Seattle now ranked #3 most expensive major US city to buy a home (2014, condos)

[deadpukka]

Originally Posted by eugene_b

As someone who recently moved from NYC (in our latest iteration of travels at least), this ^ very accurately describes our experience too. My wife and I have been going over this for half year now (since we moved basically) and we are really failing to justify reasons to buy with rents this cheap.

I'm in a similar boat, and have lived in 3 major cities in the last 3 years, just because of the flux of my work (and planning a move back to Seattle from LA).

I can't see into the future more than a year, and can't commit to buying anywhere for the long-term just to guarantee the increase in equity of a purchase. (And I have a stable software exec job, but working with small companies, I can't guarantee they'll be around in 3-5yrs - and not have to move again to where work is.)

As you said, there's something nice about not having to worry about maintenance. I've owned twice before, but renting the last 5+ yrs. When I lived in Austin, the A/C went out mid-summer in 100F temps, and the landlord had to cough up $7K to replace the whole system. I just suffered for a week with a hot house, but didn't have to pay a dime.

[drshang]

Rents here are going to trend lower relative to purchase prices here on out due to the WA lemon law for condo developments. Considering most housing units added are apartment buildings, the lemon law creates a disincentive for developers to sell units rather than rent. They will only choose to sell if the profit from selling is so much greater than renting to cover costs associated with constant legal headaches from the condo liability laws here. Thus, the "break even" for developers to sell units is a scenario where the cost to own is WAY higher than the cost to rent. This is why you are starting to see a few developers sell units rather than rent them.

It also means that you are going to pay more own a condo than rent an apartment. And the five years of construction in process in Seattle is only going to mean further excess supply in the rental market.

[leastprime]

@deadpukka,
So how was Charlotte?

[leastprime]

Originally Posted by drshang

...
It also means that you are going to pay more own a condo than rent an apartment. And the five years of construction in process in Seattle is only going to mean further excess supply in the rental market.

Also worth a least a month's free, reduced deposit, and if you're smart, maybe a dinner at Anthony's or minimally at Ivar's .

[JackLonsdale]

The discrepancy between renting and owning condominiums/apartments creates a difficult financial decision. This is the case particularly in dense, pricey West Coast markets like San Francisco, Seattle, Vancouver. Typically one is going to get more condo for their dollar when renting - ie, a higher quality of build, an extra bedroom, or an upgrade in neighborhood. The weird condo development laws in Washington state exacerbate this situation.

A wise approach would be to rent for the short term and take advantage of these kind of gaps, but to make a purchase when the condo market prices takes a big dip (or when rents start rising dramatically). Even though I hate the "throwing away your money on rent" argument put forth by realtors, there is something to be said for building equity. Also, rents can lag behind valuations for years, but have a way of eventually catching up. You don't want to be the homeowner who bit off more than they could chew, but you also don't want to be the renter who is facing retirement with zero equity and rising rents.

[eugene_b]

Just to clarify: I am not specifically interested in condos; if/when we buy, it's almost certainly going to be a house. I chose condo to attempt a more or less accurate comparison to what we are renting and to put at least some sort of concrete number on how much it costs to maintain external parts of the house. That was motivated by stories I heard from friends who bought a house and kept casually talking about some frozen pipes (north east problems), removal of old tree branch, leaking roof, etc, etc and how many thousands of dollars they had to pay for these services. I used condo's HOA fees to, hopefully, account for this. But then there are also things HOA doesn't cover (everything inside) and I don't know how much that costs.

Overall when exploring houses in the previous locations where we lived, there seemed to be much less of a gap between rent / buy. For instance when we lived in upstate NY, our rent for a nice 2br condo was $900. Right next to us there were really nice houses for sale for about $200-300k. When we lived in NJ suburbs of NYC (2 hr commute one way), rent was $2300 and $800-1000k would get you an enormous "5 beds 4 baths 3,258 sqft" house in the same town built in 2002 (looked up just now). Here in Magnolia rent is $2300 and commute is 30min which is a dramatic improvement. But it's anyone's guess how much a 2002 "5 beds 4 baths 3,258 sqft" house would cost but probably not $800-1000k.

[JackLonsdale]

Condo or house is irrelevant. Although house rentals are more rare in these expensive metros so there is less data to draw from with single family homes. Also, let's not bother comparing Seattle/San Francisco to upstate New York or the New Jersey suburbs -- there is too much difference in areas like migration, offshore investment, zoning, etc.

You are trying to rationalize paying rent instead of buying, and that is fine. Like you mentioned, all of the overhead of owning represents a serious financial burden, especially up front, and you can't really justify the costs of ownership unless you live in that for-sale condo next door for three years or more.

So yes, you are probably doing the right thing in renting for the short term. And yes, renting gives you an initial upgrade in quality of life because your financial burden is lessened.

But don't come back to these boards as a renter in five years time and complain that you've been shut out of the housing market.

[CoastieTX]

Seattle homes prices drop $70K in just three months.

Inventory for single family homes and condos have risen 86% and 161%, respectively, from just a year ago.

If I were renting in Seattle right now, I’d hardly be feeling the pressure to “Buy now, or be priced out.”

https://www.seattletimes.com/busines...own-continues/

[eugene_b]

Jack, I am not too worried about getting priced out and not trying to rationalize paying rent over buying. I am just trying to understand what makes more sense at the current price levels: pay rent or buy. And ultimately it really depends on what both prices will be in the future which I don’t think anybody can reliably tell. If 5 years from now, the 1 million house I looked at and didn’t buy, will cost 10 million, I’ll eat my words. But it’s not terribly unlikely that 5 years from now this same hose will appreciate by a bit and my rent will go up by several hundred dollars and in this case I don’t think I’d be too sad about missing out on house appreciation because all these 5 years I would have been placing money into savings account and my down payment money would have been invested elsewhere (in diversified assets, unlike house which is one scary “all eggs in one busket” thing).
And I am not even going into negative scenarios - it’s not unheard of real esrate prices dropping by a bit or by a lot and things like that happened in the past. Not saying it will happen to Seattle but I am just not finding it wise to base rent vs buy conversation around scenario that prices will keep growing at crazy rates as if it was something guaranteed to happen.

[Cinema Cat]

Originally Posted by Flightoficarus87

According to this report (based on a Seattle Times article using Zillow data), Seattle is now #3 in the US behind San Francisco and San Jose to buy a home

I don't know how you'd measure something like that. Certainly there are more expensive homes in Los Angeles and New York City. But perhaps those cities also have slummier areas. So maybe they did some averaging of price.

If you only counted the "desirable" homes and areas (still subjective), I don't think Seattle would rank #3. The nicest parts of L.A. are pricier than the nicest parts of Seattle.