Author Topic: Seattle rent vs. buy data  (Read 1558 times)

WanderLucky

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Seattle rent vs. buy data
« on: October 25, 2017, 03:50:22 PM »
I'm running some scenarios using the NYT Rent vs Buy calculator (https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html)  and wondering if anyone has opinions on the inputs for the Seattle area. Specifically, I'm wondering what the opinions are on:
- Home price growth rate; I set it to 3% but think that feels conservative based on what I've seen in the past 10 years.
- Rent growth rate; I set it 4% but also seems conservative. There is lots of new construction happening but rental rates seem to keep going up.
- Investment return rate; I set it to 7%.
- Inflation rate; I set this to 2%

Any opinions on any of this? Thanks!

mountainfamily

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Re: Seattle rent vs. buy data
« Reply #1 on: October 25, 2017, 10:25:12 PM »
Seattle is challenging. I want to say that there is still lots of room for its prices to go up, because we're nowhere close to San Francisco or Vancouver. It's a desirable place with clean air, abundant water, poor public transit options, and not much room to build, so I think the close-in neighborhoods will appreciate a lot. Then again, it's a city of boom and busts and it's been going up really quickly, so it's hard to tell.

We are closing on our first home in NE Seattle, a solidly built 3 br/1 ba midcentury house in a walkable/bikeable neighborhood 3 miles from the University, where my husband is a professor. We have a baby on the way and plan to stay for 7, 10 or even 20 years. It has a detached shop that we could convert to a rental cottage (expensive but would be worth it).

Over the past two years, we have uncomfortably watched while prices climbed, then skyrocketed, in our area. We are below the median income of 130k but had substantial savings. We ran a lot of calculations, agonized, got outbid, looked at neighborhoods we didn't really like, saved more money, then got really stubborn about staying in our neighborhood. This year, in addition to the general stock market runup, we had some good luck with single stocks (I love me my index funds, and they make up most of our portfolio but that luck was much appreciated)...

Ultimately, because of our long-term outlook, life changes, and repeated steep rent hikes, we decided to stop trying to time/analyze the market and buy.

The house will be a place to live, update over time, raise a family, and practice hospitality. When we do sell in the far future, it will at least have been a good hedge against inflation and a way to accumulate wealth slowly. Bonus if we make more money than expected on it.
« Last Edit: October 25, 2017, 10:28:20 PM by mountainfamily »

Helvegen

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Re: Seattle rent vs. buy data
« Reply #2 on: October 26, 2017, 05:15:37 PM »
This is like asking if you think X assumptions are correct about the stock market. Maybe, but who really knows?

Food for thought though:

Hereís the #1 Reason Itís so Hard to Find an Affordable Home

I've been a pretty regular reader of this blog for years:

Seattle Bubble

I didn't buy my house as an investment or for purely financial reasons. It was a lifestyle choice more than anything else.

SnufferBottle

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Re: Seattle rent vs. buy data
« Reply #3 on: October 26, 2017, 08:45:52 PM »
I assume this is for your primary home? Personally in a ultra hot market like Seattle I'd rather rent and take my $$ to buy RE out of state and get a 15%+ return.

Only scenario where it makes sense imo would be if you can find a cheaper property that needs to be updated (via direct mail, etc.) and do a live-in flip to create forced appreciation.

WanderLucky

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Re: Seattle rent vs. buy data
« Reply #4 on: October 27, 2017, 10:31:14 AM »
@mountainfamily, congrats on the new house! I'll bet it's a huge relief to not be out there hunting for a place with the hordes of house seekers. We just went to our first set of open houses last weekend and it was brutal. And I hear you on Seattle being challenging with forecasting! I've also seen the rent hikes (via friends) and difficulties with renting with pets so I'm leaning towards continuing to own my current place. I am super lucky in that I bought my house in a great Seattle neighborhood almost 10 years ago. See my post below (Should I stay or should I go) for my current dilemma. I was hoping that running some calculators might help with the decision.

@Helvegen, thanks for those resources! I also didn't buy for purely financial reasons. Seattle is a great city, I own a business here and my life has been here for the past 20 years. On one hand, I can't imagine living anywhere else (at least in terms of having a "home base"), and on the other, I'm losing patience with typical city life dealing with things I never had to in the past (so many people! traffic! no parking! waiting in line!) . It's a bummer. And I know I'm one of the lucky ones, so I should quit my bitching. I guess I just want to question my assumptions and check in now again that I'm choosing this and it still makes sense, and not just defaulting to it.

@SnufferBottle, that's an interesting idea (rent and buy RE out of state). I may look into that for one of my scenarios, one of them being to keep my house and rent it out, and rent/buy something else to live in.

Thanks all for your thoughts on this. It's helpful getting other perspectives. And if anyone has guesses on those numbers, I'm still interested in hearing them! :)

mountainfamily

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Re: Seattle rent vs. buy data
« Reply #5 on: October 27, 2017, 10:50:52 PM »
This is like asking if you think X assumptions are correct about the stock market. Maybe, but who really knows?

Food for thought though:

Hereís the #1 Reason Itís so Hard to Find an Affordable Home

I've been a pretty regular reader of this blog for years:

Seattle Bubble

I didn't buy my house as an investment or for purely financial reasons. It was a lifestyle choice more than anything else.

A 5000 square foot is $500k minimum in NE Seattle - I saw one go for $650k in Ravenna and a double lot in View Ridge go for 1.3 million. Builders have to build a $1.3+ million dollar home to make a profit. Unfortunately there are a lot of dumpy homes not really worth fixing up. I get it. Considering our lot is 8200 sq feet and the solid but humble house landed mid 600s, maybe I got a relatively reasonable deal. [The sellers of the estate actually stopped bidding well below our max.  I think they felt sorry for all of us!]

I also read Seattle Bubble regularly for the past few years. While it's quite interesting to read about all that is going on/could be going on, ultimately, one comment stuck with me. Someone said "if you want to own a home for personal reasons and stay long term, ignore all this noise, stop trying to time the market, and just buy." :) Maybe that's just what I wanted/needed to hear. My rental house price has gone up by $900 in the past 1.5 years.