifics about our house purchase, but there are some similarities. (Currently I work downtown and HusbandX is on a 6 month contract on the Eastside--blech.)

We bought a house for so many reasons other than just money (like stability for our kid, and because cumulatively we have had a grand total of one decent landlord so we just didn't want to deal with that anymore, etc.). But we also realized that there are still neighborhoods in Seattle that are relatively decent for what you get.

My biggest problem with your dilemma is that you seem to think that you MUST drive to work. Have you considered South Seattle? It's got both buses and light rail that both go downtown for your wife's commute, and it's quite affordable. Also, there are buses to the Eastside, light rail coming [not soon enough], and really fabulous bike routes from that neighborhood. I think that changing your perspective from one that driving is mandatory to one that driving is one choice of many changes the Seattle real estate math quite a bit. In the area where we bought, my husband can bike to work (although, not at his current contract--would be an hour and a half) and I can either bike or catch the bus 3 blocks from my house that delivers me to within three blocks of work. It also means that we can catch the bus with our kiddo on weekends to easily go downtown without having to drive/pay for parking and take advantage of all the fun things there.

What I'm trying to say is, figure out a different way to commute and then look at the neighborhoods that would best suit your needs. Also, would you consider being landlords if you decide to move? Despite many people saying we're in a bubble I haven't seen any indication that rental prices are going to significantly go down in the near future. If you decided to go off to greener pastures in 4-6 years it might be a secondary source of income to have a place you can rent out around here.

Last, there are some diamonds in the rough. Our house is great in so many ways but it had a lot of cosmetic issues that turned other people off. Eww, terrible paint job! We looked at that and said, paint is easy. But others saw it and decided that it was ugly or too much work, so we got a house that is worth over 20% more than we paid for it, despite the market conditions. It also has a new water heater, new windows, etc. The hard part was done for us but most people just saw ugly paint.

RangerOne

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Re: This Seattle market is nuts!
« Reply #23 on: July 28, 2017, 04:22:50 PM »
With regards to rental prices: http://wolfstreet.com/2017/06/01/rents-deflate-in-the-hottest-us-cities-soar-in-cheaper-cities/

There are signs in major metros that we may be seeing big cities come up against peak affordable rents.

Sadly cities like San Diego and Seattle seem to still be racing to catch up to cities like LA and Boston. Our rents are still technically pretty low compared to what in theory a health tech sector can sustain.

So we may not be as far off as we may think from leveling off rental prices, especially if apartment building continues to boom.

Honestly even if we were somewhere along the curve of a bubble I would buy right now if I was able to comfortably afford a long term 3-4 bedroom home. There is little need to worry about a bubble if you have no short term pressure to sell your home.

I think buying a starter home with hopes to trade up in 10 years is risky right now. Buying a stable home that you could comfortably live in without trading up is another story. The only downside for people looking for long term homes in the current market is choices are few because there are far more buyers than sellers.

leighb

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Re: This Seattle market is nuts!
« Reply #24 on: July 31, 2017, 10:54:31 AM »
Two things to add:
  • I like the idea of a "Mustachean Lifestyle Score"
  • I bought my house at the top of the last bubble, (in Portland.) My Midwest family thought I was crazy. It's now worth double what I paid. I might have been able to time the market and made a little more (10%), but financing would have been a lot more difficult and those were stressful times. Job security was low, no one new where the bottom was, just like no one knew where the top was.

joonifloofeefloo

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Re: This Seattle market is nuts!
« Reply #25 on: July 31, 2017, 11:07:33 AM »
PTF, same story, different location.

Fuzz

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Re: This Seattle market is nuts!
« Reply #26 on: July 31, 2017, 05:52:52 PM »
I don't think buying the house solves a problem you have right now. You don't have a kid yet, and a kid is fine in an apartment for a long time (possibly until they're 18). Just remember that all real estate stuff is psychological. If you want the experience of puttering in your own yard or fixing up a place, consider a weekend place somewhere like Leavenworth/Cle Elum. Saving 100K/year is huge, especially where your net worth is like 4x income and not 25x. In 5 years, you could buy something outright.

clarkfan1979

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Re: This Seattle market is nuts!
« Reply #27 on: October 11, 2017, 01:43:48 AM »
    Hello Mustacheans,


    I've been lurking around here for some time, but this is my first post. We're about to make a giant financial decision, and I was hoping to collect some wisdom from this community before we did.[/li][/list]

    My SO and I currently live in Seattle and are now at the point where we'd like to purchase a house. We seem to be entering this mindset at a very challenging time, as the current Seattle market is insane! Especially in range of homes we're looking at. There are still some communities we can afford to live in that are near the city, but the rub comes with our current employment setup. MY SO works in downtown Seattle while I work on the east side of lake Washington. This puts a total drive distance of about 12 miles between our respective employers, but with Seattle traffic, that can quickly turn into a total driving time of well over an hour during rush hour. Although I would love to also consider employment downtown, my current salary is enough to keep me in my current role for the foreseeable future. And my SO can only work at her current institution without leaving Seattle for another large city. So in order to keep both of our commute times down and income where it currently is, the neighborhoods we can conceivably purchase in are rather limited if we both want to keep our commutes to under 30 minutes.

    So here are our numbers:
      Combined yearly income (pretax): 280k
      Current savings in retirement accounts: 220k
      Current savings in Individual accounts: 190k
      Current savings accumulation rate: 100k+ per year
      We currently have no outstanding debt and two (old) cars which are paid off
      Current rent: 3k a month
      Current Mustachean lifestyle score: 75/100
      Current Family situation: No kids, but would like to have one in the next 2-3 years


    Current cost of condos/town homes/houses in the area we'd need to live in to not hate our lives:
      2 bedroom condos: 600k + HOA fees
      2 bedroom townhomes: 680k+
      2/3 bedroom single family homes: 650-750k+
      *These prices are up 20% from this time last year.... :(


    At a minimum, we'd like to purchase a 2 bedroom condo. At a maximum, a 3 bedroom single family home. We're also fine with continuing to rent, but here is where my knowledge on the best path forward begins to break down. In a seller's market like this, one that isn't looking to subside for at least another 2-3 years given the city's population and salary growth, and given we're locked into this city for at least another 4-6 years for SO career reasons, does it make sense to jump in now and gut our individual accounts on a down payment? Or should we continue to save at our current rate and miss out on the housing market in this city, then FIRE in 5-6 years somewhere more reasonably priced? I've ran the NYT buy or rent calculator with different numbers, and if I drop in an average of 7% home value appreciation over 5 years, it's a no-brainer to buy. But I'd still rather gather some feedback from some smart people who aren't algorithms.

    Based on your personal situation, I would continue to rent. If you had a job in which you could work from home, I would say that you could buy.

    Here's the deal. When there is a market correction, many people will become unemployed. If you are a well educated smart person, you will be able to get another job, but it will most likely be in a different location. If you are tied down to a house it will make finding a new job much more difficult.

     
    Once you get that new job wait for prices to fall for another 1-2 years and then buy.

    surfhb

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    Re: This Seattle market is nuts!
    « Reply #28 on: October 13, 2017, 05:47:45 PM »
    The entire country is a small recession away from an RE meltdown IMO.    Id keep saving and swoop in when everyone else is holding their dicks in their hands wondering what happened.

    Mr. Green

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    Re: This Seattle market is nuts!
    « Reply #29 on: October 16, 2017, 08:22:24 AM »
    The entire country is a small recession away from an RE meltdown IMO.    Id keep saving and swoop in when everyone else is holding their dicks in their hands wondering what happened.
    There are a bunch of cities where prices haven't even recovered from the the last meltdown. Maybe local markets will have issues but I doubt it will be country wide.

    uwp

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    Re: This Seattle market is nuts!
    « Reply #30 on: October 18, 2017, 12:41:21 PM »
    If you are locked into the area for 5+ years and are paying rent at those levels with your income, buying looks pretty appealing.
    Mortgages on homes at those prices puts you right around your current rent cost, and then you'll have the savings in taxes on top while in a high bracket.

    You said you've run the NYT calculator, so there isn't much left to discuss other than anyone's guess about the future of Seattle's housing market.  I don't see how it can keep going up 10% a year, but I also don't see how it can drop with inventory levels where they are.  Of course, inventory can build quickly if everyone gets the sudden urge to sell their house, but for now, I assume prices level off at what a dual income Amazon employee can afford (maybe the 4k/month range) because that is what everyone in Seattle is competing against in bidding wars.

    mynameisbob

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    Re: This Seattle market is nuts!
    « Reply #31 on: October 21, 2017, 09:35:06 PM »
    I got down to the point of your combined yearly income. 280k holy shit, do whatever you want! :P

    Haha, JK...sort of. You mentioned you would like to purchase a 2 bedroom...what if you just bought a one bedroom condo (but one you really love). Then when you have a kid, suck it up and let them live in the room with you until it gets wierd. Jim Gaffigan has a funny book "Dad is Fat", part of it is how they live in a 2 bedroom condo with 5 kids in NYC. Stay there until you FIRE then you could rent it out to a rich hipster.

    If the market tanks your risk is not as high, and you have a income generating asset for life.