Movin' on up in the Seattle area

[DrShort]

For those of us who've purchased their homes several years ago but would like to upgrade to something a little bigger/nicer, this market is tough to time. I'm left analyzing not only if prices will fall, but how my homes value will change in relation to those I am looking at buying. And then there's the uncertainty surrounding interest rates -- saving $20K by waiting six months could be more than offset by interest rates rising 2%. So I am here asking for thoughts and/or discussion.

To be specific, I am thinking of selling my house near Greenlake I bought in 2001 for $318K. The zestimate is $574, but think $525K is more realistic market value based on what i am seeing.

Currently, I've been looking at houses in the Wallingford, West Seattle, and Central Area from $650K - $750K. Surprisingly, there's a lot of crap out there even at those prices, but I have found a few I really like. Homes in that price range seem like they've fallen more than those closer to the jumbo cut off.

I am currently contemplating a few options:

1. Do nothing and just be happy where I am.
2. Sell now, rent for 6 - 12 months and buy.
3. Remodel for more space.

Thoughts?

[laxtosnoco]

I vote for number 2.

I would modify it a little though: Sell now, rent for 6-24 months, drive a really hard bargain and buy.

[crucifiction]

I agree on #2, that is the only way to get out ahead in this bubble. Cash out now while you still can then sit and buy those houses you want for the price your current house sells for. Otherwise its just a wash and you are leaving money on the table.

[ira s]

At first I too I thought you should also opt for #2...Greenlake homes are still selling, especially those that have some innate charm and aren't priced way too high..
But then I thought: how would your current mortgage payments compare to rents?
If rents are the same or only slightly lower, maybe you should stay in your house and think about buying in a couple of years. I should slap myself here. What kind of advice is that from an agent?

[deejayoh]

If you sell, (unless you fsbo or are an agent) you are looking at a minimum of 5 points transaction cost, maybe up to 8. So that's $25-40k to play with on a remodel. If you like your location and can add the space (and equivalent value) that's almost always the best play financially just because of the transaction costs. Of course, there are myriad complications like living through a remodel, compromised layouts etc. - and if there are things you really desire (like say, a view) it's a non-starter.

[mike2]

I suggest you move to the Eastside, to a deluxe apartment in the sky. That way, you'll finally have your piece of the pie.

[ira s]

Deejayoh's right. Even if you FSBO, you'll want it listed on the MLS and offer the selling agent full 3% commission...then you'll have to pay 1.78% real estate excise tax (plus five dollars) plus something like 1200 dollars title and 700 escrow and other assorted costs.

[biliruben]

Excellent and timely topic, DrShort!

I've been staring at the MOS in 720 where I live slowly rising towards a buyer's market, and realizing now's the time!

My plan is #2, but I wouldn't do it if the situation weren't pretty perfect (and I'm still trying to finagle it so it is.)

We are currently out of our house, as is all our furniture, as we were putting in wood floors. This experience and ever-escalating expense makes me realize you shouldn't do any remodeling on a place you don't intend to live in indefinitely. The experience is much more frustrating and painful when you can't fall back on the "I will enjoy these floors for ever" meme. Now all I have is "maybe we'll recoup 50% of our expenses" meme. Not fun.

So, given that we are out of our house and currently staying in a nicer place (in-laws' house, who live out of town), I think I have convinced my wife to sell now, instead of 1-2 years. Now all we have to do is talk the in-laws into renting to us for as long as my wife can tolerate, and we are golden.

Sell just after the crest of the top, and buy after a decline. At least that's the theory. Renting in between gives you much more leverage as well. No contingency nightmares, or being held over a barrel by adversaries who know you need a place to live or are currently carrying two mortgages and need to sell.

Just starting window-shopping in North-end, in-city neighborhoods in the 550-650 range (bought in 04, so don't have your equity luxury), and peering longingly up at the 750s, hoping they'll fall into our range of affordability before my wife loses patience.

Keep us updated on your plan.

[SeattleMoose]

Timing is everything....

Option 2 is probably your best choice if you want to try and maximize your gain. Seattle is lagging the leading bubble areas (e.g. CA) by about a year. With a recession under way, it is only going to get worse. You already missed the "peak" (mid 2007) but you can still get out with a decent profit / down payment for your "step up"....provided you can unload your home in a market with ballooning inventory. Pricing below your competition will be the key.

Based on previous bubbles I estimate "bottom" will be reached in about 2013 but this time feels different.....this may be America's "perfect storm" in which case housing may never recover (e.g. Japan).

One other good thing about dumping the house and being "free" is you are not anchored to a specific place in case jobs pick up somewhere else while Seattle is still "down".

Good Luck!!

[ira s]

If you do decide to sell, Greenlake homes, especially more affordable ones, are still selling rather briskly, so at this point it shouldn't stay on the market long, unless it's utterly devoid of charm or full of mold and rats.

[Markor]

Dr Short, I agree with some of the posters above. Do #3, unless you're in an intolerable location for your needs/wants, or you're convinced you won't have an acceptable house even after a remodel, or if a remodel is too expensive, all things considered (like all the costs of selling/moving), in which case do #2.

One of the episodes on the HGTV (home & garden channel) featured a couple who had looked at a myriad of homes to try to get something more to their liking than their current house. They weren't finding anything they wanted, so the HGTV team showed them what they could do to remodel three houses on the market. But the team included the couples' own house in the remodel plans, and they liked the plan for their own house the best (after all, they did choose the house once before; there was a lot they still liked about it), and it was also the cheapest because it didn't involve the costs of selling/moving.

You might want to spend some money on an architect, to see what your house could be and for how much.

Other thoughts: a house near Green Lake is probably going to appreciate at a higher rate than many other Seattle areas, if only slightly. A smaller house can be made to seem more roomy with good design; there's lots of books on that, and of course an architect can help. I think house prices will fall more than $20K in that range in the next six months, so if it were me I wouldn't worry about interest rates during that time frame.

[DrShort]

[Alan]

What if people think in terms of payments?

Today your 5.25% loan on $550k has a payment around $2500. At 7% with a $2500 payment you can borrow around $415k.

How do you feel about a $135k drop? If you think interest rates are going to 7%, buying today might not be the best decision.

[DrShort]

[aldreth]

sell now? lol