North King, South Snohomish houses - all old and worn out?
Ok, I'm looking to buy later this year and have begun looking what what is available in my price range (say ~$340K max for a 3/1 place with a garage and a bit of room for a garden). I'm looking in the South Snohomish area (Edmonds, Lynnwood, MLT) since it is a decent split between my south Everett and south Seattle work locations. North King County isn't completely out, but I'd prefer the (somewhat) lower taxes of Snohomish county.
Most of the houses here date from the 1950s - 1960s, with some '70s, '80s, etc, sprinkled in. Most of the 50s/60s houses seem to be 'original', which to me looks to be old and worn out. A small percentage have been remodeled (for better or worse) and priced accordingly, but many just seem to be expensive and old. I don't expect a new house with new design and construction features, but am I out of line to think a 1950s 1100 - 1300sqft 'original issue' place somewhat expensive when it is in the $340K range, or is that just the market?
Considering what I've been seeing, I'm tempted to just keep renting, perhaps paying a bit more than I do now, but less than PITI payments would be.
Most of the houses here date from the 1950s - 1960s, with some '70s, '80s, etc, sprinkled in. Most of the 50s/60s houses seem to be 'original', which to me looks to be old and worn out. A small percentage have been remodeled (for better or worse) and priced accordingly, but many just seem to be expensive and old. I don't expect a new house with new design and construction features, but am I out of line to think a 1950s 1100 - 1300sqft 'original issue' place somewhat expensive when it is in the $340K range, or is that just the market?
Considering what I've been seeing, I'm tempted to just keep renting, perhaps paying a bit more than I do now, but less than PITI payments would be.
Comments
Wow. First post and everything.
I think the question of if an unupdated 1200sf 1950's 3/1 is worth $340k is the sort of central question we've been trying to answer for a few years here.
A few years ago, those same houses were selling for $480k.
How do you determine value? It is what people are willing to pay. Look at the difference between renting the place and paying the mortgage interest+taxes+maintenance. Would doing something else with that money make you happier? Better yet, would doing something else with that money make most other people happier?
From a fiancial perspective, the house worth is determined by the amount of income it can generate and the rate of return people are willing to accept. If renting the house generates profits of $500/month (after taxes and maintenance) and investors are willing to accept a 1% annual rate of return, then the house is "worth" $600k. Note that mortage rates suggest an acceptable rate of return is between 5% and 6%.
Nitpick... Rational investing means the expected return increases with the risk, and the owner is taking more risk on the house than the bank is, therefore the expected return of the homeowner must be more than the expected return of the bank for this to be sensible. Of course, this assumes the homeowner *intends* to repay the loan.
Note that if lending standards are crap then the bank's expected return may be less than the mortgage rate due to defaults, but in general I would expect the bank's expected return to be close to the mortgage rate.
I hadn't considered that! Thank you.
That puts a bound on the rate of return that people should be accepting.