The Seattle Times last month followed up on the Forbes report ranking Seattle as the most overpriced city with a report on the many conflicting opinions about the Seattle real estate market.
Veteran Seattle real-estate agent Don Henry is certain the rapid run-up in home prices has put Seattle into bubble territory.
“There are just so many people out here who can continue to sustain these increases,” Henry said, particularly when wages aren’t keeping up.
Not so fast, says Seattle real-estate economist Matthew Gardner.
“You’ve got people saying, ‘housing bubble, Chicken Little, the sky is falling,’ ” he said. “It isn’t, and I don’t think it’s going to fall in Seattle.”
The article is surprisingly balanced overall, which is a refreshing change from the standard operating procedures in newspapers as of late. I definitely recommend reading the whole thing. Regarding the Forbes report, the Times consulted one local “expert” that disagrees with their analysis:
“They put together a hash of statistics, and they don’t all go together,” said economist Dick Conway, co-publisher of the Puget Sound Economic Forecaster.
Rather than still suffering the after-effects of the dot.com blowout, Conway said “Seattle is now growing 50 percent faster than the U.S. economy” in terms of job growth. It also posts the nation’s fifth-highest per-capita income, which is what allows buyers to afford home prices that have climbed 12.1 percent in the past year.
I also found the following bit of information to be particularly interesting, considering that it roughly describes my situation. Information about wages by area can be found at the Bureau of Labor Statistics.
By his calculation, a first-time buyer earning the median wage in King County has just half the income needed to buy the median-priced house.
The article concludes with a word of warning:
So what should homeowners and buyers take away from all this?
For buyers looking for a place to live, a cautious approach to borrowing. The increasingly popular adjustable-rate, interest-only loans could leave buyers with no equity and with house payments they can’t afford, Gardner warned.
“It won’t take too much of an adjustment upward [in interest rates] for these people to be in trouble,” he said.
And that is what I think the main problem is. So many people have the mentality that they deserve to have it all, and have it now. When they find that their income isn’t enough to buy a house around here, they take out “exotic” loans so they can “afford” one anyway, only to set themselves up for a world of hurt down the line.
(Elizabeth Rhodes, Seattle Times, 07.30.2005)