N.W. Housing Bubble?

[secret_squirrel]

like to see someone provide something meaningful which makes a good argument for spending nearly $4k per month to buy a home in Seattle when something comparable can be rented for $1600.

4k is a payment for about a $700,000 mortgage. Glancing at the offerings onCraigslist, I don't see a lot of $700,000 homes renting for $1600.

Look at the neighboring communities, and the rent vs. own comparison is much closer, too. Especially if you put a reasonable amount down and avoid PMI.

I have been pro real estate my entire life up until 3 years ago

Too bad you didn't wait a little longer to get out. The last 3 years were quite profitable. I just sold a small house I bought in 2004. It was on the market less than a week and now I have a nice down payment for our next home. We don't expect such rapid equity in this market, but we still need a place to live, a home for our family. We're purchasing for the long-term and can weather a slow-down. I've been in this reas estate market since the 90s and even with slow appreciation, I have always been better off investing in my own property than someone else's.

Going back to your example - for a $700k home to drop to a payment of $1600, it's value would drop by half to around $350k. And the $350k house would drop commensurate. Now, I'm not saying that won't happen... But it would have an apocolyptic shock on the entire economy or be caused by a catastrophe. And I'm not saying that apocolyptic shocks or catastrophes can't happen... but if they do, millions of people are going to have a lot more pressing things to worry about than real estate. And I'm not going to live in fear of the worst case scenario.

But that's just my opnion. YMMV.

[BanteringBear]

"4k is a payment for about a $700,000 mortgage."

I don't know where you are getting your mortgage calculations, but you better find a new method.

Per craigslist:

For rent: 2 bedroom 80th and Stone-$1600. Zillow value $571k. 20% down of $115,000 leaving a balance of $456k. PITI total of $3257 per month (30 year fixed @6.5%).

Now what was your argument?

FYI, I sold my house in Kitsap County less than a year ago, at the peak (I was scared I missed it).

[cdelena]

Looking at homes both for rent and sale in the PNW over the last year I observed quite a few that apparently had appreciated substantially where homes appraised about $500K but were offered for rent at $2000 or less. In no way would the rent cover PITI on the appraised value but apparently did (or was close) on the owners mortgage. I considered a home offered for sale at $470K that was renting for $1800, and another pulled off the market at $549K that asked rent of $1900.

[NCWmark]

Here on the east side in Wenatchee it doesn't seem to going down or leveling off yet. Housing costs have skyrocketed over the past few years especially. It appears that Californians have moved to Seattle driving the price up and West Siders have moved east driving the price up here. It's okay by me as I'm the beneficiary right now.

[cspeaker]

I have a $337,500 mortgage and my payment is $2700/mo total (taxes included) with an interest rate of 7.6%. I am paying about $900 more than what I could rent my house for. $412 of my monthly payment goes towards principal and an escrow account (that I get back). That leaves $588/mo ($7056/yr), which I get back at the end of the year. Those are real numbers in a real situation. When I am 62 years old my house will be paid off (if I don't pay it off early) and then I will only be paying $275/mo in property taxes. I can spend the rest of my money on traveling and when I die I will have something to leave my children and grandchildren.

Does it really make sense to rent?

[cdelena]

Originally Posted by cspeaker

...

Does it really make sense to rent?

Sure, in some cases the financials can favor rental but you may not get the home choice you want and probably won't have the flexibility to make changes in a rental.

There are markets where the inventory of housing keeps the going rate reasonably low in relation to purchase price.

The cost of maintenance and the value of the money used for down payment can easily equal appreciation in a market with little gains measured of a long time. When PITI is compared to rental the balance can favor rental, especially if the mortgage interest rate in not real low. The tax benefits of ownership are marginal for many since not all can itemize to there advantage.

The answer is 'it depends'. There is not a pat answer for all people in all markets.

[RobE]

I live in Thurston County in a regular, decent middle class multi-racial neighborhood and the houses were all built within the last seven years. Three houses in my tract that I know of have been up for sale for months, including my next door neighbor's. At least two others have been rented out to hispanic families (illegal aliens, I suspect) and they have just built a big new apartment complex up the street from where I live and it is just about empty. During my seven years here, my house has appreciated in value around $100K. It is fully paid for (moved from California, cashed out the equity on a previous home), so no worries there. But I do worry about homes sitting empty or owners renting them to riff raff until the market gets better in five or six years or they can finally sell them at some kind of profit. This foreclosure boom is not going to be pretty.