How do I know, because I’m a recent college grad who is in this situation and has friends in this situation.

Picture Wiley E Coyote realizing that gravity is about to make his aquaintance.

An informal poll of a handful of Bainbridge Isl. RE agents tells me that just under 3/5 of the BI market is out of state buyers – the bulk of that from California and Colorado.

Ask yourself if 41% of the market can continue to absorb the void, in both price and volume, of the X-Cal refugees.

Ask yourself if that 41% can absorb all the new construction in condos, and specs.

Ask yourself what part of the remaining 41% is in the business of selling RE, building homes, or financing homes.

Ask yourelf what part of the remainder is in the business of selling to people with HELOC money.

Yes, the tiny fraction of Bainbridge (and any other Seattle ‘burb) homeowners can continue to float the market. Why? We are SOOOOOOOO special. Just ask anyone that owns a house.

20 cents on the dollar by 2010. You heard it here first.

Highly doubtful that folks from FLA, DC and CA will be fleeing to Seattle as their bubbles burst.

They might as well stay home and pick up cheap properties in their own neighborhoods.

And FLA, even at the height of it’s bubble, was/is way cheaper than Seattle.

CA is unravelling pretty quickley so those out of state buyers should be drying up fast.

I 100% agree. I bought my first house in Jan 2005. I tell my wife once a week to expect to “lose money” on this deal. Having said that, I just don’t think it pays to never list the reasonable counter-arguments to our positions.

I can tell from your sites that you are serious-minded and circumspect about this debate. But a lot of the commenters on here seem to have decided their position in advance, and then will pick and choose “facts” to fit that worldview.

You’re right, in this kind of market the best choice is clear: rent. And that’s exactly what I’m doing, and so are many others. However, that doesn’t really change the fact that housing has become seriously overpriced and is likely due for a correction. Renting means I’m getting a better deal, but what about all those people buying “investment properties” or getting in over their head because they buy the realtors’ calls of “buy now or be priced out forever!”?

Tim, then why can’t people just rent? Renting is NOT unaffordable.

By the looks of things, it is not only average joes who have stretched to get into this HOT!!! real estate market. But also people who, by normal measures, would have seemed “wealthy” just a few years back.

When RE prices fall, those who were COUNTING on abnormal price appreciation just to keep themselves afloat, whether “rich” or poor, all will be Darwinized.

The only ones who’ll be safe are those who trully bought within their means and can comfortably afford their mortgage in a correcting market.

And those who either cashed out of RE last year or saved humungous downpayments to put down after the market corrects.

And this one’s got a LONG way to go before it’s corrected.

I’m on record predicting at least a 10% fall, and perhaps as much as 30%, in median housing prices is Seattle, with certain classes, condos (particularly new) and high end homes taking the biggest bath.

It takes a long time for this sort of thing to play out. Unlike the stock market there several stages you need to go through before you can see home prices declining. First you need to see in increase in inventory (in Seattle, late summer, early fall is my guess), then you see a leveling of prices, then you see the investors putting their properties on the market, then finally, after much reluctance, you see regular joes and jolines finally realizing that they aren’t going to get the price that Tim and Tina did a year ago, and they sell for less, and finally you see broad declines.

I bought 2 years ago, thinking we were close to the top, and fully realizing that I could lose my full 20% down. I was okay with that. I could probably sell right now for 30% more than I paid, but my house is my home, and I was conservative when I bought, so I’m willing to take the loss.

In fact I dream of the a 30% decline. 50%? Even better!

It will be healthy for Seattle in the long run, and because I bought a modest cottage which continues to allow me to save, it will also allow me buy a nicer house down the line, assuming relatively even price declines.

I also think housing is too expensive…but I’m not totally convinced it’s going to change. I feel the market forces will continue to keep prices high.

People have been saying there was a bubble way back in 2002. It’s funny to read old articles were they say housing prices will drop in 2003 (and they don’t) and then they say it will happened in 2004 (nada) and so on and so on. I know people who listened to that advice back in 2002 and are kicking themselves for not buying back then.

‘m

I apologize if I somehow gave the impression that I don’t like Seattle. That is certainly not the case. Indeed, for many of the reasons you mention, I love Seattle—and I’ve lived most of my life in western Washington.

I’m not sure what point you’re trying to make regarding comparing Seattle to national housing stats, as that’s something I rarely do on here. I think my main point is that the cost of housing has seriously exceeded what is remotely affordable to someone making moderately decent wages (median to 150% of median) and being responsible with their money. Regardless of the statistics in the rest of the country, or how desirable Seattle is, I think that’s a problem, and I think it’s likely to correct itself in the not-too-distant future.

For many people, Seattle affords a unique combination of culture, natural beauty, mild climate that can’t be found anywhere else. I’m from the NE, and would never move back.

The point is, you can’t quantify the “desirability” of a location. And despite the fact that some people don’t like Seattle, there are lots of folks who think it’s a much better place to live then most of the rest of the country. And for that reason, housing is, and most likely will be for a long time, in high demand here.

It is possible to objectively examine Seattle’s housing market without all the "female dogging" and moaning.

As of the last census, Seattle-Tacoma- Bremerton CMSA ranked 5th in per-capita income, btw.

That’s why this blog is called “Seattle Bubble” and not “Washington State Bubble”

I mean, really…California has sunlight. After six years in Seattle, I’d pay good money for that.

Median Income

California: $48,440

Washington: $48,185

Median Housing Prices

California: $535,470

Washington: $275,700

Wow…your average Californian makes only $255 a year more then a Washingtonian yet has to pay $259,770 more for housing!

Of course, I’m sure the Minnesotans make us look pretty stupid…

that last post should read that Seattle median housing prices are 150-175% of the national median.

sorry.

Did you bother to read the article linked in this post? This one?

Incidentally, you’ll note that the article you linked places Washington state at about 11% above the national median wage. Aside from the fact that this is not “exceptionally high” (you’ll note that Minnesota is higher), right now, our median housing prices are somewhere around 150-175% above the national median price, depending on the source.

So…a) there is no wage growth (that’s true nationwide, too), and b) our housing market price increases have outstripped the wage difference by an order of magnitude.

This study from the AP put Washington in the top 15 highest wage states:

http://tinyurl.com/jhwl3

So were is all this negative economic data that people are citing coming from? I’d like to know….

I’m not sure what your comment has to do with the topic at hand, but I agree, roads are a big issue in Seattle as well. In fact, just this weekend I started an entirely separate blog to discuss exactly that. Check out Seattle Traffic.

It’s unbelievable how lousy the roads are and how noisy they are. They make the road noise unbearable for the drivers and all the homeowners with 500 yards of any of the highways. I’ve never been in a city with such lousy roads.

Although I liked my life there, I eventually left because over the years, as the housing situation worsened, all of my friends left Seattle , one after another.

The trend was just too much and showed no signs of improving. I can’t stand the transient quality of Seattle life that’s been brought on by high real estate.

As another poster pointed out, it’s not like the folks there are the friendliest in the world. When you finally get to make a friend, you want them to STAY! But high housing/low wages- or even trouble finding work at all!- kept everyone moving on through. Blech.

I am an older professional and have a low 6 figure income and there is no way I am gonna take my hard-earned equity from selling my 5-acre 2000Ft2 house in Texas for some sh*tbox up here.

You don’t buy at the top and quite frankly, I think I am going to rent, save my money, and retire back in the Texas Hill Country.

Seattle is highly overrated!!!

I’m one of the vaunted, overly-educated twenty-somethings who lives in Seattle. I moved here for my PhD, but I’m moving away when I’m done. There are jobs in my field here, but none pay enough to justify the increased cost of living.

I have never even considered owning a home here, so the speculative housing market doesn’t affect me directly. That said, I’ve found myself burnt on several different occasions by amateur-hour property “investors” who are increasingly freaked when they realize that they can’t rent their piece-of-"chocolate" properties for enough to cover the mortgage.

I think that’s the silent tragedy of the bubble…real, sane, hardworking people are being hurt by the rampant speculation, even if they can’t afford a home. It really bugs me.

X-Cal equity refugee buys a house for $600K, with $50K down, and a 4.75% 3/1. Taxes are $7.5/yr.

Monthly payment is:

P&I = $2873
Tax = $ 625
Ins = $ 100
management fee = $160

Grand total (prior to maintenance):
$3758/mo

Assuming they keep it rented 12/12 months for $1600/mo, they have a negative cash flow of $2160/mo + maintenance.

3 year lease = -$77,677

Interest rate adjusts to 7%:
now, and they get an extra $50/mo in rent, but taxes have jumped 10%/yr for the three years:

-$3109/mo or -$37,309/yr.

Property is losing value. Interest rates are at 9%, so they know their payment is going up (as is their potential buyer’s payment), and house is now worth $300K.

2 years later they sell.

Tally the damage.

$50K down payment – gone
$78K neg cash flow – gone
$75K neg cash flow – gone
$30K maintenance – gone
$200K capital loss – gone
$21K RE fee – gone

$454K loss in 5 years, or $91K loss per year.

Trust me, this is a KIND estimate.

Now, multiply this times 6 houses…

True situation. No kidding.