New Buyer

[ryg]

I am moving out to Seattle and am shopping for houses with my fiance, my realtor is giving me a pretty hard sell that now is a great time to buy etc and she keeps giving me articles about the Seattle market that shows how affordable it is right now. Can someone give me some unbiased advice.... My tendency is to wait 9-12 months before we buy, am I out to lunch?

[biliruben]

No, you aren't out to lunch. I just sold my house, and now your plan is my plan.

If you can manage it, move here, rent for a year, explore the neighborhoods, and watch as the market slides and the sellers start to sweat.

My guess is the market will decline for the next 5 years, at least. The majority of that decline will happen in the first year or two, however. We are probably down 5-15% from the peak of last summer right now, depending on neighborhood. We have another 15-30% to go.

What segment are you looking in? Do you want to look in Seattle-proper or outlying areas?

[jenseattle]

Prepare for an onslaught of people telling you property values will go down 50% in the next two years.

While I believe home prices will fall in the short-term, we recently purchased a home and I believe it to be a good decision for a variety of reasons. How long do you plan on being in your next home? If less than 5-7 years, I wouldn't consider buying now.

Also, I think there's a lot of value in renting for a while to check out neighborhoods and see what you like. Certainly, it wouldn't hurt to rent for a year and check the market at that time.

[ryg]

We are looking at Freemont, Magnolia, Ballard, Queen Anne, Leschi, Madison Valley neighborhoods so far.

[jenseattle]

Since you're looking at close-in areas, your investment is less risky than further-flung areas. There was an interesting article recently about homes close to bus lines and convenient access to urban centers going up in value, even as the local 'burbs were suffering.

We rented in Ballard for two years and just bought in Ravenna--you might add it to your list. I looove living here and find it much more convenient than Ballard (great freeway access to downtown).

[ira s]

ryg,
I think most realtors actually have themselves convinced that now is a good time to buy. Inventory is certainly way up, so there is a lot to choose from. But prices haven't come down much. There's nothin wrong with renting for a while, or looking at short sales or REO property, where you might find a house now significantly reduced. I think we will see more and more short sale property. It's more complicated and there's more of a chance that something go wrong, and realtors sometimes don't make their full commission and have to do more work for it, but there are a few bargains out there.

[ryg]

What is REO property or short sales (please forgive my ignorance)

[Alan]

I'm not sure what REO stands for but it refers to a property that was repossessed and now belongs to a bank.

A short sale is the sale of a property that is in foreclosure for less than the outstanding loan balance. The sale will come up "short". They require cooperation from the bank and usually involve some amount of debt forgiveness.

[Markor]

ryg,
After living here for 15+ years, it still took 2 years for me to decide what area to downsize to. For most of us I suspect, it's a grand compromise. If you're new in town and buy right away, odds are good that you'll regret your location/choice later. Then there's the bubble...

[Tejas]

REO = Real Estate Owned. Or in non industry parlance. It has gone back to the lender or the current owner of the paper, which ever bank holds the note.

[ira s]

When a home goes into foreclosure, they have a sale of the property, and the amount owed is usually the minimum bid. Sometimes that amount is more than what the property is worth, so nobody bids, and the property goes to the lender, or becomes Real Estate Owned (REO)..
When a home owner is behind on their mortgage payments but doesn't want the home to go into foreclosure, they will work with the lender to see if the lender will allow the homeowner to sell for less than what is owed . This is a short sale.

[Cougar]

ryg,

Where are you moving from? You say fiancé, will you be getting married soon? Marriage and buying a home are HUGE stress factors, one could easily cancel out the other. Welcome to Seattle, rent for awhile to get your feet wet (bring an umbrella!), and wait for prices to come down. We are just at the turning point for price decreases. There are many of us that rent and can give you lot's of information where to find a rental. Unless your job is paying for your move and purchase of a new home, then talk to Ira.

[Markor]

Good advice Cougar.

About some of those areas IMO:

Magnolia - staid; nasty commute if one of its few access routes is closed

Ballard - nasty commute to downtown I hear

Queen Anne - $$$$, but houses there will probably hold their value better, or appreciate better in the long run, than most other areas

Madison Valley - a flash flood drowned a woman in her basement there; a solution is in the works, but make sure you're not on the valley floor just in case

[sorin]

Granted that every situation is different. I do think it's safe to posit that rapid home price appreciation is not something we will see in the next several years. I put more weight towards price declines. As others have already advised, rent for a year, explore different neighborhoods. Figure out what areas are really your flavor. If you are looking to immediately buy for fear of being priced out, you have nothing to worry about.

If you have any doubts about buying, for the love of god, don't talk to a realtor. A realtor is a sales person, not a market advisor and definitely not an investment advisor.

[Notabull]

I also recommend renting for a year (or two) in order to find the neighborhood that you like. Even the optimistic realtors find it hard to say that prices are going to go up, and even if they only stagnate (unlikely) you'll still come out ahead.

Yes, renting kinda sucks when what you really want is to be a home owner, but it's not exactly slumming it. There are some nice rentals out there, and you'll likely be spending more time out of the house than in it if you're doing the right thing and exploring the city and surrounding areas.

Keep in mind that a realtor only makes money if you buy a house. Asking a realtor if now is a good time to buy a house is like asking a car salesperson if today is a good time to buy a car. A realtor is a salesperson with (usually) decent transaction and negotiation skills. They are not real estate economists.