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This Seattle market is nuts!

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Mooseman2000:
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:
Rent indefinitely. The housing crash (or at least very long stagnation) will come eventually.

-W

Ocinfo:

--- Quote from: waltworks on July 08, 2017, 11:51:34 AM ---Rent indefinitely. The housing crash (or at least very long stagnation) will come eventually.

-W

--- End quote ---

+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:
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:

--- Quote from: Mooseman2000 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.

--- End quote ---
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.

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