The impending Seattle housing market collapse. (Snohomish: sales, renters, mortgages)

[irrational exuberance]

Actually in the long run is huge. If I borrow at 4.875% than my monthly payment is 1640 (PI) I pay 280,596 in interest. If I borrow at 5% my monthly payment is 1664.14 and I pay 289,092 in interest so that is nearly 10k I could have used to invest or go on vacation or buy some nice furniture etc. One more calculation if I take that 24 dollars difference and put it into the stock market that is worth 43,937 in 30 years......So you see there is quite a huge opportunity cost from 4.875 to 5% I would save 10k plus I would have 43,937 more in my portfolio

[irrational exuberance]

Originally Posted by Condorll

Good for you! But tell me, is the difference between 5% and 4.875% gonna make it or break it for you? If so, maybe reconsider that purchase.

Also remember that just because the FED cuts, doesn't mean the Banks cut Mortgage rates! The FED is looking for short term stimulus to the economy (and saving a few banks butts in the process), while the Lenders are looking out 30 years on those interest rates. There have been times where Banks actually increase rates due to their own economic projections, even though the Fed cuts .

It wont make or break me its informed decisions. We could spend alot more for a house but like I was taught two types of people,
1. Income - expense = savings
2. Income - saving = expenses.

Obviously, my wife and I are type 2. So where ever we can save more money and cut expenses is our goal

[Condorll]

Originally Posted by irrational exuberance

Actually in the long run is huge. If I borrow at 4.875% than my monthly payment is 1640 (PI) I pay 280,596 in interest. If I borrow at 5% my monthly payment is 1664.14 and I pay 289,092 in interest so that is nearly 10k I could have used to invest or go on vacation or buy some nice furniture etc. One more calculation if I take that 24 dollars difference and put it into the stock market that is worth 43,937 in 30 years......So you see there is quite a huge opportunity cost from 4.875 to 5% I would save 10k plus I would have 43,937 more in my portfolio

Yup your right assuming home prices stay the same. One surge in buyer interest and you may see buyers bidding up homes. That does happen frequently in Seattle where multiple offers go in on a home. With the number of Buyers sitting on the fence right now, this Spring may see a resurgence of activity.

Your 10K interest rate saving may cost you $ 25 k more on the home purchase if prices start to rise.

You are trying to pick a bottom, good luck with that.

[irrational exuberance]

Originally Posted by Condorll

Yup your right assuming home prices stay the same. One surge in buyer interest and you may see buyers bidding up homes. That does happen frequently in Seattle where multiple offers go in on a home. With the number of Buyers sitting on the fence right now, this Spring may see a resurgence of activity.

Your 10K interest rate saving may cost you $ 25 k more on the home purchase if prices start to rise.

You are trying to pick a bottom, good luck with that.

Another misconception plaguing people. You are asssuming someone will buy your house. Until the moment that money is in your hand its unrealized gain meaning, I dont consider a house an asset until I get money out of it. So we invest accordingly. Historically in Washington state houses have appreciated about ( 3-5%). That is a fair rate of return I guess but if you like 99% of people out there (not you of course you have boatloads of money) you finance the house. So once you sell, payoff loans, fees etc you are really left with a decreased amount. Im not trying to live in Seattle because I work in South King county and my wife works in Downtown tacoma. I am looking at South King county and pierce county. And I wouldnt call bottom a 3100 sqft house. In seattle you would be paying over a million for a house that size depending on location and I mean not the bad areas but modest areas. I will be paying 310k and saving the rest. In my world the only thing people care about is money. So if I save alot and make use sound judgement the wealth will come but I am a humble/fruggle person I could have a million dollars and still search out the best bargain and try to save as much as possible.

[70Ford]

Good news for the Seattle home market.
Home prices will remain artificially high.

Lender, community group to aid troubled homeowners

The mortgage payment on Theresa DiMartino's Burien home jumped from $1,442 to $2,390 a month last fall, just as she was going through a breakup.

"I was forced to put my home up for sale, but I had no offers," DiMartino, who has a 6-year-old son, said at a news conference Monday in Seattle.

But under a new agreement between her lender and a community advocacy group, DiMartino's 8.99 percent adjustable rate loan will turn into a fixed-rate mortgage at just 5.22 percent -- below current market rates -- allowing her to keep her home.

[Condorll]

More Good News for the Seattle Housing Market.

President Bush signed into law today the Economic Stimulus package which includes raising the limit for a Jumbo mortgage from the current $417,000 to an amount equal to 1.25 x the av cost of a home in the specific area.

Seattle's av home cost was 430,00 in January 2008 so a jumbo loan would only be for amounts higher than $537,500. All mortgages below $537,000 will be considered "conventional" mortgages at the lower rate (usually 1 point below Jumbo rates).

What this means is that if you need to borrow 450k, under the old rules and at a rate of 6.7% your payment would be $2900 per month. Under the new law, your loan would be at the "normal" lower rate of 5.7% and your payment would be $2600/month, a savings of $300/month, $3600/year. $108,000 over the life of the mortgage.

Time to buy Folks!

[jenlion]

Man, this just BURNS ME UP!!

The excuse for giving people who were irresponsible and signed up for something they couldn't afford was that they didn't understand the paperwork? (according to the article)

They didn't UNDERSTAND that the adjustable rate might ADJUST??

So now they get BETTER rates than people with spotless credit - who worked HARD to keep it that way - can get?????

Thanks, 70Ford, for raising my blood pressure today!

I do understand that people have it tough. I used to live in a tiny $200/mo apartment that was a piece of crap. I worked my butt off to find a better apartment. Then a better one. THEN a house. Guess what I didn't do - I didn't go buy a house that I couldn't afford.

And they're being rewarded? How did this happen??

[wsugrad03]

Originally Posted by Condorll

More Good News for the Seattle Housing Market.

President Bush signed into law today the Economic Stimulus package which includes raising the limit for a Jumbo mortgage from the current $417,000 to an amount equal to 1.25 x the av cost of a home in the specific area.

Seattle's av home cost was 430,00 in January 2008 so a jumbo loan would only be for amounts higher than $537,500. All mortgages below $537,000 will be considered "conventional" mortgages at the lower rate (usually 1 point below Jumbo rates).

What this means is that if you need to borrow 450k, under the old rules and at a rate of 6.7% your payment would be $2900 per month. Under the new law, your loan would be at the "normal" lower rate of 5.7% and your payment would be $2600/month, a savings of $300/month, $3600/year. $108,000 over the life of the mortgage.

Time to buy Folks!

That's nice that the Jumbo mortgage limit has been raised...I guess. That saves us a some money in monthly payments on a asset that is overvalued in the first place. But, under no circumstances is this an excuse for housing prices in Seattle to lurch forward. The economics still doesn't make sense. $450K for a nice 3bd town home is pathetic! Seattle is great, but it isn't a "superstar" global city where you can expect these kinds of prices regardless of median SF income levels.

If lifting the Jumbo mortgage frees you to buy at a lower rate, then take it with a grain of salt and continue tossing out those low ball offers....

I agree with jenlion that helping out people who are fiscally irresponsible is just outrageous. I had a 5 year ARM once, but I understood the contract and sold the darn place before the rates reset....DUH! If people go into default, then they deserve a foreclosure.

[Condorll]

Originally Posted by wsugrad03

That's nice that the Jumbo mortgage limit has been raised...I guess. That saves us a some money in monthly payments on a asset that is overvalued in the first place. But, under no circumstances is this an excuse for housing prices in Seattle to lurch forward. The economics still doesn't make sense. $450K for a nice 3bd town home is pathetic! Seattle is great, but it isn't a "superstar" global city where you can expect these kinds of prices regardless of median SF income levels.

If lifting the Jumbo mortgage frees you to buy at a lower rate, then take it with a grain of salt and continue tossing out those low ball offers....

I agree with jenlion that helping out people who are fiscally irresponsible is just outrageous. I had a 5 year ARM once, but I understood the contract and sold the darn place before the rates reset....DUH! If people go into default, then they deserve a foreclosure.

I agree with you on the ARM financing. In my opinion many who opted for the teaser rate ARMS had nothing to loose. They went from an apartment or mobile home into a new house with nothing down. If it didn't work out they planned to walk away, no sweat. Raising the Jumbo limit and fixing the ARM resets at current rates won't help these people as they will still have to come up with some hefty cash to make the required down payment for a conventional mortgage, more money if their home price went down.

[drewba]

There's an interesting article in the Seattle Times today that ties much of the rise in housing prices to government regulations such as the Growth Management Act, Critical Areas Ordinance and permitting processes. The inflation adjusted median price of homes in the Seattle area increased from $221,000 to $447,800 between 1989 and 2006. According to this UW study, almost $200k of that increase was due to regulations.

Business & Technology | UW study: Rules add $200,000 to Seattle house price | Seattle Times Newspaper