TIME: Renting Still a Better Deal in Seattle

In their latest issue TIME Magazine declares that in many cities, price-to-rent ratios indicate that buying a home has become a better deal than renting for the first time in years… but not yet in Seattle: Is Owning a Home Better Than Renting?

“A year ago, it was a better deal to rent,” says Andres Carbacho-Burgos, an economist at Economy.com “Now you have a significant number of areas, especially those hit the hardest by the correction, where, when you compare prices to rents, you’d be led to believe it’s a good time to buy.”

Home $weet HomeA significant number — but not everywhere. At TIME’s request, Economy.com ran the numbers for 54 metro areas and compared their current price-to-rent ratios to what their ratios have been over the past 15 years. The result: in 21 cities, renting still looks to be the better bargain. Among the renter-friendly outposts are Baltimore; Raleigh and Charlotte, N.C.; Salt Lake City; San Antonio; Trenton, N.J.; Philadelphia; Honolulu; Seattle; and Portland, Ore.

Of course, this is the same publication that published the now-infamous Home $weet Home issue at the height of the bubble in 2005, so it’s probably a good idea to take their advice with a large grain of salt.

That being said, the rent-vs-home-price analysis is a generally sound concept, and our latest update on this metric does show the ratio 19% above its 1990-2001 average. Unless there is some reason that Seattle is a considerably more desirable place to live than it was in 2001, Seattle home prices probably do still have a ways yet to fall.

(Barbara Kiviat, TIME, 2009.08.20)

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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.


  1. 1
    Dave0 says:

    “Unless there is some reason that Seattle is a considerably more desirable place to live than it was in 2001, Seattle home prices probably do still have a ways yet to fall.”

    If Seattle became a more desirable place to live, I would think rents would increase as well, so that the long-term average price to rent ratio is still valid.

  2. 2
    posthoc says:

    “Unless there is some reason that Seattle is a considerably more desirable place to live than it was in 2001…” Really, Seattle has nothing additional to recommend itself over the last 8 years, other than a reinvigorated symphony orchestra (say what you like about quality programming and leadership, when I left 8+ years ago they were worried about next year’s funding rather more than next year’s program), a growing biotech hub around south Lake Union, a major commitment to the BMGF foundation headquarters in lower Queen Anne, and a biomedical research center (UW, if I have to spell it out) that has solidified its reputation as a top 2-3 research and fundraising facility? I happen to think Seattle home prices rising dramatically from 2000-2005 is mainly rational expectation about how valuable that housing is… no accounting for 2005-2007 though. Maybe some of you tech folk can tell us just how bad it is at BA, MSFT, AMZN, and how much we really should be worrying?

  3. 3
    Scotsman says:

    How can we turn this market around if the national media is against us? Even the local boosters have given up. While I haven’t checked lately, I’d bet even Ardell has backed off her bottom call.

    In other news, the last hold-out on my street has finally accepted the idea of reducing their price. At only a 5% reduction it’s not much, but the door has been opened. The competition is down an average of 25% from initial prices and still no sales. My guess is we still have a ways to go. Rents are currently half the cost of PITI.

  4. 4
    Scotsman says:

    RE: posthoc @ 2

    How many jobs at $100K or more are we talking about when referencing the bio-tech business in Seattle? I’d bet not that many, and they’re the only ones that will significantly impact housing prices in the city. Anything less than that just pulls prices down.

  5. 5
    posthoc says:

    RE: Scotsman @ 4 – Right, fair enough–biotech doesn’t pay the same way finance or engineering might. But it’s fairly steady work (or at least it has been), and two biotech jobs in one household can afford quite a bit of housing. Then again, many biotech jobs are public-sector and depend on a tax base–so again, I’m curious to hear what the BA MSFT AMZN people have to say: is our funding vanishing in near future?

  6. 6
    David Losh says:

    RE: posthoc @ 2

    Health Care reform will take a toll on Fred Hutch and UW Medicine. That bio tech bubble is going to slowly lose air. Tech in general is going to take a beating. We will see more and more off shore products that have a wider appeal. What we have is too little way too late. As always I blame the mayors and City Council. I think they were starry eyed with Paul Allen promises and we got a multi colored pile of poo at the Seattle Center.

    We need to rebuild and a big, very big, part of that is to offer affordable housing. Very clearly I think all the luxury just left the city and we will need working citizens to pay taxes. I see prices falling further here than other parts of the country because they were pushed for so long by Microsoft dollars. I think those jobs are headed over seas and what remains will be pay scale for workers.

  7. 7
    Scotsman says:

    RE: David Losh @ 6

    “We need to rebuild and a big, very big, part of that is to offer affordable housing”

    Probably not going to happen- we’ll be too busy paying for some light rail and this tunnel thing down by the waterfront…

  8. 8
    Tim Clark says:

    My totally unscientific experiment of moving very often (and this year) makes me believe that rental prices have fallen very significantly this summer, and availability is great. Certainly the place we found this year to rent would have been $1000 more a month (and all of our savings) if we’d bought it in 2006…

  9. 9
    SpringStreet says:

    At MSFT, things sure are interesting.

    When you look at the years where we had literally over 100 new hires -per month- (this includes college folks, industry hires from around the US and world, and some local folks transferring) moving to work at Microsoft, you’re talking about a large number of 6-figure folks who weren’t part of the picture anymore.

    Also, although 100/month is a blip on the radar, many of these were families, couples, and others who then had even more cash flow to put into a mortgage. That’s a lot more people and cash chasing the same housing there for a while.

    Today, that 100+person/month influx is not happening, so there is no high-income net gain happening from the Microsoft side at least. I’m less familiar with the Amzn side of things, but they never went on a hiring binge like MS did over the past 4 years, massively expanding and all.

  10. 10

    Trenton, New Jersey is a renter friendly outpost?
    There are a whole bunch of houses there which can be owned for less than 100,000 dollars. How low could rents be?
    Of course it is a rathole, a crime ridden, dangerous cesspool of a city. It’s a historic city famous for George Washington crossing the Delaware River during the battle of Trenton. Like everyone who came after him, he was trying to get the hell out as fast as possible.

  11. 11
    Kary L. Krismer says:

    Seattle is a better place to live now! It’s getting a new mayor! ;-)

    BTW, in addition to Time being a bad source of information, so is Economy.com upon which they rely. That’s the entity that Money Magazine relied on in 2002 to pick Seattle as being one of three most likely bubble cities.

    Speaking of Money Magazine, just over a year ago they predicted Seattle would drop 9% from May 2008 to 2009. Using the NWMLS median for King County, the drop was almost 15%. Using Case-Shiller it was over 16%.

  12. 12
    Flotown says:

    I just signed lease for $1900 for a house in NE seattle that sold for $690k in 2006 (bubble rehab/flipper); probably would sell for $550 ish now. Nonetheless, feel pretty good about it.

  13. 13
    SpringStreet says:

    RE: Flotown @ 12 – Congrats!

    I’m on a lease for a property that a speculator purchased around 700, tried to sell for 750 for a year, and is now considering a short sale into the 500s.

    I was likewise happy about it, until now the stark reality is that the owner is going to want to sell very badly (annoyance for me), or the property could even be foreclosed on, because the lease amount is hardly enough to cover HOA dues and taxes for the owner, let alone principal or interest.

    Kind of wishing I hadn’t jumped on the awesome deal :-(.

  14. 14
    Kary L. Krismer says:

    Springstreet, in most cases now you have greater rights to stay for a bit after foreclosure. Both the feds and Washington state have new laws on that this year. And the good thing is that the way state law works, the new owner’s attorney might advise them to not collect rent from you while you’re there!

  15. 15
    td says:

    My husband used to work in the SLU biotech hub. There seem to be few labs that have stable funding or employment. Competition for grant $ is tight, and dedicated scientists (grad students & phd’s) are more than willing to move to where the money is. So far, SLU has proven to be either a springboard to move on to bigger and greater things, or a major bust as most small biotech firms cannot grapple with cash flow problems in this economy. My husband was a level 4 research tech, he now makes more money (about the same amount I made when I was first hired into finance) at a BA desk job watching his slacker coworkers gab on the phone and update MySpace.

  16. 16
    Dave says:

    Posthoc – biotech is hurting. No relief there. Covance bought Rosetta lab side of the business. It will employ about 80 people in a “contract research” role. That means alot of low paid temp workers (the industry supports that sort of employment model) and few high paid worker bees. Being a “contract” research place means an even bigger onus on keeping staff temporary that Merck did – and Merck was moving that way anyways. Covance will have intermittant contracts and all that fun stuff . Zymo is laying off too.

    That “growing hub” is kind of like a ghost town. Things have really changed in the last several years.

    As to the Hutch/Udub comin to the rescue – obviously you haven’t worked at these places. This came up in discussion at my place of busienss and the best quote was “Have you ever tried to pay a mortage on what the U pays?”

    Discuss as you wish.

    Also – it is interesting that the Biotech model business model is designed around the concept that the new employees don’t realize how little they get paid relative to everyone else – especially when you work in that a 4 year science degree is pretty mandatory. No wonder that “research scientist” is one of the worst jobs for investment into career/vs. rewards/income. Up to 15 years of training (undergrad, grad school, post docs) for maybe getting a job. heck of a gamble – that’s why alot of them are so desperate at the end – they are in their mid-thirties and have to find work.

  17. 17
    posthoc says:

    RE: td @ 15RE: Dave @ 16 – Thanks for the responses folks. Looks like you’re making several assertions, so in order:

    1) more money is available in the private sector as a banker than as a “level 4 research tech” (sorry, not sure what that means). I don’t think I would dispute that, given my absolute ignorance about comparative salaries–but are you also claiming that the level 4 research tech could not suport a mortgage (or at least half of one) on his/her salary?

    2) biotech layoffs: Hard to say, I think the evidence is about more firing than hiring, but I do hear about hirings as well (Amgen, CT). Of course, this may be only within my specialized field, rather than company-wide.

    3) growing hub vs. ghost town: I admit to having no hard hiring or payroll figures to support an increase, but you haven’t provided any to support the “ghost town” model. Scrap this one until one of us finds data?

    4) “Have you ever tried to pay a mortage on what the U pays?” I’ve worked at one or the other, am married to someone who does, and do not consider their wages to fall substantially below “market” value (which is a bit of an abstraction anyway given the large number of public-sector employees in this field in the Seattle area). Maybe lab-tech jobs, but not most white-collar positions. You can check out the (very recently released) salary report if you’re interested: http://www.ofm.wa.gov/persdetail/2009/default.asp Anyway, it’s certainly enough to buy a house in the area–pooled income helps but is not required.

    5) biotech rewards early investors: not much argument

    6) biotech requires a 4-year science degree and hence training for a “research scientist” position is poor financial reward: this is a two-part question since you are conflating “research scientist” (associate, bachelor’s, or master’s) with “researcher who gets grant money” (PhD and MD exclusively). For logic’s sake I’m going to reverse the position of my answers:

    Yes, most grant-recipient positions require an incredible amount of education relative to the financial reward. I would posit that most people who go that route aren’t interested primarily in money in the first place–else it’s a really bizarre choice of profession. But even so they still get paid reasonably well in money, prestige, and security.

    Yes, most entry-level positions in research science require a bachelor’s degree in some scientifically related field. And yet: how much less are entry-level folks making than other recent graduates? And how many of them aspire to a higher position and are trying to get connections to move up the ladder, hence are willing to accept an ostensibly below-market salary? I would argue… “not much,” and “many.” Discuss as you wish.

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