To me it’s not a question of whether or not the ridiculous price gains of recent years will continue, but rather how long will they continue? Though other parts of the country have shown some signs of slowing, in the Seattle area the answer is apparently “a little longer.”
King County’s home price increase means the median home cost $385,000 in August — $56,000 more than the median home cost in August 2004, according to figures released on Monday by the Northwest Multiple Listing Service.
That’s a 17 percent year on year increase.
In Snohomish County, the median price of homes soared 23 percent to $296,725, while the figure for single-family houses soared 24 percent to $311,525, the first time it has climbed above $300,000.
Yowza. Considering that even by semi-rational financial standards, my wife and I shouldn’t spend much more than $240,000 for a home, it looks like we’ll be continuing to rent for a while.
Maybe the bubble non-believers are right, and prices will never drop. Maybe we missed the time to “buy now before it’s too late” and we’ve been priced out forever. I rather doubt it though.
(Kristen Millares Bolt, Seattle P-I, 09.13.2005)
(Bill Kossen, Seattle Times, 09.13.2005)
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Maybe the bubble non-believers are right, and prices will never drop. Maybe we missed the time to “buy now before it’s too late” and we’ve been priced out forever. I rather doubt it though.
As a bit of perspective, people down here in the Bay Area would also say “buy before you’re priced out”. However, given the extremes RE has taken here (almost 40%/year), some people are beginning to question that assumption. Seattle simply hasn’t overheated as much as San Diego, SF Bay, or Santa Barbara.
How far do you think Seattle needs to overheat before the thing caves in? I can’t imagine things could get as bad as SF Bay; how would investors up there get “positive cash flow”? You know, we can already see the end coming, so I’m guessing Seattle isn’t far behind. People who overleveraged to buy homes (Seattle or elsewhere) are going to be hurting–sad stuff.
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The bulls are temporarily right, but the bubbleheads will be eating steak several years down the road.
In order for the price gains to continue, you would have to have income growth, creation of new high wage jobs, interest rates declining, 40 or 50 year mortgages, lots of new folks moving in with good jobs, a demographic bulge of folks of the home buying age. Any of these happening in the Seattle area?
Right now economic growth is relatively strong– according to the government. Yet, some of the studies show that in some markets 40%+ of the new jobs are related to construction and lending. So when the economy goes into recession– and it always does, it ain’t going to be pretty.
Patience.
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People who overleveraged to buy homes (Seattle or elsewhere) are going to be hurting–sad stuff.
Honestly, I couldn’t care less about someone who gets into a ghetto mortgage on overpriced real estate. Rotsa ruck!
I think the fun really starts here in the Puget Sound area when Microsoft realizes that they’re still pretty much a Windows + Office company, and that they really don’t need 60K employees for this. Plus, the Indians …
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5 years ago it was fairly easy to buy a piece of RE with 20% down on a 30 year fixed and be cash flow positive when renting it. Now it is nearly impossible to find anything that meets this formula. IMO the formula will once again be satisfied with a decrease in prices or an increase in rents or some combination of the two.
Based on current rents, prices would have to decline between 30 and 50 percent to make this formula work again. I certainly think it is a possibility.
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No need to worry, so long as it’s cheaper to rent. When all things are considered, you can get a very nice house for a reasonable price, renting. If you save even some of what you would have had to pay extra for a cheap house if buying, you will have an advantage when you finally buy. In the mean time, you will have been living better than you could have by buying now.Why bother? Even two or three years isn’t much in a lifetime, and rest assured, prices will come down, perhaps a lot.
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