Continue renting in seattle?

[LAL]

Housing prices are appreciating a little insanely where we are.  We currently rent a 3/2.5 bath home for $2400/month.  We sold and moved into the area and love it.  Want to settle in for the long haul.

However in July 2015 the house next door to us 4bd/2.5 ba sold for $571k.  Two houses from us (same neighborhood, same everything) 4bd/2.5ba house sold this month for $715k now 8 months later a 25% increase in 8 months!  The rent on the same size house 4 houses down from us is $2600/month.  I mean if it goes up another 25% in 1 year it'll be close to $900k which doesn't seem feasible.  Even 10% appreciation puts it at $800k for these homes.  We were considering buying but are hesitating.

We're pretty close to FI and live mustachian.  But I'm thinking and getting a lot of (crap from people) that renting is throwing away money.  I understand Seattle is the new silicon valley and the prices aren't going down.  I don't expect to get a deal, but I'm wondering is it possible it could go down a little or level off for a very long time?

Should we just continue to rent? I mean even the realtor we were working with told me don't expect a deal, you are losing money renting, you need to be willing to waive the mortgage and inspection contingencies, it's not a bubble but really low inventory driving prices up so fast.

So now what?  We've got cash for dp and income and we're secure in retirement savings.  But we lived the san diego bubble and our condo we sold there in 2005 still hasn't hit that level yet 11 years later. So I'm thinking perhaps this is dangerous.

[mskyle]

Have you run the numbers using the NYT calculator? I'm in a similar situation to you (renting in a HCOLA, with a similar rent to comparable home purchase price ratio) and I will not be buying in my market, but I'm also not planning on staying here for the rest of my life; if you are, you might be closer to the tipping point.

Honestly to me the insane appreciation makes me *less* interested in buying, not more interested. It doesn't seem remotely sustainable, and the only way it *can* sustain itself is by pricing out most of my neighbors and turning my neighborhood into some kind of brogrammer/VC haven.

Yeah, there are risks in renting: your home can be sold out from under you, and your rent can increase in capricious ways. But renting is not throwing money away. It is paying money for a thing you use, your home. There are huge opportunity costs in buying. Take a look at this article if you haven't already -  Why your house is a terrible investment.

[Telecaster]

I mean even the realtor we were working with told me don't expect a deal, you are losing money renting, you need to be willing to waive the mortgage and inspection contingencies, it's not a bubble but really low inventory driving prices up so fast.

The realtor who makes a hefty commission told you that are losing money renting?  I'm shocked.    Housing is an expense to be minimized.  Sometimes it is cheaper to buy, sometimes it is cheaper to rent.  Plug some numbers into this calculator and see where you come out:


http://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html?_r=0

[LAL]

The calculator says after 9 years the rental prices should tip in favor of buying.  I enjoy feeling settled and our rental place is cheaper than where we sold and moved from.  But we moved to get away from HCOLA.  Not to get into another place that's expensive.  I guess I'm balking because I don't want to waive inspections and contingencies.  It seems foolish but maybe I'm overly cautious.  I wonder what RE investors say?

[uwp]

I wouldn't call Seattle  the most mustachian of cities, but when you look at rental costs vs buying, I think buying still has a pretty decent appeal.  If you're looking at the Eastside, I'm not sure how much different the math is (probably not very).

I think if you want to settle in for the long haul (ie. 10+ years), than buy.

One thing I would keep in mind as you said you are close to FI and live mustachian: a big benefit of buying for a lot of people is the tax savings on interest/taxes (and in Seattle it can be a large interest & tax deduction), but if you are heading into years where you won't have a lot of taxable income, that can change the equation.  If you're in the 25% bracket you are looking at several thousand dollars a year.

I sympathize with you on waiving inspections and contingencies, I don't think this is a healthy market.  Unfortunately with the low supply, I don't see any reason for it to change.  The 07/08 crash was telegraphed by the supply overhang, but right now, it seems like a simple supply and demand problem.  The crash scared away builders from 2008-2013ish and it's tough to make up for it.  Prices will be limited, eventually, by what a dual income family can afford in monthly payments, but with low rates and tech salaries that ceiling is high.

Of course, it's the future, who can really know.

[LAL]

We're not a dual income family and haven't been in a long time.  We do plan on sticking it out 10+ years.  And the working income will be 25% likely more on one income.  We phased out of the roth IRA income limits before so I guess the tax break is worth something.  DH will likely work another 10 years because he wants to. I'm not sure when I can convince him to retire.  I'm taking it year by year.  We'll always have FU money and probably anytime he wants we'll just "retire" finally.