hate the words low inventory,competing offers & bubble but love "Low Interest rate" (Seattle: real estate market, apartments)

[mezzler]

I would like to know what other fellow first time buyers and experts think of buying a house in the current east side real estate market. Will the current house price really hold its value after 5 years? I can only afford a 500K house and interested in Sammamish, Redmond Ridge and Issaquah Highlands. My parameters are school, Commute to Seattle dwontown and future marketability. I gave some thought about new homes in Bothell which fits into my budget but not sure about the NS school district especially on the special needs services.
Would really appreciate some tips and advice.

Thanks,

[homesinseattle]

500K house isn't a bad bet, with rents going up and incredibly low interest rates. You could change your mind 5 years from now, move to Bali, and still rent it for more than your payment.

[Hemlock140]

No one can predict the future, so it's a gamble. Our house in Sammamish cost us $190k in 1993, and at the peak was appraised at $674k in 2006. During the recession it dropped to about $440, but has since rebounded and according to Zillow is now at $646, so it has appreciated faster since the crash and is nearly caught up already. The schools are a big part of that, but also the family-friendliness, low crime rate and location for jobs, and shopping is close with the option of either Redmond or Issaquah within 5-6 miles. Redmond Ridge is farther out but has more shopping within. Issaquah highlands also has some shopping and restaurants there, but is just up the hill from major stores in the main part of Issaquah. We go to eat or see a movie there sometimes and find it to be very crowded and the roads congested in the evenings. Not only are there many people living there with more huge apartments still being built, but it attracts people like us going there for a few hours. More recently we have been eating out in Klahanie, which has become less crowded with the competition, and Klahanie has just voted to be annexed to Sammamish.

[Ira500]

Often, when asking "experts" about the real estate market, you're going to get an answer that suits their best interests.
So 99% of the real estate agents out there are going to say something to the effect of " It's a no brainer. In fact, if you don't buy now, prices are going to keep going up so fast that you might never again be able to afford it."
But...they were saying the same thing in 2006.
My feeling is that despite the fact that hordes of people are moving to the Seattle area, many of them making good money, this gravy train is unsustainable. I'm not predicting a crash. But prices have been skyrocketing. Yogi Berra did say " Predictions are hard to make, especially about the future."
it costs a lot to buy and sell a house. The buyer pays for an inspection, an appraisal, loan origination fees, title and escrow costs, etc, normally totally around 3% of the cost of the house. The seller pays for commissions for both the buyer's and seller's agents, title, escrow, and to close the loan. All this totals about 9% of the selling price.
So let's say you buy a 500,000 dollar house, and prices rise 2% a year. I know we've been seeing prices rise much faster, but 2% annual gains are certainly possible. So, you've paid 15,000 in closing costs to buy, and you sell five years later at 550,000. Then you pay 50,000 in closing costs to sell. So you've actually "lost" 15,000 because of all the costs involved.
If I were buying a house, one that I was going to live in, it would be with the expectation that I would be there longer than five years. Otherwise, it is riskier.

[bellevue123]

When you say you can only afford 500k, what exactly do you mean by afford? Do you mean you can comfortably afford (i.e. you have a down payment large enough that your mortgage payments on a fixed rate mortgage will total less than 30% of your income?). If so, then you don't have much to lose. Even in the worst case if prices drop, or you're temporarily unemployed, you'll still be able to keep the house and have somewhere to live. Plus, you've insulated yourself from potentially rising rents.

[Ira500]

Color me cynical. When people tell you that buying a house in Sammamish or Redmond or Issaquah right now is a sure bet, I'd say the chances are very high that the person telling you this is either a real estate agent, a lender, or is someone who just bought a house.
It doesn't look like prices are going to drop anytime soon, but you'll get a less biased opinion if you get answers from folks who don't have a vested interest.

[mezzler]

Thank you all for sharing your views. I see some valuable advice in each of your post.
bellevue123 - do you mean 30 % of gross or net income?

Ira500 - I agree that 5 years is a risky bet but don't have enough visibility beyond 5 years.My thinking is, reasle would be easier if i buy a house in a neighborhood that is close to MS. If the price drops and i had to move at least i would be easily rent out the house. On this point i am not confident enough on houses in Bothell neighbourhood.

didn't realize that its going to be high stress activity like this but if my stars are aligned right i am hoping i will be house owner sooner or later.

Thanks again.

[evilcart]

From an investment point of view, you will most likely be fine as long as Microsoft is fine. But buying that far out means that there is more risk should MSFT enter a strong decline.

If I was given the choice, I would want a smaller home closer in that would have a better chance of holding its value. $500k will buy you a home in Kirkland , Bellevue , Redmond... Just not a big or new one. Try to pick one that as least has room to expand should you decide to...

the old rule still stands... Location location location.

Whatever you do don't buy a "problem" site because it gets you a bigger or newer home.

[bellevue123]

Originally Posted by evilcart

From an investment point of view, you will most likely be fine as long as Microsoft is fine. But buying that far out means that there is more risk should MSFT enter a strong decline.

If I was given the choice, I would want a smaller home closer in that would have a better chance of holding its value. $500k will buy you a home in Kirkland , Bellevue , Redmond... Just not a big or new one. Try to pick one that as least has room to expand should you decide to...

the old rule still stands... Location location location.

Whatever you do don't buy a "problem" site because it gets you a bigger or newer home.

If you're close to MSFT, you'll also be close to the new East Link. Even if MSFT declines, I imagine easy access to light rail would help maintain value or at least keep rental demand somewhat strong. East Link will make an easy commute to Bellevue and Seattle.

[mezzler]

MSFT decline and East Link are some interesting perspectives. I can find a smaller home in 1600 sqft range close to redmond and live a happy life. Will the buyers of future like 1600 sqft house? will it be hard to sell because he house is small or no backyard or detached garage etc...? I somehow feel that 1600 sqft is already outdated for a SFH.