Help- Forced to Buy A House in Seattle in the next 6 Months!
Here is the story. (and maybe using the word "forced" in the title was misleading, but I really need help from as many people as I can)
Married couple. Gross combined income will be right at 100K. (Around 9% of that goes to student loans). No significant change in income expected.
We are moving to Seattle for the next 4 years, maybe 5. Potentially longer but I can't count on that. I can count on being in Seattle for 4 years, and 70% sure we would stay for 5.
We have been renters since we left home and went to college (9+ years). Between the two of us, we have paid well over 150,000 dollars to the rent gods. We are tired of living in an apartment and we would like to purchase a home/townhome. Financial reasons are not the driving force behind the desire to be homeowners. I have moved to a new apartment every year for the last 9 years. I am tired of moving. I am tired of hearing people next to me at night. I am tired of not having "ownership" over my place to live. If I want to smash a hole in the wall to install an a/c unit, I want the freedom to do so. I want to paint the walls or upgrade the windows that are letting air in/out. I want the privacy. I want a yard so I can finally get a dog and not feel guilty about leaving it inside while I am at work. I want to have a BBQ. We really want to buy a place to call our own, even if it is only for 5 years.
BUT.....I don't want to make a stupid financial move and buy something that is going to ruin us financially. We have a great quality of life right now. Our current rent is $1500 a month. It leaves us with lots of play money. I have been saving just under $1400 a month. (ie: making us live on a budget that simulates a $2900 a month rent check) We have been doing just fine with this. We are traveling lots and are by no means roughing it. We have no car payments, no healthcare payments, not even car insurance payments. Our monthly expenses are rent, power, tv, internet, gas, food, and fun money. That's it. I don't expect that to change at all since our jobs will be the same, but we might have to get a new vehicle sometime soon. If so, I would buy a used car with cash.
We currently expect to have just over $30,000 saved at the end of the year (june 2010) It's not a lot, but it was essentially all saved this year.
We are moving to Seattle in June, so we would be looking to buy a place sometime in April/May/June. Historically the markets are more buyer friendly in the winter and if we buy in the spring we might be ahead of the summer rush.
We both have good credit (>750) and we both have good/stable jobs. At the end of my 5 years I expect to get a significant pay raise (ex: 50K per year to 175K - depending on Obama's healthcare plan).
I need to be close to UW for work, also, I will be at Harborview 30% of the time. I really don't want to commute, so I would need to find a place that's within a 10-20 minute drive from UW. This has limited out search to an area that south of Nrothgate mall and north of I-90. We have discovered that this area is not cheap. BUT, we think we could find a place that we could afford that would be in the right area. I think the Greenlake area would be perfect. Capitol Hill is right in the middle, but I think that's a little too trendy/loud/active for us. We like the quiet/slow/community feel of the Greenlake area. We don't really know the area, so we are open to any other suggestions that are close geographically.
So, here are my questions:
1.) Would spending $350K on a house/townhouse knowing you are only going to be there for 4 years be foolish? I have looked at the graphing calculator on the NY times website and seem to come up with a time frame right at the 4 year mark.
2.) What kind of rents would I be expecting for a 3/2 + garage in a good area close to my work?
3.) Nobody knows for sure, but I am optimistic that next spring will be a decent time to buy. Agree or disagree?
4.) What would you do in my situation?
5.) Any other helpful information to share?
Thanks in advance for anyone kind enough to share their opinion.
JD
Married couple. Gross combined income will be right at 100K. (Around 9% of that goes to student loans). No significant change in income expected.
We are moving to Seattle for the next 4 years, maybe 5. Potentially longer but I can't count on that. I can count on being in Seattle for 4 years, and 70% sure we would stay for 5.
We have been renters since we left home and went to college (9+ years). Between the two of us, we have paid well over 150,000 dollars to the rent gods. We are tired of living in an apartment and we would like to purchase a home/townhome. Financial reasons are not the driving force behind the desire to be homeowners. I have moved to a new apartment every year for the last 9 years. I am tired of moving. I am tired of hearing people next to me at night. I am tired of not having "ownership" over my place to live. If I want to smash a hole in the wall to install an a/c unit, I want the freedom to do so. I want to paint the walls or upgrade the windows that are letting air in/out. I want the privacy. I want a yard so I can finally get a dog and not feel guilty about leaving it inside while I am at work. I want to have a BBQ. We really want to buy a place to call our own, even if it is only for 5 years.
BUT.....I don't want to make a stupid financial move and buy something that is going to ruin us financially. We have a great quality of life right now. Our current rent is $1500 a month. It leaves us with lots of play money. I have been saving just under $1400 a month. (ie: making us live on a budget that simulates a $2900 a month rent check) We have been doing just fine with this. We are traveling lots and are by no means roughing it. We have no car payments, no healthcare payments, not even car insurance payments. Our monthly expenses are rent, power, tv, internet, gas, food, and fun money. That's it. I don't expect that to change at all since our jobs will be the same, but we might have to get a new vehicle sometime soon. If so, I would buy a used car with cash.
We currently expect to have just over $30,000 saved at the end of the year (june 2010) It's not a lot, but it was essentially all saved this year.
We are moving to Seattle in June, so we would be looking to buy a place sometime in April/May/June. Historically the markets are more buyer friendly in the winter and if we buy in the spring we might be ahead of the summer rush.
We both have good credit (>750) and we both have good/stable jobs. At the end of my 5 years I expect to get a significant pay raise (ex: 50K per year to 175K - depending on Obama's healthcare plan).
I need to be close to UW for work, also, I will be at Harborview 30% of the time. I really don't want to commute, so I would need to find a place that's within a 10-20 minute drive from UW. This has limited out search to an area that south of Nrothgate mall and north of I-90. We have discovered that this area is not cheap. BUT, we think we could find a place that we could afford that would be in the right area. I think the Greenlake area would be perfect. Capitol Hill is right in the middle, but I think that's a little too trendy/loud/active for us. We like the quiet/slow/community feel of the Greenlake area. We don't really know the area, so we are open to any other suggestions that are close geographically.
So, here are my questions:
1.) Would spending $350K on a house/townhouse knowing you are only going to be there for 4 years be foolish? I have looked at the graphing calculator on the NY times website and seem to come up with a time frame right at the 4 year mark.
2.) What kind of rents would I be expecting for a 3/2 + garage in a good area close to my work?
3.) Nobody knows for sure, but I am optimistic that next spring will be a decent time to buy. Agree or disagree?
4.) What would you do in my situation?
5.) Any other helpful information to share?
Thanks in advance for anyone kind enough to share their opinion.
JD
Comments
Fro a financial standpoint, it could be very foolish. Time frame on the NY Times website? Like Yogi Berra said, " Predictions are hard to make, especially about the future." When you sell a property, there are costs incurred. Almost a 2% real estate excise tax. Up to 6% real estate commission. Escrow fees. Title fees. Costs that are often 9% or so subtracted from the sale price. Prices are still dropping in the Seattle area, and most of the people on Seattle Bubble don't expect that there will be large price increases in the next few years. Some of us expect continued large price drops. I'm not one of them. I wouldn't be surprised to see prices to continuing to drop for another year, and then stay flat for a couple of years after that. I'm not saying you shouldn't do it if it'll make you happy, but don't think it'll be a financially savvy thing to do.
2.) What kind of rents would I be expecting for a 3/2 + garage in a good area close to my work?
I think you can currently rent a 3/2 with a garage in a good area close to work in the range of about 1600-2200 per month.
3.) Nobody knows for sure, but I am optimistic that next spring will be a decent time to buy. Agree or disagree?
Certainly more decent than it was two years from now, and maybe more decent than right now, but by all traditional measures, Seattle real estate is still overpriced.
Greenlake is going to be pretty pricey...Maybe something closer to Harborview? First Hill or the Central District?
I would probably cry knowing that I have a good income and few expenses, but have less than 4 months pay saved up for a down payment. Then I would find a place to rent.
True True, but I failed to mention that we have only been out of school for 4 months. Saving 30% of your gross income per year is pretty darn good, especially when another 10% goes to loans.
Any ideas on where to look for rental properties around Seattle other than Craigslist.
Thanks for the reply. Is there any way to come up with an accurate number of expected closing costs, taxes, tax breaks etc to help decide the buying vs renting situation? I think the Tim had something like this but it was pretty basic and didn't cover closing costs and other things.
Any more info or places to direct me to learn more about those other areas?
Are you always this manipulative? (Ends justify the means?)
I could help you (I live near Green Lake and work at UW) but I'm not.
Thanks for your altruistic spirit. :?
It's an internet forum and I am just looking for advice, don't get your knickers in a twist. In this case, yes, having a catchy title justified the means. Why you would get angry and take the time to post such a comment is beyond me.
As far as tax advantages, right now the standard deduction for a married couple is 11,400 dollars, so interest, property taxes, etc would have to exceed that. If you bought a 350,000 dollar home with 10% down, your deductible interest, taxes, etc would be in the neighborhood of 22,000 dollars for the first full year, so that would be about an 11,000 dollar advantage over the standard deduction, but keep in mind that as you make payments, more and more of your payment will go towards principal and less to interest, but in the first few years it is heavily weighted towards interest.
http://www.smartmoney.com/personal-fina ... aks-14327/
so do you think that what you buy is going to appreciate 10% in four years?
Try this - find some rental homes/townhomes on Craigslist (yes this is the absolute best place to look)
then go to redfin and find the same listing. See what it is renting for vs. what they are asking for sales price
Do the math. It will be 30-40% cheaper to rent. No way you make that up in taxes (remember you also have to pay insurance, property tax, and in your case probably PMI). Then figure out how much you can bank in 4 years versus what you might make in appreciation less the 10% out of pocket to turn the place.
Probably a pretty easy decision still at this point.
Rent a house.
Buying now would be more expensive and riskier than renting and the only reasons you have to buy start with "I want...".
Rent. Look at North Fremont, Phinney Ridge, Greenlake, Ravenna, Wedgewood, Bryant, Greenlake, Viewridge, Wallingford, Greenwood, Maple Leaf, Meadowbrook.
You can find something much nicer than what you can buy, though it will take work and patience. Less work and patience than buying a place.
Be sure to add up all the buying/selling fees, plus taxes (property tax is quite a chunk), insurance, extra points for that sub-20% down payment.. and yard maintenance, repairs, homeowners dues (if applicable) and so on. Then add up how much interest you will pay over 5 years (you could probably subtract about 25% from that number since it's tax deductible).
Also include your opportunity cost: What would you have done with your $ if you didn't use it on a down payment and house payments? Maybe a Roth IRA, or matching 401k? Maybe you'd just save a more substantial down payment, offset by further drops in housing prices.
Add ALL of those things together, and subtract it from the profit you expect to make in 4 or 5 years of owning the house. Then, remember that you might not make a profit. Then find a nice rental.
Tips on Greenlake:
Whether you rent or buy, avoid the west side near Aurora (aka Hwy 99)
Ravenna is a nice street. It looks big but the traffic is pretty slow and there is a wide greenbelt between the two lanes.
I live across from the fire station which can be noisy, but I don't mind. There's a firefighter who plays bagpipes on Saturday sometimes and he's really good.
Tangletown is a nice area w/ great little restaurants 2-3 blocks from the lake. Tangletown and the east side of the lake (the Starbucks side) are the two nicest areas I think, but the north side near Duke's Chowder House is very nice too. As is the chowder.
On Craigslist be sure to search for GREENLAKE and also "GREEN LAKE" (with quotes) separately, or you will miss some listings.
Okay hope this helps a little, good luck!
After crunching the numbers, it looks like we will be renting.
I don't know if I am excited or not. I would be willing to spend an extra 5-6K per year to have my own house (assuming all other things are equal) but after 4 years I don't think I would come out ahead even with a 24K loss buffer.
I am mostly concerned about being forced to move or to deal with changing rent rates. I also would like the option to make improvements to a house if I wanted. I don't like uncertainty and not having that control.
Anyway, looking at the listings I am optimistic that we can find something where we will be happy.
It is going to suck to be paying ~$2200 a month in rent.
Yet it wouldn't suck paying $2200 a month to a bank? I don't understand. I currently pay my landlord's mortgage, $1550 a month. Would I rather own the home? Absolutely not. They overpaid, buying at the peak of the bubble. After living in this particular house for a year, I've decided I don't want to live in this neighborhood anyway.
We moved to the Seattle area more than two years ago, and I'm very happy we've been renting. We even have two dogs - I didn't think it was necessary to own a house before getting a dog. I still don't. Would I -like- to have a house? Of course.
I've been renting longer than you have, and personally have spent more in that time than you on rent in your 9 years. Yes, by myself. Does this bother me? A little. That said, I have lived in all sorts of interesting places, and when I get bored, I move.
So: rent. We are considering buying in the spring, just like you were, but I'm looking at spending half of what you are - and I'm still very much on the fence about it. I expect at least another solid year of declines, if not more. Yes, I am naturally a pessimist.
What I -really- want to know: how the hell do you pay no car insurance? You clearly own vehicles if you are looking for a place with a garage. I'm very, very curious.
Dep brings up a good point, specific to you: you have no idea what any of the neighborhoods are truly like. Sure, Greenlake is nice, but there are dozens of neighborhoods that I would consider nice or nicer than Greenlake. You can only find out which ones truly suit you after living here for a while.
If transaction costs were nil and house values were increasing, perhaps buying might make a modicum of sense. But they aren't.
Rent, and enjoy not having to pay for the new roof, the landscaping, the plumber and electrician's bills, and most of all, the Realtor (tm).
I drive a 1996 ford explorer with almost 170,000 miles on it. It was given to me by my parents when I went to university. They have paid my insurance ever since and as long as I keep that car they said they would continue to pay since it is already on their insurance plan.
The same deal worked out with my wife's car as her parent's own a business with a dozen vehicles and her insurance is on that policy.
Sweet deal, eh!
We are making the trip up to Seattle in November to scout out the area and to enjoy a long weekend. Yeah, the weather will probably suck, but I am still excited. We are going to check out traffic patterns and try to get a feel for the areas. I have spent a significant amount of time in the Seattle area (probably 25 vacation days and then I lived in Lake Stevens for 6 months) so I have a decent idea of where things are but no idea of what it's like to live anywhere. I really want to get things right the first time. To find a place that we can be happy with for 4 years as I am tired of moving every year. Hopefully it's a good trip.
Any more info on the seattle neighbourhoods or any resources on that topic would be appreciated. Are there any books that you forum gurus would recommend?
If you give me an idea of what's important to you, I can give you my opinion.
Things like:
- Walkability to retail/bars/restaurants
- Size of yards
- Crime
- Schools
- Transit
- Commute
- What sort of house you are looking to rent
etc...
Looking for 3bd/2ba (could be 1.5 ba)
garage, awesome if it had a 2 gar garage
within 15 minutes from UW medical center
would love a yard
walkability is great
safe area
don't care about schools
don't care about public transportation
Thanks for your help!
A quick search on craigslist for keywords "Bryant" & "Garage" bring up
http://seattle.craigslist.org/see/apa/1438892990.html &
http://seattle.craigslist.org/see/apa/1437017579.html
Is it even possible to get things right the first time? I guess if you know exactly where you'll be working, you can pick something based on how far you want to commute... but still, wow.
It'd be so easy to rent an apartment with the pet footprint you have now. I just wish I could move into an apartment, but there's no way. Not with two dogs.
It is making me seriously think about buying. I expect the prices to drop over the next six months and then we will see how things look.
This is a good point.
What makes me second guess my decision to postpone buying for 1+ year is the risk of rising interest rates. I strongly believe that house prices will drop at least 20% from now before bottomming out. OTOH if I wait for a 500k house to drop to 400k, but interest rates go higher than 7%, then I am loosing money by waiting.
Table below is showing total loan payments for a fixed-rate, 30-years loan: PMT(A3,30,B3)*30.
Of course you can say that inflation is probably higher when interest rates are at 7% rather than at 5% (and $1,000,000 over 30 years is worth less in a higher inflation).
Sorry. I've been busy and don't check in as much as I used to.
15 minutes from UW is a pretty wide range. I'll assume you mean by car, and not stuck in traffic. That covers most of North Seattle, excluding Western Ballard/Sunset Hill/Crown Hill and Broadview, down into the central district and even parts of the East Side, depending on 520 traffic.
Given your preference for Greenlake and safe, I'll I assume you aren't interested in being adventurous and exploring some of the central and south neighborhoods, and will stick to the usual suspects in the north.
Two car garages are tough. This is going to be a pretty big hurdle and really define where you live. I don't treat my cars with that kind of respect, so I was not looking at this at all.
Moving out from UW:
You have the U-district, doesn't have many houses, and you probably aren't going to be interested.
Wallingford - a massive dearth of garages. Usually single car when they exist. Yards are small, and 3/2 rentals would probably be out of your price range (~2K/mo?) in any case.
Fremont - Ditto.
Ravenna - Ditto.
Bryant - Now you are getting closer. Still hard to find a decent sized yard and garage, but they exist.
Greenlake - Ditto.
Phinney Ridge - Ditto.
View Ridge/Wedgwood - This is where I would start looking. Bigger houses, with bigger yards. If you stay East of the ridge (no view), you might be able to find something here.
Maple Leaf - Very, promising for what you are looking for. Great little nieghborhood, and a bunch of in-fill houses that look like this:
I find them hideous, but if you are looking for a two-car garage, this will be your best option.
The neighborhood is very walkable, with a lovely retail district with coffee shops, restaurants, a hardware store, park and drug store.
Meadowbrook - This is classic suburbia - windy streets, big lots and big garages. Not sure what the rental market's like, and not walkable, but you would get a garage.
Greenwood - This is probably as far NW as I would go, and even this is pushing your 15 minutes at rush hour. East-West is slow. This is more condo and apartment land, but there are some smaller houses and you might find some infill like the pic above that would suit your needs.
Northgate - I'd probably avoid. Transit and the mall are it's main allure.
Pinehurst - There are definitely larger lots and garages here, but you are running up against your 15 minutes, parts get a little more sketchy in terms of safety, and it's not particularly walkable, depending on where you would buy.
Lake City/Cedar Park - similar to above. You could probably find a house and a big garage here though.
Good luck!
Our situation is that dh just finished residency and we just moved back home to Seattle where's he started his 'first' job. We are renting a house on Queen Anne for ~$1900 and thinking about buying for many of the same reasons you stated. I'm an early-stage academic and the most I can plan for in terms of job security is about 4-5 years, similar to you. I am SO ready to live in my own home but at the same time, we are peripatetic and just really don't know what we'll be up to in 5 years -- it's really the most we can plan for...does that mean we shouldn't ever buy a house? I personally don't think so because I think the personal gain I would get would outweigh the additional cost, especially at this stage in our lives. So here a few thoughts about the questions you raised:
1.) Would spending $350K on a house/townhouse knowing you are only going to be there for 4 years be foolish? I have looked at the graphing calculator on the NY times website and seem to come up with a time frame right at the 4 year mark.
I'm not sure it would be foolish but I'd ask yourself how you'd feel if you paid more for housing for the next 4 years and ended up losing a bit of money (or having to rent the place for awhile) at the end of this period. Will the nonfinancial personal benefit/gain from having your own place truly outweigh the costs of paying more for your housing? This is a total judgment call.
2.) What kind of rents would I be expecting for a 3/2 + garage in a good area close to my work?
If you rent a whole house you'll pay more than if you rent a town home or duplex/triplex in a house. N Seatle neighborhoods seem to be runnning $1500-2200 for something decent but this is very subjective -- just what we found when we were looking to rent this past August. There is a lot of crap in this price range so be prepared to look for awhile (we looked at 2-3 places a day for ~10 days before finding our place).
3.) Nobody knows for sure, but I am optimistic that next spring will be a decent time to buy. Agree or disagree?
I don't think it would be a bad time to buy (but admittedly I'm not real estate expert). It is hard to imagine that home prices won't drop after the 8k tax-credit goes away and if it is not extended after April, after any left over summer rush, I'd think the fall season may bring even cheaper home prices. I'm not sure how to weigh the potentially cheaper home prices vs. 8k tax credit for a 4/5-year ownership situation.
4.) What would you do in my situation?
If you are willing to spend the extra to be a home owner and get the personal benefits, I'd be sure to buy in a neighborhood that would be easy to rent it out -- that way if at the end of your time you think you'd lose money it'd be easy to float it until you could sell.
5.) Any other helpful information to share?
If you will be working on Capitol HIll, I'd check out the 14th street neighborhood (not so young but nice); madison park, montlake, madrona, leschi, ravenna, laurelhurst in addition to greenlake, phinney, fremont, queen anne -- neighborhoods east of I-5 would make a commute to capitol hill a big PITA, even during odd work hours.
Good luck with your move, your decision and your new position. The UW is a great place for training and research and Seattle, as you know, is a wonderful place.
Your advice is practical and smart, but when I got to #5 I got confused.
I thought the questioner was going to be working at UW Medical Center, I didn't read anything about working on Capitol Hill, and also Capitol Hill IS east of I-5, so a commute from east of I-5 to Capitol Hill would be easy, unless you're talking east of Seattle itself.
But 1-4 was pretty spot on.
I think he said 30% at Harborview so I think that's what I had in mind when responding to #5. Thanks for the kudos -- its a bit of an intimidating board to ready sometimes, though it has been very useful.
We just got back from a 4 days trip to Seattle to scout out neighborhoods and areas. We found several areas that we liked, but overall it looks like Queen Anne was the winner. We can't afford to buy so we have decided to rent.
If you know of a good house or townhome to rent in the Queen Anne area, feel free to drop me a line. We would like to be close to the shops at the top of the hill, and we are looking in the $1500 - $2500 dollar range. We also would like the option to sign a long term lease if that is in your interest.
Take care
http://www.zilpy.com/