Better off renting or buying a condo now in Seattle? (Des Moines: bank owned, for sale)

[exit82]

I'm trying to understand the justification for the high price per square foot for condos in Seattle. It just seems totally out of whack-(well maybe not for NYC). Then when you add in taxes and condo fees it's truly almost absurd. Which brings me to my actual question- would I be better off renting rather than buying a condo? I work for an airline so I am in and out of town frequently. Thanks for any insight.

[JesseJB]

Id buy right now if you want to invest and have the money to buy. Id rent in any other case.

[Molly 56]

Exit82, have you got any comparisons other than NYC? Are you talking about downtown Seattle, or some of the neighborhoods?

[Ira500]

exit 82,
Seattle has seen a lot of new condo developments over the last few years, and there are a few more getting finished. But I'll give you both arguments.

1. It costs a lot to build in Seattle, between the cost of land, labor, materials, permitting, and the myriad of regulations the City requires. If the builder/developer wants to make any money, they have to charge a lot. And every market is different, so you can't really compare Seattle to Little Rock or NYC.

2. Or can you? Historically, every city has a sale price over rent ratio. Two years ago homes in the Seattle area were selling for about 300x the monthly rent for a similar place. Now it's down to something like 235x, but the historical ratio is closer to 150-175.
There is also a historical home price to median household income ratio...it used to be something like 3.5x the median household income, now it's more like 4.5, down from something like 5.25.
what's all this got to do with anything?
If you can find a condo to buy where your monthly payments, including taxes, insurance, and condo fees are not significantly higher than what the rent would be for the same place, then it might be worth buying. Or, if you just feel a lot better owning a place, then that emotional satisfaction might be worth the extra money.
But from a strictly practical viewpoint, with some exceptions, renting makes more sense. A lot of condo rents are about half of what the mortgage payments would be.
Also, the direction of sales prices has been down since July 2007, and that decline does not appear to be ending, so if you bought now you'd be assuming the risk of further erosion in prices.
But...there are a few places for sale that are significantly under market value, including short sales, bank owned property, and desperate sellers, those might be worth it. Also, at some point, probably somewhere between the next 6-18 months, we will hit bottom, and then might truly be a pretty good time to buy.

[shoegal111]

Originally Posted by Ira500

exit 82,
Seattle has seen a lot of new condo developments over the last few years, and there are a few more getting finished. But I'll give you both arguments.

1. It costs a lot to build in Seattle, between the cost of land, labor, materials, permitting, and the myriad of regulations the City requires. If the builder/developer wants to make any money, they have to charge a lot. And every market is different, so you can't really compare Seattle to Little Rock or NYC.

2. Or can you? Historically, every city has a sale price over rent ratio. Two years ago homes in the Seattle area were selling for about 300x the monthly rent for a similar place. Now it's down to something like 235x, but the historical ratio is closer to 150-175.
There is also a historical home price to median household income ratio...it used to be something like 3.5x the median household income, now it's more like 4.5, down from something like 5.25.
what's all this got to do with anything?
If you can find a condo to buy where your monthly payments, including taxes, insurance, and condo fees are not significantly higher than what the rent would be for the same place, then it might be worth buying. Or, if you just feel a lot better owning a place, then that emotional satisfaction might be worth the extra money.
But from a strictly practical viewpoint, with some exceptions, renting makes more sense. A lot of condo rents are about half of what the mortgage payments would be.
Also, the direction of sales prices has been down since July 2007, and that decline does not appear to be ending, so if you bought now you'd be assuming the risk of further erosion in prices.
But...there are a few places for sale that are significantly under market value, including short sales, bank owned property, and desperate sellers, those might be worth it. Also, at some point, probably somewhere between the next 6-18 months, we will hit bottom, and then might truly be a pretty good time to buy.

I think you are near bottom now. A friend of mine is looking at condos and the prices are at rock bottom now in the downtown area. Developers had a lot of unsold units and the prices are unbelievable at the moment.

[Ira500]

The vast majority of real estate agents will tell you that we've hit bottom right now, but that's like walking into a barber shop and asking if you need a haircut.
I'll bet a beer that prices will be lower six months from now.

[exit82]

Thank you for your responses, I guess what I'm trying to say (without trying to offend anyone) is that from what I've seen (or been shown) in the Seattle area,-it's simply not worth the money (in my opinion). I'm very familiar with Seattle, and having been employed by the airline for more than 20 years, I've moved around a bit (by choice). Why would I pay more for less in Seattle than in Honolulu, Sedona, or Metro NY area? All of which are in the high rent district as far as US property values go. Having had condos in each of those cities- I have done well enough to pay cash-(around 400K). I thought I would be losing money to rent- but in Seattle- it looks to me that I might be losing money to buy. Maybe I'll give it a few more weeks of looking- I'm kind of favoring the Des Moines area- I want to be south of the airport. Another thing that aggravates me- (now that I'm venting) is the "amenities" a few place are trying to push. I wish potential buyers realized that these "amenities" are taken over by cliques that give you the stink eye if you are so bold as to invade "their space"-which you find yourself subsidizing. I'd much rather have nice landscaping with fewer frills and lower HOA fees- but the "nicer" places have the most frills. I've yet to see a complex with nice landscaping-most are plopped on a busy street. Sorry so long.

[jinj]

Originally Posted by Ira500

The vast majority of real estate agents will tell you that we've hit bottom right now, but that's like walking into a barber shop and asking if you need a haircut.
I'll bet a beer that prices will be lower six months from now.

[bigal32]

Because you'll have no trouble finding real estate agents who insist that now is the best time to buy, ever, check out seattlebubble.com for the other side of the argument.

[WildcatTofu]

There are two important facts you should know.
1. The supply has doubled since 2007. What I heard of, in the downtown area, there was only 8000 units available around 2005. During the past 4 years, construction companies have built more 8000 new units. ECON 101 has taught me, when supply goes up, the price will go down.

2. Most of new condo in downtown are not doing well. Some of them are finished but only 20% of units are sold. That leads to two issues, first, if you want to buy, you have to pay cash. Banks will not give you a reasonable loan if only less than 50% of total units are sold. Fannie Mae and Freddie Mac can not give you a loan unless 70% of units are sold.
Second, who is going to pay for the unpaid condo fee? If only 50% of units are sold, who will pay for the other 50% of unpaid maintenance fee for security patrol, gardening, swimming pools and etc....

Some construction companies have started to unload their holding at a huge bargain. If you want to invest in the condo market, you can start to look for some deals. If you to buy a home, just keep waiting....