Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

24 responses to “Rents Predicted To Rise… Still”

  1. T.S.

    Our landlord has been dropping hints that he will be selling our house this year. That is worse than your rent going up.

    We paid $2,100 in Berkeley for a decidedly nonluxury 2-bedroom apartment a few years ago. I’m not sure Seattle will see those kind of increases, but I don’t know. One big difference was that Berkeley/Oakland had rent control, so your rent could basically never go up. I think that encouraged landlords to jack their prices in between tenants–we were able to negotiate our price down with each yearly renewal. Doesn’t look like that will be an option here.

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  2. meshugy

    Of course, one thing this article doesn’t mention is how many condo conversion apartments have come back on the market as rentals as the “investors” try to turn a buck… That’s the kind of real investigative reporting I can only dream about in Seattle.

    Tim…do you have proof that this is happening? I’ve only seen the opposite around Ballard: apartments turning into condos and rental houses getting sold off to new owners.

    Is their someplace we can get data on conversions?

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  3. Anonymous

    Doesn’t rising rents contribute to more people buying houses? i.e. If I can rent a place for $1000/mo but buy something for $1500/mo. I think this is what happened in 2002-2003 when a lot of renters saw buying as a better decision.

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  4. Anonymous

    “I’ve only seen the opposite around Ballard: apartments turning into condos and rental houses getting sold off to new owners.”

    Meshugy…do you have proof that this is happening?:-)

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  5. Gomer Bolstrood


    I rent in Ballard, and I see it all the time. There are many overpriced rentals here, offered by people who purchased a house for more than they can afford, and are looking to pass the raw-end of their bad deal off onto a gullible tenant.

    Bascially, any time you see the words “mother-in-law” or “daylight basement” in a rental ad, you can bet that it’s a ripoff. It’s part of why I’m a bear on the housing market — I see way too many first-time homeowners optimistically trying to push their mouldy basement studio for more money than it’s worth to cover the mortgage.

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  6. Anonymous

    Expect to see a lot of that this year- renters beware.

    Happened when property first doubled in the mid-late 90’s. New owners “couldn’t afford” to not raise rents.

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  7. S- Crow

    Threads on different blogs are discussing the out of state influx of California buyers to our area. While the recent article in the Times discusses multi-family property & apartments, our experience is closing strictly SFR’s for our out of state buyer customers. We’ve had some go through and others that’s fell apart.

    So, it would be fibbing to think for a minute that the California market does not influence our market in Puget Sound. It truly does.

    We’ve had two recent purchase transactions completely implode with California buyers (San Diego & Organge County).

    For example, one buyer from San Diego failed to close here because we never received proceeds from their sale. Our understanding was that their buyers walked away from their deal at the last minute and the domino’s started to fall. Can you imagine the frustration of the parties with moving vans packed?

    The fallout? Lost sale, no income: escrow, title, mortgage, both Realtors, related services.

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  8. Anonymous

    Thanks for that report S Crow.

    I know that’s been happening in Seattle- failed sales- just from watching the MLS list this year.

    But it’s nice to hear from “the reporter on the ground” !

    There’s just so much that can screw up when the whole market goes berserk at the end and it becomes difficult to unload one house to buy another. Or prices fall and you don’t have as much $$ as you thought, etc.

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  9. S-Crow

    While invovled in daily transactions, escrow is a neutral party. And our company is VERY neutral and without potential conflict of interest because we are not owned by a mortgage or Real Estate broker or title company. Yes, it’s rare, and it’s why we rock! And it’s why I frequent blogs with no fear and can tell it like it is……..But once the deal is closed, it doesn’t mean I don’t have an opinion.

    For example, do you think it’s wise to loan money (a lot) to a first time buyer/borrower who shows several 30-90 day lates on car loans where the payments are a thousand dollars/month(for two vehicles while owing roughly $40K between the two); has a few other collections that we are paying off and had another third vehicle showing “voluntarily” repo’d. I could go into more detail, but what’s the point. Gross income roughly $5500/mo with one month employment history in current occupation.

    The loan: ARM, 2/28 Libor Index which adjusts in two years with a margin of 6.300%. Repeat that margin: 6.3%. Thereafter it will adjust every 6 mos. The current note rate is a sliver over 8%. If the loan adjusted today it would be roughly 11.00% based upon current LIBOR Index rates and their terms of the first adjustment no more than 11%.

    Don’t ask what the loan officer made on this deal, but it was major bank. And quite frankly there is nothing wrong with that. But it was certainly costly to the borrower due to their financial decision making and credit issues (to say the least).

    What I’m illustrating is that this is a very common borrower scenario. The question is, if the borrower can’t make $1000/mo in car payments, how can they pay for a roughly $2500/mo mtg. payment. IMO this loan is likely going belly up. It is suprising?

    Since a good portion of people frequenting Tim’s blog are future borrowers, please be aware of loan programs that may or may not be in your best interest depending upon your situation.

    PS. oops. Forgot to mention the PRE-PAYMENT penalty rider with the loan. If they refinance within the next 24 mos. they will have to pay roughly $7000 in fees to the lender, not including other closing costs and broker fees. Hope their home appreciates 10-15% over the next two years, and their spending habits change. MMMMmmm human behavior spending habits to change? Probably not. Some escrow firm will see them again I’d guess, either refinancing or selling.

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  10. deepcgi

    I’m signing a new one year lease in Redmond on Tuesday.

    1500/month for a 4 bedroom/2.5 bath, 2800 sq. ft., two-level with two living rooms, large fenced yard and a two car garage.

    Renting looks good from where I stand (which is across from the park two minutes from work).

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  11. bill

    S crow-

    Any guesses on who is going to “pay” for all these bad loans and how?

    I would like to hear your thoughts on the subject.

    I’ve got to assume that, with your front row seat, you’ve done some thinking about this.

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  12. S-Crow

    nah, haven’t thought about it too much. But we’ll all pay one way or another I suppose.

    I’m really thinking about my wife, who’s in a little pain right now and how she’s going to sleep, or not. Silly lady was up in the trees picking cherries at our place and the ladder went out and she crashed down on the side of it. Saw the whole thing happen in front of my eyes. X-rays show rib break and severe bruising. Never new how much you can appreciate breathing, until you break a rib or two. Pretty painful to just breathe.

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  13. Anonymous

    It was me wrote the comment about buying vs renting. I realized I was using numbers from when I last faced the decision and that was before the spike in home values. So fast forward today (or after the rental rates go up) and we could be talking along the lines of $1500 in rent or buy something for under $2000.

    I’m also not talking about apples to apples property. Obviously, one can’t buy the same property for only $500 more per month than he was renting, but if the person was renting something in downtown Bellevue and they didn’t mind moving to Mill Creek (I couldn’t live there, but apparently thousands can) then they could own something (well the bank could own something) as opposed to renting for not much more per month.
    Keep in mind I’m making the assumption that rental rates go up, I’m only saying that I think that’s what happen the last time renting was so close to mortgage payments.

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  14. Gomer Bolstrood

    Median rents are nowhere near median mortgage payments on the same property in King County.

    Anon, perhaps you should take some time between posts to organize your thoughts.

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  15. emcityjill

    …do you have proof that this is happening? I’ve only seen the opposite around Ballard: apartments turning into condos and rental houses getting sold off to new owners.

    I have proof for the Meshugies out there. If you check out craigslist for apartments in Seattle, using “condo” as a keyword, you’ll see plenty of units for rent (outrageously priced, many of them). In Ballard too it seems as though there are plenty new townhouses and condos for rent.

    It’s not a spreadsheet, and they’re not numbers issued by the good folks at NWMLS. Regardless, I’d say it’s pretty solid data.

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  16. plymster

    That’s a shame, anonymous. I find the frequent posting of stats to be interesting. I’ve learned much about the economy, deflation, inflation, pitfalls of ownership, pitfalls of renting, and historic trends from people in the RE industry on this blog.

    With Tim encouraging people to post less anonymously, I’ll miss your anonymous comments (though something tells me we’ve not heard the last of anonymous).

    Back to the topic at hand, if multi-families of 10-100 are selling for $1M to $12M (100-120k per unit), then how can median condos fetch 250K per unit (according to NWMLS)? How do these number jive with what developers claim it costs to build a house?

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  17. matt


    Second is the condominium-conversion trend. Some 9,200 apartments in the region have become condos since 2000, according to Scott’s calculations. Last year saw the biggest change — about 4,000 units converted — and resulted in a net loss of rental units because it exceeded the number of apartments built.

    if you needed definitive proof..

    Seattle Times April 15th, 2006

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  18. meshugy


    Tim was suggesting that condo’s were coming back on the market as rentals. What you just posted suggests the opposite. That rentals are being converted into condos…which is exactly what I’ve seen.

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  19. emcityjill

    I don’t get how it is such a stretch to believe that many recently purchased condos are reintroduced to the market as rentals. Just because an apartment building was “converted” doesn’t necessarily mean that buyers occupy the units. Tim’s suggestion is right on target if you look at available rentals in Seattle. Cap Hill, Queen Anne, Belltown….many many condos (and townhomes too) are being offered up as rentals.

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  20. jcricket

    many many condos (and townhomes too) are being offered up as rentals.

    This is one reason I’ve never been able to figure out how people that buy a second “home” as an “investment” and then rent it out make any money.

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  21. emcityjill

    In this market, they don’t! Not really. Paper gains, period.

    I think the majority are negative cash-flowing it, and simply looking for the help covering their mortgages while anticipating appreciation rates will continue to surge. This is yet another reason why RE is such a very risky investment today.

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  22. deepcgi

    by the way, i’m a renter not a landlord.

    the 1500/month is my new rent payment.
    The landlord thinks he’s rich without the rent.

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  23. stingray

    I have been here for few days. Just find sth interesting and want to share with you:

    See how many “home owner” want to SHARE their property with strange people. I can not see any reason except financial pressure.

    They buy the property they can not offord comfortably.

    By the way, I beleive some of them come from MS.

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  24. uptown

    My Seattle landlord’s been buying up small apartment buildings over the last few years. No rent increase in 3 years, and they dropped the rent 10% when I first moved in.

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