Homes in San Diego 16% Cheaper than in King

Just for kicks, let’s do an almost end-of-year check on the San Diego County / King County overall median price comparison.

If you recall, back in March San Diego County’s median was at $415,000, while King County’s was at $395,000. Our March “forecast” called for San Diego to fall to $366,771 by the end of the year (a 12% decline), while King held at $415,000, putting San Diego at a 7% discount by year end. Recall that this was based on these two allegedly reasonable assumptions:

  1. King County home prices will remain flat through December. (Was portrayed as likely by local media.)
  2. San Diego County home prices will continue to decline, at roughly half the rate they have dropped in the last six months.

Here’s the March forecast compared to the actual median prices recorded for King and San Diego counties:

King / San Diego Median Price Comparison

It looks like our media-based assumptions were too generous for both King and San Diego. In reality San Diego prices have fallen a mind-blowing 27% over the last nine months, while here in King they have dropped 8%. Of course, this means that San Diego County (at $305,000) is currently priced at an even larger discount than the original prediction, with the overall median coming in 16% lower than King County (at $365,000).

It will definitely be interesting to see how long this discount holds. Will homes continue to sell at fire-sale prices in SoCal, while only dropping slightly in the Northwest? Time will tell.

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

88 comments:

  1. 1
    Joel says:

    Will homes continue to sell at fire-sale prices in SoCal…

    As long as they continue to have big fires down there, I would say yes.

  2. 2
    economist says:

    I think there’s a bit of an apples and oranges issue here, as San DIego county is the whole metro but King County isn’t. San Diego county versus King;/Pierce/Snohomish would probably be more on the mark.

  3. 3
    The Tim says:

    economist, I agree. The point here isn’t statistical rigor as much as just an interesting comparison. Ideally I’d also prefer to be comparing SFH medians rather than SFH+condo, but unfortunately I don’t have that data for SD.

  4. 4
    Magnolia44 says:

    Seattle is better than San Diego

    Wa is better than Ca

    I am a so calif transplant since I was 18, with family still there.

    Seems feasible Seattle would be more valuable. Yes I know your point is the trail theory.

  5. 5
    buystocks says:

    Would normalizing with population density be interesting? I’m guessing san diego is more dense (but not sure) which would further magnify this difference. I’m also guessing if you ventured a national poll, most would, if given the choice, rather be in san diego than seattle.

  6. 6
    Travis says:

    I am moving to San Diego from Seattle. I have been spending a week there every month and a half for work and absolutely love it.

    The weather is perfect and there are plenty of outdoor activities. If I want the clouds and rain I am only a 2 1/2 hour flight away. I doubt I will be making that trip anytime soon. I have spent my entire life in Seattle and am looking forward to the change. Seattle just does not feel like home to me anymore but that is just my personal opinion.

  7. 7
    Ray Pepper says:

    WOWWWWWWWWWWWWWWWWWWWWWW

    Don’t fight the FED. Rates 3.5 in 2009!!! FED IS PULLING out all the stops!! Will be an interesting ride in Real Estate for 2009!

  8. 8
    Ray Pepper says:

    We are no longer worried about the cost of money , and will be buyer of bonds that create Mtg’s across America!! WE ARE A BUYER OF MTG BONDS AND WE WILL DRIVE MTG RATES LOWER IF ITS THE LAST THING WE DO..

    (What the Fed said to me today with their announcement)

  9. 9
    jon says:

    The nice weather leads a lot of people to want to live in California, and that is why it has a higher population than Washington. But to get the price of housing, you have to look at economic factors: cost of land, construction, job market, taxes, traffic, education. I think people are worried about California’s financial future and the impact that will have on the job market there, and so they are not willing to buy in the current market.

  10. 10
    Ray Pepper says:

    Find Your GEMS in 2009, be smart, and secure a rate of a life time. Picking up some Citigroup (C) wouldn’t hurt either.

  11. 11
    Mike2 says:

    This is what people in Seattle refer to as the “Rain Tax” – you have pay a premium for the privilege of enjoying 9 months of dark, wet weather each and every year.

  12. 12
    Softwarengineer says:

    SORRY TO BURST THE LONGTERM INTEREST RATE DECREASE BUBBLE HOPE

    Fed rate cuts haven’t affected longterm mortgage/refinance rates this year at all, albeit if you’re saving money, get ready for 1.5 CDs.

    This is a conundrum; I estimate about half the Seattle economy depends on rich old retired folks buying and flying…..what old rich retired folks now? Who can afford to retire?

    Its easy to focus on homes, homes, homes…..but with 70% of the American economy depending on consumer sales and we just turned off the retirement spigot, what consumer sales? I know, we’ll get the young broke couple that just bought a house to spend, spend, spend…..LOL

  13. 13
    mukoh says:

    Engineer,
    Ummm. The rates today on 30yr are 4.75%. Can you let me know what they were 12 months ago?

  14. 14
    MacAttack says:

    Better surf, too.

  15. 15
    mark says:

    San Diego county is not really nice unless you live within 1 mile of the ocean — the west side of I5. I went down there for an IT contract and worked 3 years.

    Unless you are by the ocean, it is a very hot, desert climate. Not pleasant from mid spring to mid fall at all. (February is monsoon season.) Hot months — people generally hide indoors or the shade. The people are very superficial. Traffic is madness. I almost kissed the ground when I got back to Seattle.

    Most of the house appreciation was probably in the narrow belt along the ocean. It is still expensive there, due to the scarcity and desirability. Most of the price drop is probably in bedroom communities where quality of life sucks and people just wanted more affordable houses)

    My advice would be to rent something in the winter and live here the rest of the year.

  16. 16
    mark says:

    The fed has stated earlier they will push mortgage rates down to 4.5%. Today’s announcement, fed funds cut to zero, means more profit for banks.

    But I believe banks still will not lend until they see business conditions improving. There is still de-leveraging going as wall street cleans up.

    Low mortgage rates will only apply to prime customers with a down payment. It won’t help anyone with spotty credit or an upside down mortgage. It won’t help anyone who needs to simultaneously sell and buy (trade ups). Therefore, it will not be a big help for housing any time soon.

    Banks are taking the bailout money and low short term rates, and just socking it away in treasury bonds. They are basically making free money that way, thanks to uncle sam. They will not lend to corporations or individuals who are already in too much debt, or who are experiencing slow business conditions.

    Ray Pepper — it is extremely risky to invest in bonds right now because they are illiquid (meaning you can’t get out if you need to in a hurry). Also, it is not attractive to invest in low or negative yields, so money could leave bonds in droves (that is the fed’s hope, that low rates will make bonds unattractive so people will invest in stocks or traditional lending). You may get lucky and make $, but IMO it is not a good bet during a recession.

  17. 17
    buystocks says:

    live here the rest of the year

    a whole 2-3 months, lol

  18. 18
    mukoh says:

    Mark, in what reference do you know that the banks will not lend?
    I am thinking of refinancing my loan right now since the rate is so low. Today on the phone my banker has me approved. 80% LTV/730+ score/documented income/great cash reserves/portfolio. I am able to lock today at 4.75% on 30yr.

  19. 19
    Softwarengineer says:

    GREETINGS MUKOH; COULD YOU SHOW US SB BLOGGERS THE 4.75% RATE PROOF IN WRITING?

    See Bankrate proof in writing today:

    MortgageHome EquityAutoCDs & Investments

    To compare local rates enter ZIP code:

    NATIONAL OVERNIGHT AVERAGES TODAY +/- LAST WEEK

    30 yr fixed mtg 5.53% 5.70%
    15 yr fixed mtg 5.22% 5.40%
    5/1 ARM 5.87% 5.95%
    30 yr fixed jumbo mtg 7.10% 7.04%
    5/1 jumbo ARM 6.00% 6.04%

  20. 20
    Robert Wojciechowski says:

    Just as I said the govt will be willing to flood the market with cheap money. It will do whatever: cut interest rates, get loans from abroad, print money to prop up real estate.

    Since all countries in the world are right now unstable – people will be willing to buy US treasuries and loan money to the US because there is no safe haven now.

    So real estate at some point will start going up again but probably all the ARMs will be out. So the prices will be somewhat reasonable but will not go down so fast.

    The lower the interest rate the higher the price of a house.

  21. 21
    Robert Wojciechowski says:

    And once Obama gets into the office the money creation might even go on overdrive….. And bailouts will be everywhere…… It should be cool.

  22. 22
    Notorious ART says:

    Mukoh,

    Which bank? I’m looking into a refi, too. Is that rate the apr or just the rate?

  23. 23
    jon says:

    Softwarengineer – go to wamu.com and look for loan rates.

    fine print:

    15 year fixed is 4.75%. (5.060% APR) Rates effective 12/16/2008

    The scenario above is based on the purchase of a 30-year term, owner-occupied single family residence in this state, property value of $250,000 with 20% down and a 30-day lock period.

  24. 24
    Buceri says:

    And once Obama gets into the office the money creation might even go on overdrive

    The US (Bush administration) has printed over $1 trillion in the past 2 months.

    Then again; your previous comment stated somewhere “at some point real estate will go up”.

  25. 25
    mark says:

    Mukoh,

    That has been analyzed extensively by Mr Mortgage and Mish (sorry if I’m not supposed to post links??):

    http://mrmortgage.ml-implode.com/
    http://globaleconomicanalysis.blogspot.com/

    The low rates are great for those who qualify, as apparently you do. Congrats!
    But IMO it won’t stop prices from falling because more marginal buyers don’t qualify. Speculators, builders, non perfect credit scores, low down, not enough income — either they are out, or they pay much higher rates for the privilege. Plus, anyone who needs to make a short sale has a lot of work to do, and may not be able to convince their lender at all.

  26. 26
    mukoh says:

    Notorious,
    It is Wells Fargo. I have been with Wells on personal and investment loans for over 9 years now. The APR was 5.15 I believe. The Wells lock that my banker did is floating however, rates are going to come down more in the next 2-3 weeks, and the lock will float down. If rates go up the lock stays the way it is. :)

  27. 27
    mukoh says:

    SoftwareEngineer,
    Call up Wells Fargo. I am a preferred customer as of 1996 and have had loans with them for 9 years.

    Bankrate shows lagging rates. They do not adjust daily, they average it on the week. Look at BECU. WHOLY WOW its 4.69% 30 yr fixed.

    Paste from BECU website. I have loans with BECU as well on some investment properties.

    APR as low as
    New Auto Fixed 4.99%
    Visa 6.90%
    15 Year Fixed 4.54%
    3/1 ARM 3.92%
    30 Year Fixed 4.69%

  28. 28
    mukoh says:

    Mark,
    I do not disagree. My loan payment with a refi is actually higher as I am on a 10yr balloon at 4.25% expiring in a few years.

    BUT, there is a segment of people at least from what my banker says that is hitting the refi button right now and are doing fine getting through.
    Granted that todays guidelines are what they should have been in the first place i.e. Downpayment, Income, Credit Rating, Assets, Cash, and LTV.

    Out of the buyers who should have never bought probably NONE will get through these barriers and will hit pavement. Yet marginal buyers who have decreased their credit, worked more, played smart can refi. Time will tell what the real number is.

  29. 29
    patient says:

    It would be interresting to hear from someone who considers to “take advantage” and buy now. Prices and interest rates are falling and are predicted to continue to do so for an extended period. What’s the rush? Is it that the people with a vested interrest in your transaction are saying that it might not last and you better hurry? I hope not, it’s kind of the oldest trick in the book and is rarely even close to being true. Keep in mind that “the best time ever” does not include the future. You might have the best interest ever but if it’s even better tomorrow it’s not a good argument to buy is it?

  30. 30
    patient says:

    The Tim, thanks for continuing the SD comparison series. It puts the Seattle market into an interresting perspective. ( And it really irritates the “we are sooooo special” crowd ).

  31. 31
    mark says:

    This blog did an excellent simulation of “buy the bottom” vs “rent and miss bottom by 6 months”. You might want to search for that. It highlighted how you can still come out ahead even if you miss quite a bit of price appreciation. I think reading that would really take the fear out of anyone who’s worrying about that.

    I’m watching the Case-Shiller index every month as it comes out, and is reported on this blog. Since the peak, it has shown us falling about 1% a month. Each tick down shrinks the pool of qualified buyers with equity. I also watch the employment stats, because again, each tick down weakens the gene pool.

    After the nasdaq bubble, some of my friends weren’t brave enough to buy stocks again until last year. I have been studying markets for a long time. I think it will be a long time before we see the kind of speculation that drives either houses or stocks into orbit. People will just be too wary. After the bottom, 10 years of flat to slow growth wouldn’t surprise me.

  32. 32
    Gerry says:

    Median price statistics for California are totally meaningless at this time. You have a situation where foreclosures represent a very large share of sales and foreclosed homes are overwhelmingly at the lower end of the housing market.

    California’s bottom 20% of homes represent more than half the closed sales. While California real estate truly is hurting, median price statistics do not give an accurate reflection. I would put no stock in comparisons with Seattle.

    Apart from that, I love this web site – very informative!!!

  33. 33
    S-Crow says:

    I thought I’d chime in here. Lower interest rates are providing a tool for reducing monthly payments and/or consolidating debt. FHA is providing relief for a lot of people who would not otherwise be able to refinance. Our office is closing transactions with borrowers who have low 600 to high 500 FICO’s and paying off debts from vehicles to medical bills, VISA’s and everything in between.

    So, people are taking advantage of sub 5% money right now.

    One interesting area that we are seeing more of lately is subordination of 2nd’s (when people have a 1st and 2nd on their property). It is somewhat unique in that to keep borrowers under the 80% or so LTV caps many lenders have, the existing 2nd has to be subordinate to the new 1st loan they are receiving. If borrowers don’t get the 2nd to subordinate then they may have to incur more expense (generally speaking) of getting a large single loan which triggers mortgage insurance going FHA or Jumbo money, both of which may or may not be feasible. Anyway, all that to say that this adds yet another wrinkle in the “we’ll just refinance you again” language heard in years past.

  34. 34
    EconE says:

    S-Crow…

    Hopefully those borrowers that are consolidating their high interest debt into a low interest payment don’t run up their credit card balances again. I hope that someone in the process is at least educating them about that, rather than just enabling them to take on more unsecured debt.

  35. 35
    Thomas B. says:

    Thanks for the info… I’m packing my bags right now to head to warmer climates.

  36. 36
    deejayoh says:

    I think there’s a bit of an apples and oranges issue here, as San DIego county is the whole metro but King County isn’t. San Diego county versus King;/Pierce/Snohomish would probably be more on the mark.

    Median price statistics for California are totally meaningless at this time. You have a situation where foreclosures represent a very large share of sales and foreclosed homes are overwhelmingly at the lower end of the housing market.

    On an apples to apples basis, looking at C-S or Radarlogic data (which excludes foreclosures), the story is pretty much the same. San Diego pricing as even with or lower than Seattle
    http://img122.imageshack.us/img122/8067/sdseattlecompsm1.png

  37. 37
    johnnybigspenda says:

    sandiego sales are likely mostly foreclosures… the foreclosure mix impacts the lower end of the market the most since that is where the ninja loans were used more frequently (not exclusively).

    It would stand to reason that their mix is lower end homes being sold right now and thus the median in SanDiego is being pulled down.

    Will seattle end up in the same boat?

    what happens to all the higher end homes that aren’t being foreclosed on, but are also not selling?

    I admit there is some correlation but not sure how much we can extrapolate.

  38. 38
    The Tim says:

    mark @ 31:

    This blog did an excellent simulation of “buy the bottom” vs “rent and miss bottom by 6 months”. You might want to search for that.

    No search necessary: May 1st, 2008 – Buy Now, or Wait it Out?

  39. 39
    jonness says:

    Washington’s unemployment rate inches up in November

    OLYMPIA – Washington’s seasonally adjusted unemployment rate increased to 6.4 percent in November, up from October’s rate of 6.3 percent, according to the state Employment Security Department.

    Washington lost an estimated 11,700 non-agricultural jobs in November, seasonally adjusted. The employment number also has been adjusted to remove the effect of the Boeing worker strike that ended Nov. 1.

    “Just as we saw with the 2002 recession, Washington’s economy held up longer than most of the nation, but we’re quickly catching up now,” said Employment Security Commissioner Karen Lee.

    Industries in Washington with the largest job growth in November were health services and social assistance, with 700 new jobs; professional, scientific and technical services, with 200 new jobs; electronic markets, agents and brokers, with 200 new jobs; and transportation equipment manufacturing, with 200 new jobs.

    The largest declines were in residential specialty-trade construction, which shed 3,300 jobs; clothing and accessory stores, which lost 1,800 jobs; administrative and support services, down 1,600; and general merchandise stores, down 1,200.

    The total number of non-agricultural jobs in Washington in November was down 22,400 over the same time in 2007, a 0.8 percent decrease. Nationally, jobs declined by 1.4 percent over the past year.

    An estimated 222,551 people (not seasonally adjusted) were unemployed and seeking work in Washington.

  40. 40
    economist says:

    It would stand to reason that their mix is lower end homes being sold right now and thus the median in SanDiego is being pulled down.

    Forget the median, look at the Case-Shiller which is not affected by sales mix. San Diego is down over 30% from peak.

    I think Seattle is just behind the curve really. Wait another year or two.

  41. 41
    what goes up must come down says:

    economist you mean Seattle isn’t special anymore, how can that be?

  42. 42
    Robert Wojciechowski says:

    Can someone run a simulation at what interest rate would it make sense to keep the prices the way they are – so that payment is equivalent to renting. This way people will be more willing to buy properties as opposed to staying as renters.

    The govt then could flood the market with even more money and get the HP printers rolling on overdrive to get the prices to stay where they are – just offer very low interest rates that would justify the current prices.

    I used to rent an apartment in Juanita Village in Kirkland. I paid $1500 for a 2 br. It was new complex near the lake and with undeground garage parking but a bit far from downtown Kirkland (maybe 2-3 miles). But house fees were likely $400. The apartment was worth about 400K during the boom. Now it is likely it is worth say 350K.

    Probably at 3% interest the 30 year mortgage loan would only be $1475. At 2% it would be only $1300 and 1% it would be $1125.

    So Certainly at 1% it makes sense to buy the apartment outright for 350K. At 3% it is a toss up.

    So the govt now needs to just get those printers rolling to make sure that lenders get 30 year mortgages at 2-3% and we have a home run. People will buy the houses because it will make sense. You buy an over priced shack maybe but the loan conditions are really good and so you go for it.

    When Obama hits the office – the guy will go on overdrive here. I hope HP supplies good printers and state of the art technology so the process can be efficient.

  43. 43
    what goes up must come down says:

    Robert Wojciechowski I don’t know what your deal is you post some of the strangest statements.

  44. 44
    Sniglet says:

    Find Your GEMS in 2009, be smart, and secure a rate of a life time. Picking up some Citigroup (C) wouldn’t hurt either.

    What good is a low rate if the home you buy is depreciating every year? They’ve had extremely low mortgage rates in Japan for nearly 20 years but it has done little to boost house prices (which just kept falling despite the low rates).

    You might want to listen to my podcast explaining why low mortgage rates are something to fear. http://msurkan.podbean.com

  45. 45
    Sniglet says:

    The lower the interest rate the higher the price of a house.

    You are joking right? Rates have been at historically low levels for the last two years yet that hasn’t helped US housing prices. Also, Japan provides an excellent case study as to how low mortgage rates don’t necessarily help the market. They have had low rates for nearly 2 decades but that hasn’t helped their market either.

    Keep in mind that another big drag on our market is the fact that fewer people are able to qualify for mortgages. It doesn’t matter what the rate is if fewer people can get a loan.

    In any event, the key point is that low rates have little, or no, correlation to the direction of housing prices.

  46. 46
    Robert Wojciechowski says:

    Yes. That is a problem with deflation which we are seeing in the housing sector. It pays not to buy a house – because for the same money you can buy a bigger, better house. Also if the property looses value it might pay to get it into foreclosure. If you owe say 500K on a house that is worth 400K – then getting rid of it is the right thing. And this creates losses for the banks and again is a not a good situation for the US govt.

    So the best way is to get the housing values aligned with what the market can bear and using the tools that you have at your disposal. So let’s say the US govt was able to get 30 yr mortgages down to 3%. This would create a strong case to buy properties. If anything it would make sense to buy properties so that you can profit from renting them.

    I for sure would start vuying like crazy if the interest offered on a 30 yr mortgage went down to 1%. I am not saying it will. But saying that interest rate has no correlation to housing prices is bogus.

    The lower the interest rate the lower the payment on the house. If the payment is affordable – people will buy the house.

    Ofcourse in the current scenario – you have to think about other issues. The previous boom was based on ARMs which are gone and on reckless lending which is gone as well. So lowering interest rates should cushion the fall but not prevent it altogether. When it comes to areas such as Kirkland, Bellevue – I think most residents over there will qualify for the loan.

    By drastically expanding the supply of money – you prevent deflation, bankruptcies, companies shutdowns etc. That should also cushion the fall. My guess is that Seattle prices have another 15-20% to go. After that it will make sense for me to buy at current interest rates.

  47. 47
    jon says:

    You can’t tell the relationship of interest rates and housing prices by looking at the data. When house prices are weak, interest rates also fall because the economy is weak. That doesn’t mean low interest rates cause low house prices. When people say that low rates raise prices, they don’t mean that prices will be higher than they were last month, it means they will be higher than they would have been otherwise.

    If a homeowner refinances so that their mortgage cost,etc. is close to renting, they won’t sell their house to save money by renting. That decreases the inventory. The high percentage of foreclosure sales in CA means that very few non-foreclosure sellers are willing to sell at the current prices. The number of sub-prime foreclosures are falling, and the low interest rates are helping reduce the coming number of alt-A foreclosures.

    Unlike Japan, the US population is growing and so with very low levels of new construction the existing inventory will be consumed. Also unlike the situation Japan faced over the last 20 years, the entire world economy is slow and so new money is not being lent out outside the country.

    DataQuick makes an interesting point. Although sales are higher than last year, the foreclosure sales at the low end do not result in trade-up buyers. Still the high end is doing a little better. But once the subprime inventory finishes clearing out, then potential tradeup buyers can sell their houses and grow the high-end market.

  48. 48
    Ray Pepper says:

    Sniglet you obviously do NOT know what a GEM is do you?

  49. 49
    Interloper says:

    Seattle may be more expensive than San Diego, but at least the weather sucks…

  50. 50
    cm says:

    30 year conforming loan today is 4.50% no points at most every lender if not better.

    720 credit score, 80% loan to value, 45% debt ratio.
    Add .25% to the rate for credit score of 680

    Loans above 417k upto 506k add .125% to rate.

  51. 51
    Sniglet says:

    you obviously do NOT know what a GEM is do you?

    Enlighten me then. I find it hard to believe that ANY property for sale today in the greater Puget Sound area will be worth more than it’s current sale price 3 years from now. Sure, it might be possible to find an individual property that can be bought for less than today’s actual market value, but unless you were to flip it quickly that “instant” equity will evaporate as the over-all housing market continues to tank, dragging prices down even more.

    Even a property that pencils out as a profitable rental may not remain so as rent prices get hammered over the next few years.

    I just can’t imagein ANY properties on the market today that will work out as successful investments for anything other than a very short-term flip.

  52. 52
    Sniglet says:

    let’s say the US govt was able to get 30 yr mortgages down to 3%. This would create a strong case to buy properties. If anything it would make sense to buy properties so that you can profit from renting them.

    You’ve lost me… Even 0% mortgages won’t make real estate purchases attractive if fewer people can qualify for loans, or unemployment increases. Further, absolutely unprecedented numbers of home-owners with NO equity in their homes (i.e. due to the prevalence of 100% financing and negative amortization loans) will ensure the volume of foreclosures will continue to rise for years, and drive over-all prices down.

    I wish you the best of luck with buying real-estate when mortgage rates hit 3% (which I expect they very well might), but you will simply be acquiring an asset that will lose more than half of it’s value in the next 5 years. In fact, extremely low interest rates are almost a guarantee that prices will fall substantially. The rates are only so low PRECISELY because deflationary forces are gathering strength.

  53. 53
    Lake Hills Landlord says:

    cm // Dec 17, 2008 at 9:29 am

    30 year conforming loan today is 4.50% no points at most every lender if not better.

    720 credit score, 80% loan to value, 45% debt ratio.
    Add .25% to the rate for credit score of 680

    Loans above 417k upto 506k add .125% to rate.

    Any advice on how a landlord can take advantage of these rates? I have an tenant occupied single family home I would like to refinance, but I can’t seem to get a bank or broker to call me back. Very strange. Are investment properties seen as too risky now?

  54. 54
    cm says:

    53 How many financed properties do you have? If you have more than 4, no one will give you a new refinance on a rental or vacation home, you can only refinance your primary residence, new rule from Fannie. Otherwise you looking at about 1.5% add to rate for investment property, these have been hit the hardest in the credit crunch.

  55. 55
    mark says:

    It’s fun speculating on whether 3% or 1% interest rates would stimulate buying… good arguments both ways. But ultimately all we have to do is watch case-shiller every month and look to buy when it goes positive for a few months.

    That’s probably a good stock market indicator as well. Hard to imagine the global recession ending before housing turns around. Kind of ironic… the whole world depends on Joe6p paying his mortgage and maxing out Mr Visa.

  56. 56
    SeattleJo says:

    Another question sorta related to 53 and 54.

    Does refinancing a house that we currently live in impact my ability to obtain a loan to purchase another house.? If we found a GEM, we would probably purchase a new home to live in and rent out our old place. 20% down and excellent credit

  57. 57
    Robert Wojciechowski says:

    So Singlet – You would not buy a home or apartment with the following parameters (I am kind of trying to depict a realistic scenario – I was renting an apt in Kirkland for 1500$).

    – The apartment sells for 350K. You can rent the apt for 1500$. From that you have to subtract maintance and house dues of say $400. So you net out 1100$ every month.
    – Bank offers a loan with interest of 1% (I am not saying the interest rates will go down that low!). Your mortgage payment is $1100. At 0% it would be 972$. So for sure it would make sense to buy the apt to rent? If you do not qualify – sb will – or even a company will do it.

    The Fed is aggressive as it can. Investors are cheering this. The printers are getting read from overheating.

    Look at this BTW: http://finance.yahoo.com/tech-ticker/article/147682/%27All-Available-Tools%27-What-the-Fed%27s-Moves-Really-Mean?tickers=%5Edji,%5Egspc,%5Eixic,SPY,TLT,UDN,SHV

    So interest rates are going down. The question – how much lower should they go before prices start stabilizing. And the question remains if this will be enough to stop America from collapsing.

  58. 58
    mark says:

    If we’re comparing San Diego and Seattle, you also must consider taxes. They pay everything we do, plus income tax of about 10%. The state is broke (again!) and the government employee pension plan blew all their money on — guess what! — land speculation, lol. So they’ll have to raise taxes again to cover pensions.

    So if you think it’s all pink ponies with the weather there, they’ll be happy to have everyone they can get to increase the tax base.

  59. 59
    Softwarengineer says:

    THE FINE PRINT ON BECU’S 4.6% 30 YR FIXED

    “…Important Notices

    Rates and terms are subject to change without notice. Rates are for informational purposes only and are based on the loan amount of $240,000 to purchase an owner-occupied, 1-4 family units, conforming property located in the state of WA, OR, CA, AZ, KS, MO, PA, or IL with a 20% down payment and 360 month term (except the 15 year fixed loan APR which is based on 180 month term). The monthly payment amount shown includes principal and interest. Your actual payment amount will be higher if an escrow (impound) account is established. The calculations assume member paid closing costs including points, which typically range from 2% – 3% of the loan amount. Your APR will vary based on your final loan amount and finance charges….”

    That means if you have like $200K cash you can buy an average $400K house in the Seattle area, but you’ll need like $400K cash to get one in Seattle. Who in their right minds would put that much cash in Seattle’s housing market, even if they had it [and my estimate is about 99% of the first time home buyers don’t]?

  60. 60
    Sniglet says:

    So Singlet – You would not buy a home or apartment with the following parameters

    The scenario depicted is NOT realistic. If the mortgage rate were 1% then there is NO way the Kirkland appartment would cost $350,000. We will only see 1% mortgage rates after substantially greater depreciation has rippled through the real-estate market. The $1500 rent also isn’t realistic. Rents will almost certainly have fallen a great deal by the time we hit 1% mortgage rates. In fact, I don’t think there is an appartment in the Puget Sound today with a market value of $350,000 that can get away with charging the exorbitant price of $1500 a month in rent. You can find lots of 3 bedroom 2 bath single family homes in Kirkland for $1500 a month which are worth at least $500,000. The best a $350,000 appartment could get in rent is MAYBE $1200.

    In any event, the prices for all these things will be MUCH lower when we hit 1% mortgage rates, which will change all the calculations. The time to buy will be when mortgage rates start rising into the 7% or 8% range. Rates will start going up when the economy (and real-estate) starts picking itself up off the ground.

  61. 61
    Lake Hills Landlord says:

    cm@54

    I finally got something going with a bank broker. She is running the numbers for me now and I will share my results with everyone as I get the news. I hope it isn’t a 1.5% spread between primary residence and investment, otherwise there is no point in refinancing yet (currently fixed at 6.375%).

    This is my only rental property. I myself am a renter as I can rent a place for myself for less than I rent my property out for, although if I could do it all over I would have sold in 2007 instead of converting it to a rental. If only I had found SeattleBubble in late 2006 or before…

    Oh well, lesson learned. I really am a “bad money after good” kind of guy, so I will keep sinking money into this place until it is paid off or I can unload it at a reasonable price (compared to what I’ve already sunk in). If we follow Japan’s route and it is worth the same amount (or less) in 20-30 years, at least it will be paid off. And I can consider it a failed hedge against inflation.

  62. 62
    Joel says:

    I wouldn’t take the 1% deal in 57. Imagine this. You buy the apartment. A year later prices are down another 10-15%, rents are down too and you lose your job. Luckily for you, you found a new job in Denver. But now you either sell the place and take a 10 -15% loss (not counting realtor fees and other taxes and fees) or you rent it out cash-flow negative because rents are down and you will need to pay for a property manager.

    Since prices are dropping with no relief in sight, rents are poised to fall, and unemployment shooting up the above situation should be something everyone should think about before jumping on that great deal.

  63. 63
    Lake Hills Landlord says:

    So far it looks like I can get a 5.5% (30 yr fixed) rate if I bring about $7500 cash to the table.

    However, it is contingent on a minimum of 20% equity since it is classified as an investment property and they won’t touch it without that. The question that remains to be seen is did these lower rates come in time to help me since my equity has been (and will continue to be) rapidly deteriorating.

    Sigh.

  64. 64
    cm says:

    Another question sorta related to 53 and 54.

    Does refinancing a house that we currently live in impact my ability to obtain a loan to purchase another house.? If we found a GEM, we would probably purchase a new home to live in and rent out our old place. 20% down and excellent credit

    It may, in that if you refinance current loan into new owner occupied loan and then turn around and try to get another owner occupied loan for new house, you are double dipping. If you use 2 differnent lenders, most likely will not get caught, but the moral dilemma is still there.

  65. 65
    SeattleJo says:

    RE: 64

    Thanks CM,

    I would most likely be using different lenders, but I still don’t want to do anything illegal. I know for a new loan on a new house, if I represent myself as purchasing it to occupy it, I must have that intent. I’ve heard that intent must be for at least a year.

    So the same goes for a refinance then? I would like to refinance, but there always is a possibility we could find a new house to occupy. But then again, it may be a while. Our intent is to buy, but only if the right house and right price comes along.

    So if nothing is for sure can’t I refinance as owner occupied. Then in a month or year if I find a new house to live in, can’t I apply for an owner occuplied loan and rent the old house???

  66. 66
    cm says:

    65
    Yes it is based on intent to live in the house for 12 months.

  67. 67
    Robert Wojciechowski says:

    Hey Singlet – If you think the rent scenario is not realistic – please take a look at this:
    http://www.avaloncommunities.com/avaloncore/nfloor.asp?comm=175

    I remember that I was renting over there for only 1500$ (a 2 br) – not the most expensive one. Now they rent even for over 2K per month. But it is a kind of nice apartment – but I have seen many better apartments.

    Similar apartments went for over 400K during the boom times. How much do they cost now is anybody’s guess – but I would risk saying they cost 350K.

    So at what interest would it make sense to own such an apartment? Probably 2-3%.

    This does not mean that things will not change in WA state like the whole economy imploding – but those will be different circumstances. But for now the Fed has the printers going on overdrive……

  68. 68
    Sniglet says:

    So at what interest would it make sense to own such an apartment? Probably 2-3%.

    Unfortunately, by the time mortgage rates are at 3% the rents will have declined as well, changing the whole buy vs rent equation yet again.

  69. 69
    Robert Wojciechowski says:

    Hey Singlet – You could be right that as circumstances change the whole buy vs rent scenario will change. But my fear is that the Fed could push hard for lower rates before the unemployment kicks in hard and the Puget Sound economy starts becoming a fish.

    I don’t have a Phd in economics but I am sure that the Fed could even give some special incentives to banks that loan for a small interest.

    Another thing is that I see Obama as a socialist type person. And at some point there could be even incentive to reduce principal on the loan of people who face foreclosure. Socialists policies generally punish the responsible, smart or hard working and transfer wealth to poorer people who make for example bad decisions.

    But whatever the Fed does – it seems it would only slow down the inevitable inherent price of real estate. Because even if they manage to inflate the prices for a longer time by keeping interest rates ultra low – then long term when they raise interest rates the real estate will tank again – just like when they got rid of ARMs and tightened lending standards. So it would all seem like good strategy for the short term. Still short term is what people may need. You can always finance debt with more debt and spiral spending out of control in the short term and get away with this – just like banks got away with ARMs and all kinds of exotic practices in the past.

  70. 70
    Alan says:

    If you are paying $2k a month to rent a 1300 sqft apartment then you are an idiot. Rents are running around $1/sqft.

  71. 71
    Robert Wojciechowski says:

    Even a pyramid scheme kind of worked in the short term………

  72. 72
    Robert Wojciechowski says:

    Whether one is an idiot or not is subjective. However the guys at:
    http://www.avaloncommunities.com/avaloncore/nfloor.asp?comm=175
    do not complain. They just take the cash and keep it.

    But this is a better community than say an old dillapidated community where plywood shacks are falling apart and 1st floor units already have mold…..But by no means this is luxury. Just an ok apartment – they still have wall to wall carpets.

    So such communities can sell the apartments for this much without problems. Now it maybe just idiots living there – but the supply of idiots in Kirkland would have to be high enough to justify the model and hence you have to take it into account when figuring out rent vs buy scenario.

  73. 73
    deejayoh says:

    Avalon Apartments – check the URH corner of the page:

    “Reduced Rent Plus Two Months Free!”

    they just take the cash and keep it…

  74. 74
    Robert Wojciechowski says:

    Yes. But even if you assume that a renter gets 2 months free and rents for 2K per month – the effective rent will still be 20K per year. So over 1500$ per month.

    And maybe 1-2 years from now this will not be sustainable – but for now it looks ok. Move in specials existed even in 2006 – lots of apartment communities would give you 1 month free or 1/2 a month free or sthg like that to entice you to live there.

  75. 75
    Lake Hills Landlord says:

    I would most likely be using different lenders, but I still don’t want to do anything illegal. I know for a new loan on a new house, if I represent myself as purchasing it to occupy it, I must have that intent. I’ve heard that intent must be for at least a year.

    So if nothing is for sure can’t I refinance as owner occupied. Then in a month or year if I find a new house to live in, can’t I apply for an owner occuplied loan and rent the old house???

    On the closing papers it will probably state that you must occupy the house for the next 12 months as your primary residence. There will likely be legal mumbo jumbo indicating that I would be breaking a contract or committing fraud or something if you don’t follow through. So I am not sure that intent is enough. You probably don’t have a way to get the exact wording from your broker before closing without raising red flags in their head and jeopardizing the deal.

    YMMV

  76. 76
    Lake Hills Landlord says:

    Sorry to keep so off topic, but I think the thread devolved a while ago.

    Can anyone recommend a reliable non-FNMA mortgage broker? Investment properties are a bear through FNMA banks (just became 25% equity to avoid heavy fees and complete no go with less than 20%).

  77. 77
    EconE says:

    For 2K/mo in Kirkland I’d rent waterfront from a private owner. Not at Avalon.

    http://seattle.craigslist.org/est/apa/959225860.html

    And I’d negotiate.

  78. 78
    deejayoh says:

    And I’d negotiate.

    Bingo!

    And any complex that is offering 2 months free on a 12 month lease, you can bet that their vacancy rate is over 16% (2/12) so they are not exactly loving life right now – and are probably quite willing to negotiate.

  79. 79
    Alan says:

    Whether one is an idiot or not is subjective.

    I disagree.

    I do think that idiots have a problem self-identifying as idiots.

  80. 80
    buystocks says:

    I do think that idiots have a problem self-identifying as idiots.

    I’d also venture that idiots erroneously think others are idiots

  81. 81
    Alan says:

    I suppose I should be fair though. There are probably people with good reasons for paying those rental rates. Maybe they need to be very close to that area for whatever personal reasons they have. Who knows. It isn’t really my place to judge. But if the location isn’t really important to you and you couldn’t find an equivalent rental for less money then you are non-subjectively an idiot — or extremely lazy.

  82. 82
    Ray Pepper says:

    Sniglet, I gave my definition of Gems many times…Currently these are the GEMS I’m personally looking for:

    Single wide mobiles on their own land for under 40k in Pierce, Kitsap, Thurston, and Mason County. 8 years ago I began buying these for about 40k. The prices escalated to 100k plus on most of mine. American General Finance, Beneficial, Citi, and others no longer loan on these. Owners and sellers are stuck. They all rent 750-890 and tenants LOVE them as an alternative to renting an Apt. I’m down to just 4 currently but I’m finding that the prices are nearing what I used to pay for them since builders are no longer acquiring the lots and hauling them away. There are 1000’s of these GEMS out there that provide great returns on your money through Section 8, etc. All I want is cash flow. Its all I ever wanted on these. I sold 3 off 2 years ago to builders for High Line homes. Taxes on these are usually 800 a year and insurance is 300. Don’t show me rentals for 100K+ that rent for 800+. My GEMS are mobiles on their own lots for appreciation going forward will be minimal.

    ITS all about Cash Flow and it Always will be!

    Others have their own ideas of Gems. These fit right for my portfolio.. Also the owners like Owner Contracts as well. Many wish to continue to live in the home but need cash!

    Hope it helps you Snig! There are always going to be GEMS out there! ALWAYS!

  83. 83
    mukoh says:

    Sniglet,
    Are you off the pipe? Put it down boy.
    That $240k on BECU website was for estimation of MONTHLY PAYMENT ON THE AMOUNT OF PRINCIPAL.

    On a $400k property you need $80k. down.

    The 4.5% interest is already at wells fargo and other banks TODAY at anything under $417k.

  84. 84
    mukoh says:

    As per discussion on Avalon, here is a clue in the whole time SB has been around it reaches about 1k people a day in our metro area. That is in reality 1% roughly, if that.

    The point is, money is not made on smart people, but on suckers, and look at how many suckers are out there. Whopping 99%.

  85. 85
    LUC says:

    Mukoh,

    Software Engineer was referring to the BECU website not Sniglet. I think you better take your own advice.

  86. 86
    mukoh says:

    Woops. Sniglet interference. Disregard 84 was directed to Engineer.

  87. 87
    economist says:

    Socialists policies generally punish the responsible, smart or hard working and transfer wealth to poorer people who make for example bad decisions.

    As opposed to Republican policies, which generally punish the responsible, smart or hard working and transfer wealth to richer people who make for example bad decisions.

  88. 88

    We need to stop artificially trying to hold up home prices…its just going to prolong a stagnant economy. If prices fall, and you get burned….file bankruptcy and move forward. Its not that tough.

    By the way, 1% loans will never exist on a mass scale….the banks need a sufficient spread to make it worth their while.

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