Big Picture 2011: Price to Rent Ratio

Big Picture Week 2011 continues with an updated look at Seattle’s price to rent ratio. Here’s our chart of single-family home prices divided by annual rent:

Seattle Price to Rent Ratio

Another chart with dramatic improvement since last year’s Big Picture Week. When last we checked in on this measure (June 2010 data), the ratio was 20% above its 1990-2001 average. As of September (the latest Case-Shiller data available), it’s down to just 11% above the 1990-2001 average, and right in line with where it sat between 2000 and 2002.

Here’s a different look at the same data, with prices and rents split up and each series indexed to January 1990 = 100 so you can see how each has been moving independently:

Seattle Home Prices and Rents

Rents hit an all-time high in October, and appear to be headed up again after (predictably) stagnating between 2009 and 2011. If rents rise another 4% and home prices fell another 4%—an entirely plausible scenario over the next year—the two lines will line back up again for the first time in fifteen years.

Last year based on this data, I estimated that Seattle home prices had another ten to twenty percent to drop before they would line back up with the economic fundamentals. Since that time, the King County median home price has fallen 15% ($380k to $322k). I’d say maybe five percent more to go sounds about right.

Big Picture Week on Seattle Bubble

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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.

85 comments:

  1. 1

    Too bad we don’t have data on the number of people jumping from renting to owning. If I had to guess, it probably peaked in 2007, even with those ratios.

  2. 2
    David Losh says:

    I don’t get the prediction you keep making in these charts. “I’d say maybe five percent more to go sounds about right.”

    That’s not what these charts keep showing you.

    All your “Big Picture” is showing is the Bubble from 1998. It is also only showing housing unit sales data.

    In order to have a big picture you would need to look at much, much more than what a collective group of idiots paid for residential housing units.

  3. 3
    John Bailo says:

    Although you wouldn’t know it based on the title, in this article, the Seattle PI reports that apartment vacanies have risen.

    If you only read the part I bolded, you can see the facts:

    Despite a recent uptick in the area’s apartment vacancies, apartments will become pricier and harder to find next year, according to a new forecast.

    But a bunch of new buildings are set to open after that, reversing the trend.

    “We admit it. We were surprised by the increase in the (region’s) market vacancy rate from 4.6 percent back in March to 5.3 percent in September,”

    Read more: http://www.seattlepi.com/realestate/article/Apartment-vacancies-expected-to-fall-then-rise-2392298.php#ixzz1gX4LNkkm

    Given this, why would anyone expect rents to then rise? It seems like landlords are cutting off their noses to spite their faces and people are either buying, or leaving.

  4. 4

    RE: David Losh @ 2

    David, You’re a Gem

    Normally I try to refrain from name calling [especially rude troll bloggers that do it to me], it just reduces your blogging persuasion anyway…..but calling Seattle home buyers generally since 1998 a collective group of idiots….you have me rolling on the ground in laughter….

  5. 5

    Speaking of the Rent to Buy Ratio

    I wouldn’t even dream of becoming a landlord in this upsetting mess, called a Seattle economy. If there was a decent stable income for a tennant, some savvy landlord grabbed ’em up for $400/mo rent on a 5 year lease contract….otherwise ya likely gotta rent to a lot of P/T workers, convicts and migrants….and once they get into your unit and the other packs of gypsies join ’em [with their dogs and crack houses, etc] to destroy everything; it takes months and legal costs to evict them….then ya gotta remodel the trashed unit.

    Then the unit is vacant for months on end during remodeling too.

    My advice, don’t become a landlord in today’s economic quagmire, unless ya got a $1000/mo cushion…which is a blue moon miracle in itself at today’s Pink Pony prices.

  6. 6
    Jim says:

    My mortgage for the house I live in in Saint Paul is 44 bucks a month. It’s a glorious old Victorian place. My rent for my crappy Magnolia apartment was 1300 a month. See my other comment for clarification:
    Are you guys still on here trying to figure out or rationalize the housing bubble in Seattle and why it hasn’t burst? I was on here years ago everyday but I decided to do something about it instead of trying to figure it out and sitting around in my Magnolia apartment complaining about it all. I left! I moved my business to Minneapolis/Saint Paul where I grew up and bought not one house but four! All foreclosures, all less than 40k each! I love it here, the cycling is the best in the country, the people are far friendlier than Seattle, more hipsters in MPLS than anywhere in Seattle (good and bad) I ski all winter and sail on the lakes and Lake Superior all summer! It’s great. I just could never rationalize a 450k crap box condo in Seattle when I can have several homes here for 1/2 the cost of one 500 sq ft poorly built condo. The nightlife here puts Seattle to shame these days as well. Uptown and Hennepin are electric like Capitol Hill was 15 years ago. The arts are unparalleled here as well as regular people can afford spaces and afford to live here not just corporations and their pawns. Those that can move here I would suggest doing so!

  7. 7
    David Losh says:

    RE: softwarengineer @ 5

    You got smeared a couple of times based on bad data about average income.

    I agree you are way off, but you have hit on something about rents.

    OK, the thing about income is that Seattle, and the surrounding areas do have a very high income. I was shocked to see how many people make over $100K per year. It has to be skewing the numbers.

    Those people making over $100K may well buy property. The real people, probably a majority, are having a harder time meeting the income requirements being thrown around here.

    I agree that now is not a good time to be a land lord, and getting worse.

  8. 8

    RE: Jim @ 6 – Most people like to ski on mountains. ;-)

  9. 9

    RE: David Losh @ 7

    David, Ya Mean There’s Good/Reliable Data Out There on Seattle Incomes In the Market and Buying Seattle Homes?

    Now, you have me rolling on the ground in laughter again….

    I’ll trust my gut feel any day over Ouja board guesses.

  10. 10
    Scotsman says:

    RE: John Bailo @ 3

    ” people are either buying, or leaving.”

    Or doubling up. I expect we’ll be seeing a lot more of that as unemployment rises.

  11. 11
    Jim says:

    And sit in traffic for a few hours each way and pay a small fortune each trip to do so! I ski out my back door here on 28 miles of beautiful pristine birch forest, gorgeous rolling river bluffs, rarely see another soul. All for 25 bucks per year! I’ll admit I love a great work out so Nordic skate skiing is right up my alley. 1,000 foot climb (that’s twice Queen Anne is plenty up and down) :)

  12. 12
    Jim says:

    Thankfully I’m not most people! Nordic skiing is my thang! RE: Kary L. Krismer @ 8

  13. 13
    sally buttons says:

    RE: Jim @ 6 – Freezing your can ala Mary Tyler Moore…and hipsters finally do rock? Bravado + “where I grew up” is porridge. Electric is typically someplace else or may-be “like Capitol Hill was 15 years ago”.
    I got it.

  14. 14
    Jim says:

    Actually no, it’s 50 degrees and raining here I guess that’s why I’m thinking Seattle. Mary Tyler huh? You hanging with Frasier and Niles? No it really is electric! I would describe it as “cool” not cold as independent businesses here are flourishing still not just Amazon et all…With a 40 dollar mortgage vs 3500 mortgage I guess I could fly to Aspen weekly if I like…If you can people check it out.

    PS
    God d#mn Cathedral Hill puts Queen Anne to shame…Everything QA always wanted to be but never could be…RE: sally buttons @ 13

  15. 15

    RE: Jim @ 6

    Exactly Jim

    I got the good years out of Seattle, before it turned into the mess it is today….if you just got here, you have no idea what I’m talking about, but us old Seattle tree huggers that were born in Seattle watched the “blueist skies ya ever saw in Seattle” turn into a greed monger for the rich elite. Hades, when MSFT came in with its hoards [many were insourced] to pack the existing freeway system even more from its old packed state….that’s when we lost Boeing manufacturing, we couldn’t move parts on clogged freeways….

    The good news today, traffic’s a lot better since the cars/jobs reduced the last decade….but is that really good news?

    BTW, my relatives live in Minneasota and yes, the homes are cheaper and much bigger….the people are friendlier too….

    Will I retire in Seattle if it stays the same or gets worse? Hades no.

  16. 16
    sally buttons says:

    good god jim, aspen is so cool. how nice it would be to find somethang electric.
    Happy Holidays!!

  17. 17
    Jim says:

    You are welcome in my new house anytime my friend! and RE: softwarengineer @ 15

  18. 18

    RE: Scotsman @ 10

    I’m Not as Conservative as You Scotsman

    But we agree on many issues, and economic data integrity is the top of both our lists….these “wanna-be anti Pink Pony bloggers” show their real colors when they argue with us using their “reliable” data over common sense [even gut feel].

    Most of ’em are in debt to their eye brows in Seattle real estate and try to rationalize it with false bottom calling. We’ve all heard it for years on this website and it’s all been “Peter crying wolf” in complete error….

    We’ll just sit in our easy chairs and laugh, debt free…..eventually they stop blogging in embarrassment, have you noticed?

  19. 19
    Jim says:

    You sound bitter and angry? I haven’t encountered that since…well, I was in Seattle last…All cruelty stems from weakness! Enjoy your narcissism and rationalization over “why we’re so cool it justifies everything else” Gotta go, the charming old neighbor lady is bringing me another pie! RE: sally buttons @ 16

  20. 20
    Cheap South says:

    RE: Jim @ 6

    JIm; there’s nothing like being where you feel at home, And I am glad for you. But if you were stuck in your magnolia apartment for a little drizzle, how can you go outside with inhumane temperatures and snow (that will literally get you stuck indoors) in St.Paul; why didn’t you do Nordic Skiing in Seattle? There are flat areas and hills. I’ve never heard of anyone associating St. Paul with outdoor activities. Don’t get me wrong, I’ve been to the area, and I’ve heard good things about it. I am sure there are more jobs, super cheap housing (I wonder why), better public transportation, better schools, better restaurants, better nail and tatoo parlors, etc. But boy, when you bring up outdoors activities as a plus from moving away from Seattle…….

    Again, good for you. One more apartment available in Seattle.

  21. 21
    sdb says:

    Jim, if it weren’t for the winters, I’d be right there with you!

  22. 22
    WillyNilly says:

    RE: Jim @ 6

    But, … it’s the Mid-West.

    Hip? you funny guy.

    People must be moving there in droves, oh wait – no their not.

    Enjoy!

    Oh look, the pie conveyor belt just coughed up another gem!

  23. 23
    2kt says:

    Dear able proprietor. You data and analysis are free and we all should be nothing but grateful.
    But. I have a question for you.

    Go to Craigslist or classifieds. The homes rent from $.80 to $1 per square feet, appartments from $1.50 to $2 per sqf. So, for homes annual rent is $9.60 to $12/year and for appartments it is between $13.50 to $24/year. How is it possible with such numbers to arrive to multiple of 29.6 ??

  24. 24
    The Tim says:

    RE: 2kt @ 23 – Keep in mind that the pool of rentals that go into the rent numbers in the charts are not the same type of housing stock as the homes that sell. We’re not doing a strict rent-vs-buy comparison on equal homes here, we’re comparing two well-defined indices over time.

    $325,600 / ($917 *12) = 29.6

    Note that the home price and the rent price are for the “Seattle area” (i.e. King/Snohomish/Pierce) as of September. I’m not sure what region your search was for, but at the prices you mentioned $917 a month would rent you between 459 and 1,146 square feet. Seems reasonable to me for an average.

  25. 25
    2kt says:

    Exactly. You use rental numbers which are (probably) mostly derived from appartment rents and NOT house, while taking house price on the other side. You should be taking condo prices vs your appartment rents to arrive into a sensible number. For homes in Seattle area the mulitple of price to rent is approximately 18 to 20.

  26. 26
    The Tim says:

    RE: 2kt @ 25 – If the point of this index were to make claims about the price to rent ratio of a specific individual type of home or create some sort of value metric that can be applied to any home, that would make sense. But that’s not the point.

    The point is to compare the change in what people are overall actually paying for rent to the change in what people are overall actually paying for homes. Simple as that.

  27. 27
    2kt says:

    RE: The Tim @ 26

    The point is (usually) to provide real market place based data as opposed to near-hypothetical numbers that are not supported by the actual market place reality. But…, suit youself.

  28. 28
    The Tim says:

    RE: 2kt @ 27 – And the charts in this post are based on “real market place data,” as I said. The reality is that the ratio charted here reflects what people overall are paying in the actual market to buy or rent homes.

  29. 29
    2kt says:

    If you use the same metrics your chart will always show the trends right. But as for 30 times price-to-rent multiplier representing any sort of reality – it does not.

  30. 30
    Macro Investor says:

    By Jim @ 6:

    Are you guys still on here trying to figure out or rationalize the housing bubble in Seattle and why it hasn’t burst?

    Great quote, and it goes to what I’ve been saying. No matter how you slice it, $400k IS NOT AFFORDABLE.

    My friends live in the Dallas area. For $175k they have a fairly new 4 bedroom house on 1/3 acre with built in pool. Yes, it’s really 4 bedrooms. Not the half finished basement jobs you see in Seattle. Compare that to the shabby, moldy shack you get here for double the price… and with transients and various low lives wandering nearby.

  31. 31
    The Tim says:

    RE: 2kt @ 29 – Sorry if I have not been clear. Let me try one more time.

    What the ratio in this chart is not showing: That all homes, a subset of homes, or any one home in the Seattle area can be purchased for 29.6 times what it would cost to rent said home or homes for a year.

    What the ratio in this chart is showing: The ongoing relationship over the last ~22 years between what Seattle area home buyers as a whole are paying to purchase homes and what Seattle area home renters as a whole are paying to rent homes.

    If you thought this post was purporting to be something else, I apologize.

  32. 32
    2kt says:

    I think the way Canadians do these kids of reports is far more accurate. They take attached, detached and condos separately, showing property specs for a like-kind properties. Far more market-attached data analysis than your medley.

  33. 33
    Scotsman says:

    RE: 2kt @ 32

    Canadians do everything better. And they have free healthcare! They also fix the price of their gas so every station in town has the same deal. How cool is that?

  34. 34
    David Losh says:

    RE: softwarengineer @ 9

    It’s not guesses from my gut feeling. I encounter hundreds of people who have moved here from all over to work at Amazon.com. It’s the way Microsoft used to be.

    What I also know is that down town Seattle is no longer the ghost town it was a couple of years ago. The you can throw Tacoma, and Renton into the mix. Tacoma not so much because it is Peirce County, but as a whole we have a very affluent corner of the country for wage earners.

    On top of that we have multi generational wealth that is a sub culture here. Since the 1970s I don’t think you can count on all your fingers, and toes the number of families who have created wealth, true wealth, in the Seattle area.

    I trust that a big number of wage earners are making over $100K, enough to skewe any numbers you want to use on a national scale.

  35. 35
    David Losh says:

    RE: The Tim @ 31

    Isn’t it great to have a fan?

  36. 36
    NESeattleSeller says:

    Hey Tim – Any chance you can get Dupre and Scott to give you some not-too-recent single family rents data? I know they won’t give up the good stuff – they make their living with that. But even some 2010 SF home data might be helpful.

    My experience as a landlord is too small to be used as data, but the tenant pool that applies when I put a house for rent is large, well qualified, and willing to pay more than the PI payment for my estimate of the sale price, and in many cases, more than PITI. They are often young couples with good, steady jobs that are sick of apartments, condos and townhomes with a single garage they can’t actually get their car into and no extra parking. While many on this blog may not believe it, it is easy to find qualified renters who will not only not trash your house, but will also do a little yard improvement/landscaping. And after a year or two of renting they go buy a house to have room for a family.

  37. 37
    WillyNilly says:

    RE: Macro Investor @ 30

    Yes, but it is Tex-ass. Give me a house for free in the mid-west or in that fine lone star state, and I will respectfully decline. Free- no joke, no thanks. If you have no nerve endings, no sensitivity to the human experience, if food if fuel and housing is protection from the elements, and a place to deliver packages to – then some of these ‘armpits’ are viable options for you. Even factoring out personal preferences, ugly is ugly and uncomfortable is uncomfortable, and disgusting is disgusting. Paint it anyway you like, if your dwelling in the sewer is 12% of your gross income, versus a place that is appealing for 27% you must be so far ahead bottom dweller. The American palate in general is quite unsophisticated and uninformed. Go stand in a pile of #*it, I guess you won! Texas, seriously? The ONLY good thing about Texass is barbeque – and that exists elsewhere.

  38. 38
    Scotsman says:

    RE: NESeattleSeller @ 36

    I don’t think too many here would try to claim renters are trash. I’ve rented for years and have left every home in better shape than we found it. The only issue is whether it’s better to rent or buy at this time, and whether buying with the idea that it will be some sort of investment is a valid idea.

    Would you buy your current rentals at their market prices today given what may happen in the economy at large over the next several years?

  39. 39
    David Losh says:

    RE: NESeattleSeller @ 36

    It makes no difference if the rents you get cover PITI. It makes no difference if the property cash flows. The only thing that makes any difference is the over all return on the investment.

    My concern is that we have way over built housing units, single, condo, and town house, at the expense of, or neglect of, constructing high quality affordable rental units.

    I was in a beautiful apartment today in Ballard. Three bedroom two bathrooms, and laundry, nice view great location. Now they pay I think $2100 per month. That seems fair to me, but your house may rent for $2600. Well the $2100 is a cash flow, your $2600 may be PITI.

    Those are just examples. My feeling is that as rental units get built up to a more historical norm, all rents will decrease. The apartment building will cash flow a little less, but rental houses will also be worth less.

    When you go to sell your rental properties, and most people do, will the investment of your time, effort, and energy pay off in cash flow, and the appreciated value of the property?

    I say no. I say that a lot of land lords right now need to sell to recover some equity before the whole rental for retirement thing becomes a loss.

  40. 40
    Skeptic says:

    Tim, could you disclose how many pre-IPO options on Redfin stock you have been granted? They might color your viewpoint.

  41. 41
    The Tim says:

    RE: Skeptic @ 40 – Did you have any comments about the actual data being presented in this post, or just off-the-wall ad hominem insinuations?

  42. 42
    JGBellHimself says:

    RE: Scotsman @ 33
    Well, Scotsman, not looking too far up under your kilt…
    you are missing some things, and also wrong.
    As my first and last ex-wife will tell you, my being born a Canadian did not mean, to her, that we were better than every-any-one-else, or even good for some-any-thing.
    Canadian health care is NOT free.
    But, tis true everyone IS covered, and no matter where you work, or not; where you live, or almost not; what is or is not wrong with you – see, my ex wife, please, not – you do have medical care.
    And, the reason that a “liter” is the same price “everywhere” is that, unlike U.S., they still have monopoly oil companies. Or had you not noticed:)

  43. 43
    Scotsman says:

    RE: Skeptic @ 40

    Do you even know what percentage of the NW real estate market Redfin serves? How about the percentage of total regional sales they close? Can you quantify the impact on Redfin’s bottom line of a 2% increase in the median sales price of a home in Seattle proper for say 2010? Have you ever spent some time on the Redfin forums to see how they handle negative comments, or to get a sense the economic outlook that prevails? Do you really think Tim can bend the data enough to have any impact?

    Are you just bored?

  44. 44
    Scotsman says:

    This just in- home prices are related to total employment and the number of wage earners in their peak earning years. Now who would have ever guessed that? CHS sows another wild idea (yes David- right along with the seeds he advertises).

    http://media.chrismartenson.com/images/chs_housing1.jpg

    http://www.oftwominds.com/blogdec11/housing-employment12-11.html

    One thing we haven’t spent much time looking into here at SB is the influence/impact of shifting demographics on home prices. We talk about boomers bailing for retirement, population growth, a few rants about imigration, regional population inflows/outflows, etc. but always on the periphery

  45. 45
    Scotsman says:

    RE: JGBellHimself @ 42

    Well hello there. While you and your ex may be very reasonable people, most Canadians seem convinced that they are better than the wild cowboys (and now a good percentage of Indians) who roam both geographically and literally beneath them. And they never fail to boast of their “free” health care. In fact, two weeks ago as I was returning from a day trip to Vancouver I noticed a sign as we approached customs returning to the states. It said “Drive carefully- you are entering a high healthcare cost area.” That is, your “free” health care won’t be worth a damm soon- you’re about to enter cowboy land.

    Why was I, a conservative American, in Canada? Sad to say, but if you want decent authentic Scottish wares- like a new kilt, or a decent set of bagpipes, you have to go to at least Vancouver, and better yet Victoria.

  46. 46
    JGBellHimself says:

    TT, nice piece.
    To even try to make sense of the rent to own ratio in this convoluted RE market is welcome.

    Seattle has always been perverse. For both renters and for putative owners. WHERE in Seattle you wanted to live, and whether or not you wanted to SEE The Water, determined what you would have to pay. There never was, and is, no “normal”.

    That having been said, by using “area wide” numbers, to smooth out the defugalties, still does show U.S. what is available, over time. Everett is not downtown Bellevue. Nor is Kent, Auburn or Burien or Magnolia. Thank God. But, statistically on average you can, should you choose to do so, SEE that the numbers did change.

    That having been said, what we think is true in Seattle is that while your extremes are not as severe as Lost Vegas or The Phoenix Rising, you have seen huge shifts in “affordability” – for both apartment and home rentals, and for both condo and single family homes, in different areas in and around Seattle.

    And, while you might not see it, your flux is not as great as theirs is.

    With underwater mortgages of over 50% of all homes, and over 50% of all home values, and with massive numbers of foreclosures and vacant homes; the shifts from owning your own home, to renting an apartment or condo; to renting back your home at half the price you were paying on your mortgage; are mind and financially boggling.

    What not one (1) of your commenters pointed out was that whatever the rent to own ratios were, “once upon a time”…; they are not the same now. And, they will change, drastically, again, soon.

    Like Flip…, all you did, GD you, was to show U.S. what it looks like in “The Church of what’s Happen’n Now”.

    What you showed me was that Seattle is not, and God forbid will never be, as bad as it is in the Valley of the Sun.

    Oh, we know, you are IN Seattle…
    you mcCain’t even remember what the Phoenix “Suns” look like.
    {Does that mean that your “head”.., is where the sun don’t shine?}

  47. 47
    JGBellHimself says:

    RE: Scotsman @ 45
    How DARE you take her side…!!!
    The ?itch was not, is not and never will be…, “reasonable”.

    We are half Scots, half English and all Canadian.
    So, we are eternally “at war” with ourselves.

    She – who must not be obeyed – was none of the above.
    Half fiery strawberry blond Irish, and half obdurately German.

    As her Kidlet said:
    “Each of you at war within yourselves…
    and also at total war between yourselves…
    what chance did WE have?”

  48. 48
    JGBellHimself says:

    RE: Scotsman @ 45
    Scotsman…, what you might not know…
    is that it twas the Hudsons Bay Company Scots fur trappers that originally “invaded” the PNW. aka Pacific North West.

    Not the English, not the French, not Ah-murr-I-cans…, but the Scots.

    DNA tests show that The Scots intermarried with the native tribes.
    They were not The Enemy…, but were The Lovers.

    Almost as interesting, is the DNA facts that most of the PNW tribes emigrated across from Asia around 5,000 years ago. Not like most other North American native tribes that emigrated over 13,000 years ago across from Asian. And, not like most “Eskimos” that emigrated only 3,500 years ago.

    Even more interesting, is that most of The Scots who came here with the Hudsons Bay Co fur trapping, are DNA more closely related to the more West Coast Irish, Welch and Scottish Highlanders. Not to the English Normans, etc. – aka, the LOW landers.

    Those Welch, Irish and Scots emigrated ON-to the British Isles over 15,000 years ago, before the land bridge between Scotland and Germany was inundated.

    So…, most Washington, Idaho and Montana, and BC & Alberta natives tribal members now have DNA “connectivity” to…
    both the Asians that crossed the Alaskan land bridge over 5,000 years ago;
    AND with the Scots/Celts that crossed the European land bridge over 15,000 years ago.

    Willing to bet a wee dram of Glenmorangie that you did not know that.

  49. 49
    Scotsman says:

    RE: JGBellHimself @ 48RE: JGBellHimself @ 47

    Re #47- poor souls, despite the initial allure you didn’t stand a chance.

    Re #48- you are correct- I did not know that. My wife is much more of a history buff than I. When there is more free time I hope to fill in some of the holes. For some reason I find particular pleasure in unexpected/non-intuitive finds such as this. For a small country/region the Scots have had influence well beyond what their numbers would suggest. But then, when God is for us who dares rise against us? ;-)

  50. 50

    Now I’m glad that I didn’t ask Tim to do the chart using both the $225,000 distressed property median and the $400,000 non-distressed median. ;-)

  51. 51
    wreckingbull says:

    RE: sdb @ 21 – I find MN summers far more offensive than its winters. I’d rather bundle up than take on the humidity/skeeter assault. As someone who spends 6 weeks/year there, it has taught me to truly appreciate the great moderator of the Pacific Ocean.

    Although ridiculously oversold, I do agree with some of Jim’s points.

  52. 52

    By Macro Investor @ 30:

    My friends live in the Dallas area. For $175k they have a fairly new 4 bedroom house on 1/3 acre with built in pool. Yes, it’s really 4 bedrooms. .

    Why don’t you ask them what their property taxes are? Prices in Texas are lower because people have to factor in high property taxes to their monthly payment.

    BTW, as to WillyNilly’s comments about Texas, I will add that El Paso is the worst place I’ve ever been in the United States. You need to leave the country to find a place that is worse.

  53. 53

    By Scotsman @ 38:

    I don’t think too many here would try to claim renters are trash.

    I don’t think there’s a basis to generalize about that. There are some great tenants and there are some tenants from hell. Same with landlords.

    Problems arise when you have a tenant from hell either rent from a landlord from hell or become an owner.

  54. 54
    Blurtman says:

    RE: JGBellHimself @ 48 – And a trip down US history lane would perhaps be incomplete without a mention of Russian colonization of North America. Russia had trading outposts in the West and Northwest up till 1867.

  55. 55
    David Losh says:

    RE: Scotsman @ 44

    Let’s call Charles “Chuck” short for Chuckles the Clown. Here’s his bottom lne: “the Fed’s public concern for employment masks its real concern, which is keeping the “too big to fail” banks from a market recognition of their insolvency.”

    Real Estate is a business. For all the happy homies out there who want to believe that if they put 20% down, and live in a place for over 5 to 10 years, then it will be a good investment, they are wrong.

    Any property is either worth the investment or not. It is cut and dried that way. If you pay a quarter of a million dollars for poop, when you pay it off, it is still poop. The return on investment of rental income, or cash flow from rental income will have to be for a very extended period of time if that property drops in resale price to $180K.

    Real Estate is a business. It is a driving economic force when it is creating jobs, and durable goods. We over shot that, and will now have to deal with the new realities.

    You should be more focused on that we have lost the military cash cow, and housing unit economy about at the same time. Bush pushed both beyond all reasonable limits.

    If you really wanted to talk economy for the United States we would need to include Health Care, and Banking Reform, but this is a Real Estate blog so let’s look at the charts, shall we?.

  56. 56
    wreckingbull says:

    RE: Kary L. Krismer @ 52 – I’d hold Fort Worth as a close contender.

  57. 57
    Cheap South says:

    RE: WillyNilly @ 37

    Nicely put. Now I have heard it all. I am waiting for someone to move from Seattle to Detroit and brag about it.

    People don’t want to admit the connection between cheap RE and armpit. FL is the same way; and like a recent article put it, “being able to wear sandals in January doesn’t make up for bad government, high unemployment, lack of public transportation, unbearable summers, and under achieving schools”. Yet they call it Paradise.

  58. 58

    RE: Cheap South @ 57 – And bad drivers too, apparently. I was their recently on a Sunday morning, and in light rain conditions they had four freeway accidents in about 20 miles, in very light traffic.

    The humidity would keep me from living there though.

  59. 59

    RE: David Losh @ 34

    I Respect Your Gut Feel Opinion David and Agree to Disagree

    I also hope my gut feel projections and opinions are respected too, whether ya agree with ’em or not.

    What’s wrong with the way it used to be too? Giving our Seattle Kids most of the good jobs in Seattle from Seattle parents?????

    IMO, its guys like Mr Gates and his addiction to insourcing/outsourcing, using sham excuses of special skills abroad [and we all know its really to lower wages]….hades, ya ever heard of the term “Mentoring” our own local Seattle kids????

    Maybe we wouldn’t have slave warehouse shops at Amazon and O/Ss that don’t run all our S/W anymore, if we went back to fair pay and good ole Seattle born and bread Yankee Ingenuity?

    But alas David, the days of rousing successful 767s developed mostly with our Seattle area kids from Seattle area Community Colleges are dinosaurs…..so are the schedules and quality with the replacement, using failed globalism thinking.

    http://finance.yahoo.com/news/census-shows-1-2-people-103940568.html

    God bless our forgotten “Y” generation.

  60. 60
    Tim McB says:

    RE: Kary L. Krismer @ 52

    Kary,

    I had heard you say that before but never investigated the claim on high taxes so I did a quick check and all I can say is wow you’re right! Here’s an example in Dallas, TX: a 399k craftsman home, $16,217 a year in property taxes or $1351.41 per month in escrow (http://www.redfin.com/TX/Dallas/4336-Avondale-Ave-75219/home/30810327). Our home price wise was not much cheaper than that, and our principal and interest on the LOAN is only $250 more than that. Absolutely nuts. I attempted to find our home clone down there (similar specs beds, baths, age, lot size, etc.: http://www.redfin.com/TX/Dallas/1115-Turner-Ave-75208/home/30836818) to see what our taxes might look like down there and the closest home equivalent had property taxes at $7,272 per year (vs. 3.8k my wife and I pay). Comparing total costs if we wanted to buy down there we’d need to shave close to 100k off our price range to price in the tax increase. Is it that Texas’s property tax is so high or that Washington’s property tax is so low? How do we compare state wise?

  61. 61

    RE: Tim McB @ 60 – I don’t know why you sound so surprised I was right! ;-)

    I think TX is high more than we are low. Note neither has an income tax. Not only does that high tax keep the price of houses lower, but it also reduces the incentive to pay off a house. Even when you own it free and clear you have to pay over $1,000 a month just to keep it. Probably hard when most people retire.

    I wonder how that affects the SFR rental market down there?

  62. 62
    Tim McB says:

    RE: Tim McB @

    Here’s another one in Atlanta. The lot size and home is slightly larger but price is comparable. http://www.redfin.com/GA/Atlanta/128-E-Wesley-Rd-NE-30305/home/24766696

    Property taxes: $8494 per year.

    The Tim,

    Have you ever considered doing a chart comparing median home price’s relationship to taxes paid on said median home value? Perhaps looking at the Case Schiller 20 cities? Just cruising around it looks like Seattle’s quite a bit cheaper than Dallas, Atlanta, Chicago and SF. A little cheaper than Portland, bit more expensive than Las Vegas and moderately more than Phoenix, New York, and Denver. It could be instructive on one variable that plays a role in pricing between cities.

  63. 63

    RE: Skeptic @ 40

    IPO?? REDFIN?……………..Now thats a funnyone!

    Not with that current model….They will be lucky to just sustain their heads above water the next 5 years..VC should kiss those dollars good-bye!

    MOVED,LEDR,ZIPR, and Z are all on a death march for share holders..As soon as a Google or some other entity establishes their own database akin to the MLS system then you will have your answer going forward. Until then Short Z until the BLOOD is squeezed out as is the case with all the aforementined just sucking cash month after month..

  64. 64
    Tim McB says:

    RE: Kary L. Krismer @ 61

    I meant no disrespect; I just was shocked by wide differences between the two markets. I figured there would be $1-2k per year difference at most. I’m not sure what the impact it would have on the rental market but I’m sure that cuts into investor revenue quite a bit. The same is true as Seattle keeps passing all these levies and taxes on property which I imagine keeps pushing up rent. Perhaps some day we too can have property taxes as high as Texas ;)

  65. 65

    BTW…anybody notice the DUMPING of LNKD by insiders near their all time low??…..Zillow get the picture??…Red Fin, the candle was ready to be lit but like everything …TIMING was critical…The markets would never accept your IPO favorable for many many years…

    Just try to sustain…We need you to help educate and keep that Search engine afloat! LOVE IT!

  66. 66

    RE: Tim McB @ 64 – I was just kidding.

    Washington has a constitutional limit on how much the taxes can be, but that contains a lot or exceptions. Basically people can vote in almost whatever they want, which probably puts Seattle proper at great risk of being at TX levels someday!

  67. 67
    2kt says:

    RE: Scotsman @ 33

    NO, we do everything better. 45,000 die every year from lack of health insurane and 50% of the population is eligible for food stamps. We are the land of the free and the poor and pretty darn proud of it.

  68. 68
    David Losh says:

    RE: softwarengineer @ 59

    You’re kidding?

    Yankee ingenuity. Hmmm, Yankee ingenuity.

    Oh you mean our free land grab in the 1800s that divided up the United States amongst immigrants.

    Now we have the same, very same, monarchy thinking that has been in Europe for thousands of years. That’s your ingenuity right there.

    Let’s do it the way the Europeans taught us to do it. Let’s have fiefdoms in the form of corporations taking care of all the birth to grave needs we may have.

    Is that the ingenuity?

    One O/S? That is a government patent issue. Airlines, airplanes? That’s a government over sight public safety issue dictated by the Insurance Industry.

    Ingenuity? Come on, you need to get out of the house more, or better yet out of the United States.

    We don’t do anything here, any more. We pay people to sit around with make work projects while banking, and insurance companies “invest” pension fund, and insurance premium, and interest income.

    We don’t do anything here. We can’t even figure out how to buy property according to this web site.

  69. 69
    Scotsman says:

    RE: David Losh @ 68

    When you and Softie die (not anytime soon, I hope) ya’ll should donate your brains to science. Someday we may have the tools to understand . . . ;-)

  70. 70
    David Losh says:

    RE: Scotsman @ 69

    You mean we should stick with main stream thinking. That’ll do it.

    Stay in the box, don’t color outside the lines, and it will be OK.

  71. 71
    ChrisM says:

    For add’l insight on property taxes:
    http://interactive.taxfoundation.org/propertytax/

    and a fun picture here showing median property tax by county:
    http://www.taxfoundation.org/UserFiles/Image/maps/property_tax.png

    but obviously income & sales tax need to be factored in as well.

  72. 72

    By Scotsman @ 45:

    RE: JGBellHimself @ 42

    Well hello there. While you and your ex may be very reasonable people, most Canadians seem convinced that they are better than the wild cowboys (and now a good percentage of Indians) who roam both geographically and literally beneath them. And they never fail to boast of their “free” health care. In fact, two weeks ago as I was returning from a day trip to Vancouver I noticed a sign as we approached customs returning to the states. It said “Drive carefully- you are entering a high healthcare cost area.” That is, your “free” health care won’t be worth a damm soon- you’re about to enter cowboy land.

    Why was I, a conservative American, in Canada? Sad to say, but if you want decent authentic Scottish wares- like a new kilt, or a decent set of bagpipes, you have to go to at least Vancouver, and better yet Victoria.

    Some would say a decent set of bagpipes is a contradiction in terms.
    I myself love the tones, but that won’t stop me from repeating the old joke- Why do bagpipers march when they play?

    They’re trying to get away from all that noise.

  73. 73
    TaxesAreABitch says:

    By Tim McB @ 62:

    RE: Tim McB @

    The Tim,

    Have you ever considered doing a chart comparing median home price’s relationship to taxes paid on said median home value?

    I second that. I asked to see something similar a while back. I’d like to see the monthly payments for the median house w/20% down in whatever cities, after factoring in the T in PITI. I came to about the same conclusion – in our price range, the tax difference between here and IL (2nd highest in the country I believe, behind NY) was such that you can get about 100k more house here for the same monthly payment. So while that may not account for the whole difference in prices between here and some midwest cities, it is a very large chunk of it. In a lot of cases, if you take a comparable home here vs. Chicagoland (which can be hard to do, since there’s no such thing as a single family home with a view in Chicago), the monthly payment here is less. When I tell friends back in IL what we paid here, they are shocked, and I have tried to explain this but a lot of people didn’t get it.

  74. 74
    JGBellHimself says:

    RE: Blurtman @ 54
    You are very correct about that.
    Spanish in Cal, Russians in Alaska.
    Which was what 54-40 or fight was about too.

    What you might find interesting is a recent PBS program on the internment of one of the three major groups of Alaska natives = Aleuts, Eskimos and Indians = the Aleuts during WW2 ! Since most of them are members of the Russian Orthodox Church, WE did not trust them. So, we literally herded them all up, and put then into camps, for the winter.

    Most of U.S. on the West Coast know we did that to the Japanese, but most of U.S. did not know that we did the same thing to the Aleuts.

    Oddly, during “The Cold War” we let them go back home.

  75. 75

    By TaxesAreA”female dog” @ 73:

    I came to about the same conclusion – in our price range, the tax difference between here and IL (2nd highest in the country I believe, behind NY)

    I’m not sure if that’s true (IL being the second highest in the country), but IL also has an income tax. So assuming it is true, the powers that took over Boeing several years ago and moved their corporate headquarters to Chicago, moved themselves to an area with higher taxes for themselves and other key employees.

    Sort of makes you realize why the 787 didn’t come together so well. The company is run by people that make stupid decisions.

  76. 76

    RE: David Losh @ 68

    I Know David

    Underlize the “Y” generation in Seattle’s higher paying slots can be rationalized a million ways, except if you’re their parent or God forbid, you are the “Y” generation….

    Remember Nike’s phrase, “Just do it”.

  77. 77
    Tim McB says:

    RE: ChrisM @ 71RE: ChrisM @ 71

    Thanks Chris M.

  78. 78
    Tim McB says:

    RE: TaxesAreA”female dog” @ 73

    I wonder if he can’t get a reliable number from each market on property taxes. Perhaps that’s why it hasn’t been done. But I’m pretty sold on this as one moderately significant reason for variations between prices in different markets. As a trend I noticed with the exception of California (who loves to tax anything that moves), the west seems to have lower property taxes relative to price, in general. To me this could help explain why prices on average are higher in the west than the midwest, south or east coast. I first noticed it when I pulled my brother’s tax records for their place in Chicagoland as well. Valued at a third the price as ours, but they pay nearly the same in property taxes.

  79. 79

    RE: Tim McB @ 78 – California’s property tax system is more of an annual excise tax, since it’s based on price paid not value. Stupid system.

  80. 80

    RE: ChrisM @ 71 – That second link would be a lot more useful if they spread out their price cutoffs a bit more. Having over $2,000 doesn’t really say much, when some might have a median over $6,000.

  81. 81
    Mike says:

    County wide comparisons seem to be somewhat distorted when you’re looking at renting and owning comparisons. Seems the following factors would all come into play:
    (1) the cost to rent doesn’t increase as fast as the price to own in a comparably nicer neighborhood, people will pay more to “invest” in a neighborhood they will be stuck with than renters who have a year commitment and can easily trade up later. I have no idea if there is an actual study on this but my guess is that the rent for comparable units does not jump nearly as much from White Center to Queen Anne as does the jump in price for a similar house.
    (2) No factual basis to prove this, but my guess is that the raw number of rental units is heavily biased towards more pricer urban areas than the SFR stock is, e.g. more SFR units in Black Dimond than rental units, and the oposite in Capital Hill. That seems like it would tend to skew the averages to make buying look comparatively cheaper if you look at figures on a countywide basis as the SFR prices can get weighted down by the more rural areas.

    If you look at renting compared to owning in North Seattle / Kirkland and renting still comes out way ahead.

  82. 82
    The Tim says:

    RE: Mike @ 81 – Good points the reinforce why one shouldn’t only use region-wide stats when analyzing a specific neighborhood in their purchase consideration.

    I should do another post that breaks down the buy-vs-rent question for a specific home type in given neighborhoods like this one from October 2009: Rent vs. Buy Comparisons: Have the excesses been removed?

  83. 83

    […] while we’re talking about the USA, these charts from Seattle Bubble blog, 14 Dec 2011 and 15 Dec 2011. Thanks to jesse for the […]

  84. 84
    SSMayer says:

    RE: Kary L. Krismer @ 8 – Touché! I cannot imagine living away from Puget Sound. I was born here.

    The real estate may be overpriced, but I’d rather live in a small home here, than a huge place anywhere else.

    I love the people here.

  85. 85

    […] said, based on my analyses of affordability, price to rent, and price to income, I suspect that we’re basically at “the bottom” for home […]

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