Seattle Bubble Forum Archive

With the Median Family Income, Estimated in WA – 2007 at $63,500, what percent of King County's estimated population of 1,826,732 be able to buy? With slick financing gone we are back to stated income loans. Homes currently on the MLS are priced at the 2006/2007 standard with inventory rising.

How many can purchase;

a) over $1,000,000
b) over $ 500,000
c) over $ 250,000
d) over $ 100,000

I say a majority (75%) fall below qualifying for a $500,000 home. What does the median home price need to look like for families survive?

I think to be historically comparable to income the average house in king county should be somewhere in the 220k range.
I think most people cannnot afford the average house in king county. How may people make 200k a year to buy an entry level house. I don't think that many.

you can't just compare median income to median home price and claim the area is unaffordable. Look at the profile of Seattle MSA - something like ~50-60% of people in the area already own a home. So most buyers are trading up or down, and you can afford much more when leveraging existing equity than you can when a first time buyer (ok, I am assuming you have equity, but that is usually the case in this market)

The comparison is only valid for 1st time buyers - who represent what % of market? I don't know, but I'd bet less than 20% and I suspect most of them are buying a house that is cheaper than the median.

You start with a base of income (3x) to purchase price.
Purchase price above that determines the amount of down payment one has.
Looking at the average income of $63,500 or lets round up;
Sea/Bell income of $100k with an average of 100K down is still a stretch for a $500K home. Of the 12000+ homes listed on the MLS, 50% are above 500K and those under, many are condos. Until sellers and RE agents see the writing on the wall, it will be a standoff between buyers and sellers.

The down payment used when purchasing a house is no longer "rolling equity". When the Taxpayer Relief Act of 1997 became law you don't have to buy another home with your sale proceeds. You can use the money to travel to Europe in style, buy an RV and drive across the country or get all those designer shoes you never could afford before, so really it's savings. Disciplined real estate investing takes the commercial temptation away and uses the proceeds from a sale to reinvest. Today equity has been tapped way before a sale of a home or like some,
being "underwater".

What I would find interesting is a poll of titled "what is your real estate resume?".

A) new buyer
B) previous homeowner waiting to buy up currently renting
C) current homeowner waiting to buy up
D) happy renter for life
E) happy homeowner and tend to stay where I am

My status is B. My first home was a custom built that I took an active part in, (no labor). Next home was a top to bottom remodel with addition, (did much of my own labor). I have two rentals and a large land parcel in contract with a builder. I can relate well with all sides of home buying and selling. Economics is a HUGE factor.

It's easier to look at it from the perspective of only first time buyers. Assuming first time buyers are roughly comparable to the median (throw out the top and bottom 10%) and see what they can get... Right now, a first time buyer with a median income can maybe get into a small condo, or a small house in the far suburbs. Look for $200k properties - that's ~3x median + 10% down.

Regardless of equity situation, it's not hard to figure out that first time buyers can't afford to buy, and current 1st tier owners can't sell and move up to 2nd tier homes, and so on. When 3x median + 10% down can afford a decent condo or starter house in the city, things will begin moving at a normal pace. We're still 50-100% above that.

I'm B (C-ish, but the I'm just trying to stretch out the lag between selling and buying as long as my wife has patience for).

DJO - I seem to recall CR estimating equity extraction at about half a trillion a year at during the final few years of the run-up. That's not insignificant, and I would doubt Seattle was immune to the phenomena.

I would probably agree with that, I was simply giving you some evidence that folks were (and still are to the extent that they can) extracting large amounts of equity from their homes. You asked for data, I attempted to deliver. It would be nice to see some local data, but I don't have it.

The data I provided shows, if it shows anything, that their will be fewer move-up buyers going forward.

Sure, not every mortgage holder, or even a majority, HELOC'ed themselves into hoc, but enough did that it will be a damper on the middle and upper tiers of the market for some time going forward.