Also, I think it is worth bearing in mind that if interest rates increase dramatically, the higher rates will apply to all prospective buyers, reducing the amount that they can afford to bid. In other words, demand (meaning willingness AND ability to pay, not just fondness for houses) will decline and there will be further downward pressure on prices.

Buying at the peak of a market cycle is bad enough without borrowing to do so at a rock-bottom interest rate. The combination could really stick you if anything in your life changes after the purchase. Losing money is bad and being upside-down on a mortgage is perhaps worse.

No bubble here folks…..anyone up for a cruise on “De Nile”?

http://money.cnn.com/2007/12/14/news/companies/fannie_annualmeeting/index.htm?postversion=2007121413

It’ so simple. The problem for the housing market is that the prices are to high still you only hear symptoms as “high inventory”, “credit crunch” etc being touted as causes. I’m glad to see that someone got it right. Now we just need the industry and markets to start acting to speed up the deflation of the bubble.

- James

Ray Pepper
Broker
http://www.500Realty.net

My wife and I both work for the same company and commute together so our numbers are times two.

We spend about $180 a month on gas going 70 miles round trip. With no traffic until we hit Redmond, it takes 50 or so minutes each way. We drive basic cars (20k ish) so 17k in annual mileage would be about 2k in depreciation and another grand for repairs/maintenance. That works out to about $350 a month. You do have to buy more often so that’s a consideration…

When we commuted from Kirkland it was at about a third that cost so I would tack an extra $200-250 or so per car in additional cost to commute in.

Time is relative to each of us. It took 30-40 minutes to commute in from Kirkland to Redmond (7 1/2 miles) more gas per mile but less miles and the time is more but not as much as I figured.

It’s not for everyone but paying 450-600k for a house? We didn’t even consider it, although we could have swung the lower number on a fixed rate. Driving or renting was all we looked at since there was nothing but junk in the 300’s close in.

http://www.zillow.com/HomeDetails.htm?zprop=48840084

The exception here are some of the flipper homes who completely renovate older homes and then sell them for higher prices.

The exact same scenario played out in DC last year, the prices were flat while the inventory built up as only the desirable homes sold. Eventually, the other sellers had to lower to sell and the prices have come down 10-30 percent from the peak (depending on the area).

Do i hope for a 50K drop next year and have to get locked into a 8% rate – so monthly payment they same.

I doubt rates will move up so far so fast. Another rate cut looks likely in the next round. Deejayoh noted that you might be able to buy a long-term lock on interest rates, if only in the futures market. Could be worth researching.

right now debating buying or waiting to see how it looks in the Spring…

The masses will be doing the same, so I’d suggest making a decision by Feb. The early birds will probably have provided the answer by then, esp. if there aren’t any!

Let me tell you that houses in Lynnwood, WA 98037 are way over-the-head in values, let me put it that way. I purchased my house in 2000 for $220,000 for a 3 bedrooms, 2 1/2 baths, the house is about 8 years old at that time. Then in 2001 – 2002, new houses around that neighbor were about $250,000 to $325,000. In 2003 – 2004, it jumped $100,000 to between $350,000 – $450,000 and then way up to $600,000 to $700,000 in 2006 and now in 2007, there are lots of homes are for sale and I am hoping that more houses are on the market so it can correct itself.

Crazy. Significantly less appreciation in my Issaquah exurb over the past decade, while the number of homes for sale has been consistent: hardly any. I guess we’re too far out to have reached the loftiest heights.

You forgot one of the main concerns! Location, location, location. Seriously, this is a major factor for most people. Why are houses near downtown Seattle more expensive? A lot of people want to live near downtown Seattle. Simple as that.

A premium to rent was in fact the historical norm, for the very reasons you enumerated above this comment – it’s less risky than buying.

A premium to buy is ass-backwards, it means landlords will lose money, and is not sustainable.

my circumumstances – 36, $ for 20% down, lived here in Seattle a year, and tired of renting (been doing it for 3 years), also lost money on my previous home (bought for 196K in 1999 sold for 189K in 2004 – gotta love prices in Austin), so some fear… right now debating buying or waiting to see how it looks in the Spring… prices have not come down in the area i am looking in Kirkland, with sellers simply taking houses off market rather than lowering price. Also people are still buying these houses for 500K and putting rental signs up (which i don’t get) – my realtor says they are banking on appreciation, which i guess is the only thing that makes sense.

Once again, I’m not talking about uprooting my family and moving to Nebraska. I’m saying that if my rental in Ravenna expires, I can find a house in… Ravenna! Or Wedgwood. Or Meadowbrook. Or Greenlake. All near enough where she can see her friends and be a part of her village.

Forces me to buy? Ha, ha. We make decisions together.

You mean to tell me you wanted that floral print bedspread?

Going out 45-50 minutes will get you in the 300’s and plenty of perfectly nice homes to choose from.

People should factor in the cost of the commute though, in terms of gas, auto depreciation & maintenance, and time.

Angie: Good post. You know, I’ve never understood why someone would rush into making such a big decision either. “Yes, you are having your first child. Calm down. Being a good parent has nothing to do with being a renter or an owner. Breath.” =)

2700 sq/ft? You meant 1600 sq/ft with rest consider as basement?

Yes. How is a sq. ft. in a basement sub-par? I’ve not understood that. There might be some duct work there, but if it’s full height I’d like a sq. ft. there just as much as one at the first floor. Given a choice between 2700 sq. ft. on one level and the same size split between first floor and basement, I’d rather have the latter.

Regarding the school issue, we owned a house and our children were raised here. The school district changed school boundaries many times, thus even though we stayed in the same house our kids’ schools/friends changed.

Yeah, hate it when they do that. The best you can do is be close to the school, but there’s three of them scattered around.

Markor, actually, my wife is mesmerized by the fact that Target, Costco and Trader Joes are right down the street. I’m not mesmerized by anything that has to do with buying a house, that’s why we are renting still.

Funny! When she forces you to buy, consider that the older houses on Squak Mtn. are closer to Target and most other Issaquah amenities. (Maybe you meant Fred Meyer.) I bet it’s faster to get from Squak Mtn. to Trader Joes & Costco than from the Highlands. If she wants new, there’s new stuff in downtown Issaquah. The one benefit of the Highlands is that kids would probably love it—lots of other kids, a big park and they have sidewalks there, which is rare in Issaquah.

The real problems start when no one is willing to step up and take on those civic responsibilities—that’s when things really go to hell in a handbasket.

About those kids and stability questions—of course you can do a fine job of parenting if you rent, I don’t think there’s any serious question about that. What is more serious is shaking up a kid’s world when the family moves. Yes, kids are resiliant and they survive it just fine, but disrupting all those relationships in the village of people who are your kid’s world—not just friends, but caregivers, teachers, neighbors—IS a big deal, and not one that a parent undertakes lightly.

Ever wonder why people freak out and buy houses when they have new babies? Every wonder why people pay a premium to live in a school district with a good reputation? Some of those “intangibles” are rooted pretty deeply, and gain new importance when people become parents.

and yes, i do understand that a landlord can theoretically sue for damages beyond the deposit, but i consider this a remote possibility.

i honestly wonder if there won’t be a premium to rent over buying before this is over. when you rent, you can only lose your $700 deposit. when you buy, you risk losing your $70,000 downpayment.

I’ll bet there are some country songs about it.

I guess for some reason there are never songs about Foreclosure.

“Next to food and clothing, the housing of a nation is its most vital problem. . . . The sentiment for home ownership is embedded in the American heart [of] millions of people who dwell in tenements, apartments and rented rows of solid brick. . . . This aspiration penetrates the heart of our national wellbeing. It makes for happier married life. It makes for better children. It makes for courage to meet the battle of life. . . . There is a wide distinction between homes and mere housing. Those immortal ballads, ‘Home, Sweet Home,’ ‘My Old Kentucky Home’ and ‘The Little Grey Home in the West’ were not written about tenements or apartments. . . . They were written about an individual abode, alive with tender associations of childhood, the family life at the fireside, the free out-of-doors, the independence, the security and the pride in possession of the family’s own home. . . . Many of our people must live under other conditions. But they never sing songs about a pile of rent receipts. . . .”

Intangible=Emotional

Which is a polite way of saying, “If you have money to burn, go ahead and burn it”.

Do yourself a favor and take some nice weekend drives and see if there are some outlying communities that fit your lifestyle.

The drive is no where near as tough as I thought it would be (no traffic and beautiful scenery) and the 1 acre lot with newer 1600 sqft house (no kids :-) fits us perfectly.

I took that to mean that home would be the best friend’s house. Are you guys getting a little prickly?

2700 sq/ft? You meant 1600 sq/ft with rest consider as basement?

ON DECEMBER 12TH, 2007 AT 7:58 PM
“I have a 5-year-old daughter and home for her is where my wife and I are currently renting.”

That will all change when she makes a best friend at school.

You beat me to it! Yes there’s a chance one could find another acceptable rental that feeds into the the same schools and within walking/biking distance of the kids’ friends (like the last place). That’s a small area though. It’s an opportunity cost of renting for parents.

Thank you to Joel and Markur for stating what I hoped would be apparent. There are plenty of rentals where I am in North Seattle, all of which feed into the school she’s currently in. And if the house didn’t, I have this sneaking suspicion that she’d make friends at her new school. She’s funny that way.

“That will all change when she makes a best friend at school.

Give me a break. This sort of reasoning is pathetic. Children are the most resilient of parasites.

Abe Lincoln grew up in a ~300 square foot cabin. Buy your kid a trailer, turn the title over to them and you’ll be doing our country a favor. Maybe your kid will end up as an American hero, too.

My wife and I moved up here from California a year ago and have looked at Issaquah Highlands as well for our first home. We have come to realize that prices are way out of whack even up here (and we are from California).

I suggest you run, don’t walk, to the north side of Squak Mtn. and May Valley on the south side. For the price of a cheaply-made house on a tiny lot with $300/month HOA dues in Issaquah Highlands, you can get a much better-built house on anything from 8K sq. ft. to 1+ acre in the other areas, with low or no HOA dues. And the commute is the same or not much longer from Seattle.

Right now in Bellevue (Phantom Lake area) there’s a 2700 sq. ft. house on an 8K sq. ft. lot, built in the 1950s (decent construction), for $460K, the price of a 1600 sq. ft. townhouse in the Issaquah Highlands. Buyers are mesmerized by the stainless steel appliances and engineered wood flooring in the Highlands—they’re not worth that much!

Think about the post above. If you were a lender, and knew that the courts could force you to reduce the interest rate on any loan you made where the borrower entered chpt. 13, how would your credit standards change? A few more stupid moves like this and there will be credit only for the most qualified, those with perfect credit scores and high down payments.

There’s a little more to it than that I think. Lenders made megabucks doing quasi-illegal things, now they’re giving up some of the spoils to save the economy and thereby themselves. They may disagree, but it’s probably because they think they can survive longer than their competition in the downturn. I doubt lenders believe the economy can stay upright if all lenders allow ARM resets to happen.

“I have a 5-year-old daughter and home for her is where my wife and I are currently renting.”

That will all change when she makes a best friend at school.

You beat me to it! Yes there’s a chance one could find another acceptable rental that feeds into the the same schools and within walking/biking distance of the kids’ friends (like the last place). That’s a small area though. It’s an opportunity cost of renting for parents.

The key is being fully informed. To me this means taking a patient perspective on buying by knowing the the real estate market in aggregate (Seattle Metro) and in the specific area of interest (school discrict/neighborhood/development). A long term outlook must be in play for you personally, professionally and financially. When it comes time to arrange financing, please shop. There is no place like my being in the escrow business, as my spouse and I are, to see the enomous differences in fees and service levels of mortgage brokers/loan officers. Take your time, research and then decide.

When the time comes to buy, you’ll buy. If not, you are no worse off than before.