## The difference between affordable and actual home prices hit an all-time record in May

Reminder: Subscribers have access to the members-only spreadsheets folder, which is updated with the charts in this post.

As promised yesterday, here’s an updated look at the “affordable home” price chart.

In this graph I flip the variables in the affordability index calculation around to other sides of the equation to calculate what price home the a family earning the median household income could “afford” to buy at today’s mortgage rates, if they spent 30% of their monthly gross income on their home payment. Don’t forget that this math includes the (giant) assumption that the home buyers are putting 20% down, which would be \$133,800 at today’s median price.

The “affordable” home price has bounced around between about \$550,000 and \$590,000 since the beginning of 2017. The current “affordable” home price of \$568,758 in King County would have a monthly payment of \$2,319.

The current gap of \$100,242 between the affordable price and the median price is similar to the difference we saw between the two numbers in March and April of 2006. Just a few months ago in May the difference was a whopping \$168,447, which is actually higher than the previous record high of \$167,363 that was set in July 2017 (the peak month for prices during the previous bubble). This definitely supports the argument that the current slowdown in sales is due largely to a lack of affordability.

If interest rates were at a more reasonable level of 6 percent (which is still quite low by historical standards), the “affordable” home price would be just \$483,485—about \$85,000 lower than it is today, and \$185,515 below the current median price.

Here’s the alternate view on this data, where I flip the numbers around to calculate the household income required to make the median-priced home affordable at today’s mortgage rates, and compare that to actual median household incomes.

As of August, a household would need to earn \$109,108 a year to be able to “afford” the median-priced \$669,000 home in King County. This is up from the low of \$46,450 in February 2012, but down slightly from the May high of \$119,004. The previous cycle high in July 2007 was \$99,321. Meanwhile, the actual median household income in King County is estimated to be about \$93,000.

If interest rates were 6% (around the pre-bust level), the income necessary to buy a median-priced home would be \$128,352—38 percent above the current median income.

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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

After all other debt, like car and college loans, etc…

Was the mortgage debt limit of buyers in the 80s and 90s….let’s see now what kinda home we can qualify for on like about half gross pay? The future soon at a theater near you?

Add in the 5-6% mortgage rate brimming up from no more Quantitative Easing and a roaring stock market….perfect storm or sunny day if you’re a saver.

2. 2

Unrelated to Article, But Interesting News Legal High Tech Seattle Type Precedent Today

https://abc7.com/4297967/

Parents can be prosecuted for taking their teenagers’ iPhones from them….LOL

3. 3
Mark says:

“If interest rates were 6% (around the pre-bust level), the income necessary to buy a median-priced home would be \$128,352—38 percent above the current median income.”

Very interesting considering that’s where interest rates should be by next summer if the Federal Reserve continues hiking at the rate they have outlined. Two hikes for the rest of 2018 are essentially a given, and all 12 Fed meetings next year will be “live” meetings, i.e., have the potential for a rate hike.

4. 4
Notme says:

private income tax 30%

-a bubble haiku

5. 5
Jake says:

@3 Mark

Maybe an impending rise in interest rates to 6% will cause of a flood of new buyers to hurry and get loans and bring demand up again…. I say this selfishly as I listed my home for sale this week. Bad timing probably, but I also benefited from the slow down to get the house I just bought. The timing on this shit is such a gamble.

6. 6
ess says:

Question

Mortgage rates are inching towards five percent.

But does everyone get that rate? What if credit is not pristine? I assume the interest rate is higher?
If so, does anyone know the co-relation between credit scores and mortgage interest rates?
Or put another way – how much does interest for a mortgage increase (if at all) as credit worthiness drops, and what is the range?
Is there a cut off point for credit scores that most lenders will not lend money to a potential home buyer? Or are other factors considered, including size of down payment, assets available, etc?

Thank you

7. 7
Jake says:

RE: ess @ 6

Ess, if you are getting a loan for \$500k or above, you probably have decent credit

8. 8
Rupert D says:

The Tim: thanks for posting the affordability charts – very good info. For us city dwellers could you do the same charts for Seattle only?

9. 9
Justme says:

A two-for-one: The condo supply is going up because the apartment supply is already too high.

http://www.king5.com/article/news/local/condos-are-making-a-comeback-in-seattle/281-596502530

10. 10

More Unpredictability Added to Seattle Real Estate Market

I know you bubbleheads hate FOX, CNN, MSNBC, etc, etc…..even SWE barely has the stomach for the waste product coming out of it lately….its a total quagmire IMO. But I tune in anyway to help with our prediction analysis.

Big Rattle Snakes in the Chicken Coop Now:

1. The Deputy AG [apparently open border slanted] Rosenstein is accused by the Open Border Party NYTs [a Open Border Party MSM News source BTW] of saying he suggested wearing hidden listening devises while attending meetings with Trump after the May 2017 firing of FBI Director Comey [Rosenstein’s apparent buddy BTW]. This is big and yes, the Mueller investigation took a BIG hit IMO over this NYT’s take. Of course, Rosenstein disagrees with this anonymous NYT’s source….but the smear against him by the Open Border Party MSM is very weird, and SWE is scratching his head why?

2. Declassification of the FISA dossier was delayed by Trump to first get an AG Inspector General report from the President’s AG office….why? Weird?

3. Meanwhile stocks are historically high and still going up.

All this recent news are puzzle pieces to a time-line to implementing the MAGA agenda and a simultaneous brisk economy forcing interest rates on mortgages much higher in Seattle. My crystal ball got Stephen King “The Fog” in it….need more data to figure this mess out now…

Add this to the Halloween Witches Brew bubbleheads, the Kavanaugh appointment sex allegation hearings time-line now has a few days more flexibility suddenly by Trump. Why? Questions, questions…something secret and big is going on IMO, like behind the scene plea deals between the President, DOJ and the FBI?? Lord only knows, nothing makes sense at all now….

The middle income tax cuts stability is key to Seattle real estate stability IMO, so these are all key pieces of the unfolding puzzles….I see this Mueller thing winding down to protect the guilty Deep State? More Trump deals? I’m glad I’m not President….LOL….I tip my hat to Trump to even have the courage take this ambiguous bull by the horns.

11. 11

The price is too damn high!

-Ghandi

12. 12
Notme says:

das REIC is concerned
1% property tax
30% roof tax?

-a keeping-things-in-perspective haiku

13. 13
Notme says:

Listings expire
recalcitrant sellers brave
the spring of discontent

-a bubble-timing haiku

14. 15
wreckingbull says:

By Justme @ 9:

A two-for-one: The condo supply is going up because the apartment supply is already too high.

http://www.king5.com/article/news/local/condos-are-making-a-comeback-in-seattle/281-596502530

It was not a very bold prediction, but a year ago here I noted that this conversion wave will start and continue for years. While many of these conversions are pre-completion, they are conversions nonetheless. Of course some of our fellow commenters here told me I was a dumbass and that no apartment would covert to a condo because of missed depreciation write-off opportunities.

This will be fun to watch. Indeed a push-pull situation. More condos mean more inventory on the market, more apartments mean rent-buy dynamics will be affected.

15. 16
Justme says:

I made that same prediction, as far back as 2016. And now the wave of conversions has indeed started.

https://seattlebubble.com/blog/2016/05/06/nwmls-home-prices-hit-another-record-sales-slow/#comment-255156

16. 17
Justme says:

A very timely article today on the Seattle building boom and resulting oversupply of apartments, and maybe soon, condos, too.

https://wolfstreet.com/2018/09/21/seattle-rents-vacancy-new-construction/

QUOTE: The report projects that, “if all of the units are completed and the projects brought to market as anticipated, we could see a vacancy rate of 9.2%.”

Comment: That is, unless the REIC fudges the numbers and do not count vacancies in buildings that have not been “stabilized” yet, as has been common in the past.

17. 18

Of course some of our fellow commenters here told me I was a dumbass and that no apartment would covert to a condo because of missed depreciation write-off opportunities.

LOL, I remember that absurd argument being made. I never did understand that one. Now not wanting to convert because they didn’t want to recapture prior depreciation I could see might have some tiny amount of merit, but not the other.

FYI, it is possible to pull a conversion back to apartment even after some of the units have been sold.

18. 19
uwp says:

By Justme @ 16:

I made that same prediction, as far back as 2016. And now the wave of conversions has indeed started.

https://seattlebubble.com/blog/2016/05/06/nwmls-home-prices-hit-another-record-sales-slow/#comment-255156

Man. Amazon was called out at \$700/share in that thread.
Those were the days!

19. 20
David says:

I still think a lot of it has to do with the terrible quality of remaining/available inventory in Seattle-metro.

20. 21
Erik says:

RE: Justme @ 17
I’m not convinced they won’t get absorbed, but I think Tim posted a while back and referenced an article saying 2020 was going to add more apartments than 2019. This kind of inventory surge means someone is gonna make a lot of money. If there’s a big surplus, maybe some of us poor folk can get a good deal. If they all get absorbed, rich investors will get richer. I’m hoping for a surplus and an opportunity to score a good deal.

21. 22
Matt P says:

I’m not following the numbers here: “The current “affordable” home price of \$568,758 in King County would have a monthly payment of \$2,319.”

Assuming 20% down, that leaves \$455,006.4 for the principle. BankRate says the current rate is 4.88 for 30 year fixed, which is \$2,409. Throw on insurance, say \$50 a month, and .92% for taxes, and we’re at \$2895. If you use 30% as the cutoff for housing payments, then you’d need \$115,800 year income to afford this. If 35%, then it’s \$100k. For the current median, you pay \$3,397 when adding insurance and taxes, and would need \$136k or \$116.5k to afford it for 30 and 35% respectively. The post says only \$109k is needed to afford \$669k.

Am I doing something wrong with my calculations? If not, then it’s much less affordable than the chart suggests.

22. 23
Paul Ambroso says:

RE: Matt P @ 22

\$455006 price is \$2409 assuming 4.55% interest rate on the mortgage. That’s just PI, not TI though. TI + U (upkeep) would be far more.

23. 24

RE: Matt P @ 22
I Don’t Know What Interest Rate You Used

Its in flux upwards lately; but assuming its close enough to reality, I’d still add in property taxes and insurance. You likely have a lot of maintenance issues from switching dwellings [paint, carpet, floor changes?] also. \$4-5K/mo should cover all the contingencies.

I prefer selling before the paint and carpet are replaced, to let the new owner pick the colors and such out…

24. 25

Tourism All Along the West Coast

Should be decimated in the Summers with Wild Fire Smoke

That reduces local tax revenues in the Seattle area….a real hit on Seattle hotels and restaurants.

http://www.latimes.com/local/lanow/la-me-smog-streak-20180921-story.html

I’d vacation in the midwest where the air is clean.

25. 26
LessonIsNeverTry says:

RE: Matt P @ 22 – The mortgage rate used is the difference. When I run the calcs with 4.55% I get the same numbers as the post. Ignoring non-mortgage expenses, it is interesting that the affordability gap between 4.55% and 4.88% is “only” 4.2k a year in gross income. It shows why mortgage rate changes need to be substantial to impact home prices, unless the market is fully (or over) stressed.

26. 27

Looks Like Our Tax Cuts are Safe From the Open Border Party Spending, For Now

I bet no Open Border Party Rally could fill a gas station convenience store….lOL

10s of thousands line up in Missouri for another Trump Rally last night.

https://www.thegatewaypundit.com/2018/09/amazing-two-mile-long-line-for-trump-rally-in-springfield-missouri/

That’s good news for the stocks and real estate, smile.

27. 28

I’d vacation in the midwest where the air is clean.

I’m not sure that would save you. The Canadian fires spread the smoke well into Montana. I’m not sure how far east it extended at its worst point.

28. 29

Here’s an interesting look into the minds of partisan hacks, like pfft/greg, who in a recent thread called me a liar for pointing out that we had a thread go over 100 posts without venturing into politics. Apparently the partisan left not only now associates simply being wrong as being a lie, but now it’s just being something that they wouldn’t say! The English language clearly isn’t their field of expertise!

https://thehill.com/opinion/white-house/407889-partisanship-is-a-toxin-and-potent-mind-altering-drug

Anyway, I’ve often said that being partisan is being lazy, because it doesn’t require that you think about issues. You just accept whatever position/argument your party/tribe spoon feeds you. But this piece goes beyond that an gets into the minds of these non-thinking individuals that dominate our society today. People like pfft/greg apparently even get off on it, and are addicted (the addicted part isn’t surprising).

29. 30

And in another non-RE area, here’s a piece on being able to freeze your credit records now, with links.

https://krebsonsecurity.com/2018/09/credit-freezes-are-free-let-the-ice-age-begin/

30. 31

I was just doing a weekly area search and two things stood out. 1. Only one listing went straight to pending (not pending inspection) and that was new construction, so not surprising; and 2. The listings were selling for list price, not above or below, list, except one 500k listing which sold for 8k below list. That one was less than a week on the market, but apparently the seller was happy with the offer.

31. 32
David says:

I’ve actually found a photo of pfft/greg: https://twitter.com/Talkmaster/status/1043292931883319296

Here’s an interesting look into the minds of partisan hacks, like pfft/greg, who in a recent thread called me a liar for pointing out that we had a thread go over 100 posts without venturing into politics.

32. 33
whatsmyname says:

Justme,

I am really and sincerely curious.
What year did you start to look for a house with intent to buy?
What year did you decide to wait for a better market?

33. 34
Justme says:

Bah-ha-ha. Some people think sincerity is a tone of voice or a style of writing. Don’t make me laugh.

34. 35
whatsmyname says:

RE: Justme @ 34 – No. I really want to know.

35. 36
Justme says:

Of course you do, darling…..

36. 37
whatsmyname says:

RE: Justme @ 36 – Trying to get at where you are coming from. My intuitive sense is that this combativeness comes from unrealized expectations over many years. But I know that assumptions are often wrong, and should be tested.

37. 38
Erik says:

RE: Justme @ 36
I agree with whatsmyname. You are angry and frustrated because you waited and waited like a lot of people on here did because they refused to be part of a bidding war. You lost. We all lose one time or another. What matters is how you react. Based on your comments, I’d say you haven’t accepted the loss and learned from your mistake. Now you know at very low inventory, you should buy even with bidding wars.

38. 39
pfft says:

Here’s an interesting look into the minds of partisan hacks, like pfft/greg, who in a recent thread called me a liar for pointing out that we had a thread go over 100 posts without venturing into politics. Apparently the partisan left not only now associates simply being wrong as being a lie, but now it’s just being something that they wouldn’t say! The English language clearly isn’t their field of expertise!

https://thehill.com/opinion/white-house/407889-partisanship-is-a-toxin-and-potent-mind-altering-drug

Anyway, I’ve often said that being partisan is being lazy, because it doesn’t require that you think about issues. You just accept whatever position/argument your party/tribe spoon feeds you. But this piece goes beyond that an gets into the minds of these non-thinking individuals that dominate our society today. People like pfft/greg apparently even get off on it, and are addicted (the addicted part isn’t surprising).

Kary I read the thread and you guys were arguing about property taxes(the most political local issue beside roundabouts!) and SWE chimed in for the 1000th time on sanctuary cities. I am far from a political hack. You also gave zero examples.

Have I said the economy, housing and stock markets are going to crash because Trump is president or because of his policies? NO! The economy is more or less the same as Obama’s last few years. When Trump was elected we started to hear from the right how good things are. No more talk about the ADP report, food stamps or the participation rate. You guys suddenly went MAGA while I hold the same opinions about the economy as when Obama was in office. I don’t say Trump is president sell stocks this market is going down! Did I suddenly say the housing market is going to crash?

The only criticisms I’ve had is on Trump’s specific actions- tax cuts and tariffs. Tariffs will cost jobs and I posted evidence of that. Jack Ma just said we could lose 1 million jobs because of the tariffs.

39. 40
Notme says:

whatsmyname, whatsmyname, uh
you don’t call me baby

-a disappointed haiku

40. 41
pfft says:

By Notme @ 40:

whatsmyname, whatsmyname, uh
you don’t call me baby

-a disappointed haiku

Bieber?

41. 42
David says:

RE: pfft @ 39 – Naah, the economy is up dramatially under Trump. As evidenced by Trump having undone almost everything Obama ever did.

Don’t be so butt-hurt by it though.

42. 43
whatsmyname says:

By Notme @ 4:

private income tax 30%

-a bubble haiku

costs no cash at the shelter,

-an I know good people who are struggling to find subjectively decent housing, but binary fantasies help no one haiku

43. 44
pfft says:

By David @ 42:

RE: pfft @ 39 – Naah, the economy is up dramatially under Trump. As evidenced by Trump having undone almost everything Obama ever did.

Don’t be so butt-hurt by it though.

You can’t even get your facts right. Most of what Trump has done has been blocked by the courts for now. He gets stuff thrown out of court because their legal reasoning is terrible. They can’t even get the science and the legal stuff right to overturn most of what Obama and the Congress did..the best people David? If Trump’s own people know he’s an idiot.

“Naah, the economy is up dramatially under Trump.”

Wrong. You didn’t even provide numbers or evidence. The economy is basically the same.

44. 45
David says:

RE: pfft @ 44 – ROFL. No one was reversed by the Courts more than Obama!!!

https://rare.us/rare-politics/issues/obama/obama-has-faced-more-unanimous-supreme-court-smackdowns-than-any-president/

Your ability to jump into the ignorant is second to none!

45. 46
pfft says:

By David @ 45:

RE: pfft @ 44 – ROFL. No one was reversed by the Courts more than Obama!!!

https://rare.us/rare-politics/issues/obama/obama-has-faced-more-unanimous-supreme-court-smackdowns-than-any-president/

Your ability to jump into the ignorant is second to none!

I am not wrong. First of all Obama wasn’t repealing stuff. Trump was. That was what I was talking about. You didn’t even provide context. Republicans at the state and federal opposed every single thing that Obama did so he was sued a lot. There was more bipartisanship during other years. Your article doesn’t even say what you think it does. It only tracks unanimous decisions. Maybe W lost 100 court cases 8-1?

I was talking about Trump repealing stuff and it still stands.

Still waiting for evidence of Trumps great economy.

46. 47
wreckingbull says:

Justme,

I am really and sincerely curious.
What year did you start to look for a house with intent to buy?
What year did you decide to wait for a better market?

I was waiting for you to pull out your old standby response of ‘you are bitter because you missed the RE rocket’, and you did not disappoint. You used it on me too. It’s OK to go against the grain of vapid RE cheerleading, even for those of us that have timed our sales and purchases reasonably well. I think Justme has been a good counterbalance here to those here boasting about their negative cashflow investment empires.

47. 48
David says:

By pfft @ 46:

By David @ 45:

RE: pfft @ 44

Still waiting for evidence of Trumps great economy.

48. 49
David says:

“It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover? A first-pass answer is never… So we are very probably looking at a global recession, with no end in sight.” Paul Krugman of the New York Times the day after the election.

49. 50

RE: pfft @ 39 – I missed SWE mentioning sanctuary cities–that term was not one of my searches when I was looking for political discussion. I’ll give you that without even looking to verify. But real estate taxes are connected to real estate in a very significant way. They hardly count as off-topic discussion, particularly when you’re looking for a reason for the changing market given the McCleary fix.

But still not a lie, at best a mistake. The partisan left doesn’t seem to know that (and that’s not something I’ve noticed of the partisan right.)

50. 51

I’m moving this into the current thread, because Erik asked a good question. I had responded to him about his comment on leverage and risk, and here was part of his response.

By Erik @ 137:

If you understand that concept, I’m not sure why you paid all cash for your house in Renton minus a \$30k loan from becu in 2007. Seems like the exact opposite of leverage and timing.

Good question. The main reason is we wanted to move, owed very little on our old house, and were looking at the options as to how to purchase. I did consider several other alternatives to putting the money into the house, including moving money into stock and bond market and also keeping the old house as a rental, which would have virtually required a mortgage on the purchase. With hindsight I probably would have done best with the bond market, but viewing the house as an investment wasn’t really the main point (although I did consider increasing the percentage of my assets into real estate to be a slight advantage.)

But the bottom line was rate of return wasn’t a huge factor in my decision. Not having to pay a monthly mortgage was seen as a bigger benefit. Keeping monthly expenses low was something I learned when I became a sole practioner as an attorney. So that was probably the biggest factor once we decided to actually move.

And finally, the \$30k BECU thing was a HELOC. It’s only twice had a balance. (Something Ray never seemed to understand.) It’s used mainly to maintain liquidity given the interest paid on small loans is pretty insignificant.

51. 52

RE: Kary L. Krismer @ 18
“It All Floats Downstream” From Stephen King’s “It” Book

It was a rule for Seattle Real Estate degradation in the 80s/90s and IMO its hasn’t changed….condos die out and turn into apartments, soon, at a theater near you. Old owners eat cake when that happens….the single units become bulk priced worthless.

Guys like Erik are more likely immune, because they periodically cash in their condos every other year….flipping makes common sense in Seattle.

52. 53

RE: David @ 49
They’re Shooting From the Hip David

And they have no gun target practice to hold the magnum steady when the MASSIVE back-fire jolt hits…so always miss the target using erroneous poll data that is always wrong. They need time to learn how to shoot.

53. 54

RE: pfft @ 46
Yes Pfft There Are Still Serious Problems With the NWO Economy Trump Needs to Fix

Like the HORRIFYING prices of Asian/European Engineered Pea Sized Cars and CRV Slugs [I call ’em That Because they Look Like Ugly Slugs With No Locking Sedan Trunks]…perhaps the Tariffs will get better stock with better prices or the NWO car lots are doomed. From today’s WSJ:

https://www.wsj.com/articles/used-car-sales-boom-as-new-cars-get-too-pricey-for-many-1537700401

Americans hate your open border party plan to force them into electric golf cart safety nightmares with mandatory Open Border Party Chinese Solar Cell Systems stapled on our roofs to charge ’em…why buy a new car now when your open border party wants to ban all gas cars? LOL

Cat got your tongue Pffft? ;-o

54. 55
whatsmyname says:

RE: wreckingbull @ 47 – It is OK to go against the grain of vapid RE cheer-leading. Just as it is OK to go against the grain of 20 cents on the dollar, Great ARM Reset, Inventory Tsunami, Chinese Exit disaster perma-bearism.

It is also OK to dabble in REIC conspiracy theorism, and call out any information not suiting your agenda as “propaganda”. In fact, it’s entertaining. I think I will never forget a certain someone’s indictment of Deerhawk for the dastardly “sounding reasonable”. That is surely the kind of intellectual “counterbalance” some people really value.

55. 56

RE: Kary L. Krismer @ 28
The Traffic is Light and Air is Clean in Kansas City

The tourism in Kansas is Old Town Western venues, Dinosaur Amusement Parks, the Kansas City sport teams, and the ribs and steaks there are to die for…plenty to do and light traffic to make you smile in their mostly sunny days and mild temperatures. The oak trees are plentiful [more trees there than here?] beautiful too. The rivers are plentiful there too…

The hotels are cheaper there too, much cheaper. So are the rental cars. Once you tried it you’ll never want to go back to smoky skies and OVERPOPULATION.

56. 57

RE: David @ 42
Give ‘Em Slack David

They have no agenda and we do. Name calling is not an agenda either.

57. 58

RE: Kary L. Krismer @ 30
Great Article Kary

Good journalistic detective work! The credit bureaus are a vital part of the Open Border Party organized crime establishment allowing duplicate Social Security Number identity fraud too…add in our own federal government Social Security Agency too….let’s not fool anyone, they know its going on too, but only “brainlessly” encourage it.

No wonder the Open Border Party cringes and howls whenever eVerify [all American job applicants must be checked for SSN duplication] is mentioned….LOL…..my gosh its only current attorney laws on the books to fight identity fraud felonies ;-0

You get it…thanks Kary for the URL!

58. 59
Greg says:

Here’s an interesting look into the minds of partisan hacks, like pfft/greg, who in a recent thread called me a liar for pointing out that we had a thread go over 100 posts without venturing into politics. .

Well you just lied Kary.

I was not part of any discussion relating to 100 posts…
Thus claiming I called you liar, is a lie.

Frankly your more of a fool than a liar. A hypothetical foolish old man…

59. 60
Erik says:

RE: Kary L. Krismer @ 51
Ray understands I think, he was just trying to make you look bad. Ray told me to get a becu heloc and keep buying good investments. Now that I have becu helocs, I understand your position. I haven’t touched any of my heloc money yet, but I have a lot of it accessible. So yah, I’m not paying any interest and I have the money waiting if I need it or stumble on a really good deal.

You were focused on cash flow as opposed to gambling on prices going up. You are closer to retirement than me, so that makes sense to reduce your risk. I can see why you made the decision you did especially since you said it was an older house. If you had multiple rentals already, managing risk looks a little different, but the same concept applies of focusing on cash flow. For me, security is selling rentals with more equity to pay off or pay down and recasting other mortgages to create cash flow. Having both rental income and earned income is much less risky than relying on earned income.

60. 61

RE: Greg @ 59 – There is a greg, lower cap who almost certainly is pfft. I’ve yet to decide if you are pfft too. pfft/greg refers to the one entity. If I decide you too are likely pfft, then it would be pfft/greg/Greg.

61. 62
Erik says:

RE: softwarengineer @ 52
Yep. Buy, rent out, then sell. Now the big question is, do you keep the profits in cash, apply it to pay off another mortgage, do a 1031 exchange for a multifamily, or invest the money in the stock market. That’s been my big dilemma lately.

62. 63

By Erik @ 60:

RE: Kary L. Krismer @ 51
Ray understands I think, he was just trying to make you look bad..

Which sort of backfired on him since it showed not only did he now know what a HELOC was, but also that he didn’t know how to do the basic agent task of reading a Realist report. He also thought my seller’s mortgage debt was my mortgage debt. A very rookie mistake.

As to the rest of your post, very good. You could also have multiple different strategies, such as treating your house one way and investment real estate another. But there you’d likely want to have your personal residence encumbered, both due to move favorable lending terms and also protection from creditors in the worst case scenarios. And yes a HELOC could be part of that, but that gets into the area of risk of having a second mortgage (likely not wiped out in the event of foreclosure).

63. 64

RE: Erik @ 60
Debt Can Be a Great Common Sense Method For Patient [In the bag] Investments

Debt is mostly illogical to most Americans who lack long-term investment strategies with a a winning actual history record…..few of us have those skills [or just plain luck?] Erik….that’s why I push less risk. But, on the other hand….had I not been such a pig headed retiree and pulled out way too soon from Trump’s stock “roaring market” with risk…I’d now be a lot richer now too.

There’s a lot of “roll the dice” in life, whether we admit it or not.

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s says:

RE: Erik @ 62
I’m Sure You’ll Do Just Fine Erik

Money never brings total happiness, but poverty is inconvenient.

Fail and try again, its the path to eventual success.

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David says:

By Erik @ 62:

RE: softwarengineer @ 52
Yep. Buy, rent out, then sell. Now the big question is, do you keep the profits in cash, apply it to pay off another mortgage, do a 1031 exchange for a multifamily, or invest the money in the stock market. That’s been my big dilemma lately.

When you look at how many people that are desperately trying to send the USA into a recession in time for the next election, it might be a good time to hold cash for a while.

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Erik says:

RE: David @ 66
Probably right. Democrats are gonna try to make republicans look bad for the midterms. Could help create a good buying opportunity.

More apartments are converting to condos starting 2019 and probably more in 2020 per dearhawk, a record number of condos and apartments are being built 2019 and 2020, and democrats are looking to get trump out in 2020. Could be some good deals on Seattle condos on the horizon.

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David says:

RE: Erik @ 67

Case in point: Goldman Sachs over the span of 5 days –

1) No recession for at least 3 years:

https://www.cnbc.com/2018/09/17/chances-of-economy-falling-into-a-recession-within-3-years-historically-lowgoldman.html

2) 5 days later, Goldman Sachs predicts major depression within 2 years:

https://nypost.com/2018/09/22/next-crash-will-be-worse-than-the-great-depression-experts/

And as to DEBT: We have a HUGE alien population with 75% on intensive welfare. I know of three Section 8 houses close to a property I own, ALL inhabited by Sub-Saharan Africans for years. Driveway full of cars, sometimes new, and at one involved in several murder attempts. Most seem to be committing fraud.

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Justme says:

Time for the weekend update on for-sale inventory for KC/SFH. Three weeks have passed since labor day week. The King County SFH for-sale listings increased by a mere 2 units from last week to 4837, a number not exceeded since 30.Sep 2014. As usual, inventory peaked on Friday evening.

09.21.2018 17:00 4837 (up 2 from 4835 last week)
09.30.2014 10:00 4846 (last time for-sale inventory >= today’s number)
09.14.2018 18:00 4835 (up 235 from 4600 last week)
09.07.2018 19:00 4600 (up 230 from 4370 last week)

There is a seasonal flattening of listing inventory. In 2017 the flattening started the week after labor day, whereas in 2018 it took two more weeks before the flattening occurred. The crowd at the exits of the housing market remains elevated and marginally reached a new 4-year high.

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Macro Investor says:

Software is now on the NO READ list. I also skip every comment by Pfft, kary and any response to them.

Don’t need to waste time on the ping pong political battles. It’s just boring, repeated endlessly everywhere on the internet and will never change anyone’s mind.

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Erik says:

RE: David @ 68
Before the Great Recession, major banks were predicting everything was just great. Someone on this site posted a video of Alan Greenspan saying how great the economy was doing and there was no risk. These people lie to manipulate the market.

I also live near section 8. It sucks and I want to move. I got a really good deal at the auction and didn’t research the area. Time to roll my profits into a nicer area.

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Macro Investor says:

RE: Erik @ 71

You misunderstand. Fed officials can’t go on TV and say everything is crap. It would be like yelling “fire” in a crowded theater. We have to be grown ups and understand if they are even luke warm in their comments it is a warning.

Goldman Sachs is different. They employ hundreds of analysts to write papers all day long. Some might be bullish and bearish at the same time. Most likely they don’t talk to each other. Just like you only talk to a few people at your work. Of course, the company also trades for profit. So it’s understood their opinions are biased. We just have to listen to all the data and make up our own minds.

If you live to be 100, you’ll never hear a CEO say his company and stock are anything but great (an opinion, LOL). Even as he’s filing the bankruptcy papers. He has to. It’s his job. He would be sued if he said anything else. Ignorant people call it a conspiracy, but they are just naive.

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RE: Macro Investor @ 70 – No, no, no! You’re not just supposed to skip by people you don’t want to read. You’re supposed to count how many times they post and then report the number. That is also pointless, as was your post, but it’s more thorough.

Stated differently, your post noting who you don’t read is a waste of everyone’s time. But then again, your next post was pretty pointless too.

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Notme says:

US starts wars
corrupt collaborators
flee to section 8?

-a not-random-refugees haiku

74. 75
Notme says:

the pentagon warfare queens
somalis get crumbs

-a forest-for-the-trees who-is-spending haiku

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pfft says:

By David @ 49:

“It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover? A first-pass answer is never… So we are very probably looking at a global recession, with no end in sight.” Paul Krugman of the New York Times the day after the election.

Link or it didn’t happen first of all.

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pfft says:

RE: Greg @ 59 – There is a greg, lower cap who almost certainly is pfft. I’ve yet to decide if you are pfft too. pfft/greg refers to the one entity. If I decide you too are likely pfft, then it would be pfft/greg/Greg.

I am George Soros.

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pfft says:

By David @ 68:

RE: Erik @ 67

Case in point: Goldman Sachs over the span of 5 days –

1) No recession for at least 3 years:

https://www.cnbc.com/2018/09/17/chances-of-economy-falling-into-a-recession-within-3-years-historically-lowgoldman.html

2) 5 days later, Goldman Sachs predicts major depression within 2 years

Where?

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uwp says:

By pfft @ 76:

By David @ 49:

“It really does now look like President Donald J. Trump, and markets are plunging. When might we expect them to recover? A first-pass answer is never… So we are very probably looking at a global recession, with no end in sight.” Paul Krugman of the New York Times the day after the election.

Link or it didn’t happen first of all.

Krugman did write that on election night:
https://www.nytimes.com/interactive/projects/cp/opinion/election-night-2016/paul-krugman-the-economic-fallout

But he also re-evaluated, and reversed that call within 36 hours: https://krugman.blogs.nytimes.com/2016/11/11/the-long-haul/?_r=0

But it’s important not to expect this to happen right away. There’s a temptation to predict immediate economic or foreign-policy collapse; I gave in to that temptation Tuesday night, but quickly realized that I was making the same mistake as the opponents of Brexit (which I got right). So I am retracting that call, right now. It’s at least possible that bigger budget deficits will, if anything, strengthen the economy briefly. More detail in Monday’s column, I suspect.

On other fronts, too, don’t expect immediate vindication. America has a vast stock of reputational capital, built up over generations; even Trump will take some time to squander it.

The true awfulness of Trump will become apparent over time.