How people do it
Meshugy presents good facts on recent sales. Other bloggers have asked me about financing statistics. Let's take some of Meshugy's recent sales and find out how people are financing the home purchases. This will shed light on the fuel that drives this market. Money.
My opinion is that if people did have a significant down payment or ability to get a fixed rate, they would. And, as I research Meshugy's sales findings, we do find the potential for a couple cash buyers. I did not post whether people had a fixed rate or ARM or whether or not it was a short term ARM at 6 mos, 1yr or longer. The majority were ARM's.
You can bore yourself to death researching this stuff by going to the public records site of King County. Since I do this type of work all day and have tools to do it quickly, I'll save you the trouble by showing my findings below. I find no particular pleasure or fascination with researching this stuff. It's kind of like asking "Eleua" if it's cool flying 737's, 757's or other aircraft all day. Probably excruciatingly routine, save for the occasional bumbling drunk who talks non-stop to anyone who care's to listen during the fly-over-country flight in which Eleua is at the controls.
The following are recent sales Meshugy discusses in his comments today. Note some of the recent back to back sales and selling prices.
8348 24th Ave NW 499,950 487,500 --
No Deed of Trust recorded yet or none which would indicate a possible cash deal.
3258 NW 56th St 699,000 684,000 --
existing loan at $547K; sold previously at $375K 10/13/05
6528 26th Ave NW 475,000 379,000
Meshugy may have this wrong by accident. It was listed for $379K and sold for $379K (940 sq ft home on a 2550 sq ft lot—now that’s small!
8016 20th Ave NW 419,950 425,000
100% financed nothing down (notice price increase in this scenario? Artificial appreciation? Now this sales price will be used as a comp for another home. Existing loans: $318,750 & $106,250, Sold previous $360K on 12/3/04
5807 17th Ave NW 394,500 375,000—
basically fully encumbered at $300K 1st mtg/$56,250 2nd mtg. , Sold previous on 7/28/2000 for $184K
7310 23rd Ave NW 575,000 573,000 --
$417K 1st mtg./$98,700 2nd Mtg.
6513 Jones AveNW 429,950 429,950 –
100% financed @ $343,5501st /$85,850 2nd; Sold previous on 8/30/2004 @ $319K
2835 NW 73rd St, 409,950 409,950—
it previously sold 9/10/2004 and was 100% financed at $325,000 back then.
8346 29th Ave NW 439,000 440,000—
existing $352K 1st mtg/ $66K 2nd mtg. and previously sold 100% financed 7/8/2005 for $318,000
7524 30th Ave NW 410,000 425,000—
existing 1st at $340K & $63,750 2nd .
7302 23RD AVE NW 450,000 450,000--
$211,096 due in one year (interesting) as it is a junior lien position, which could mean many different things.
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Have a good night. My wife is yelling at me that Million dollar listing is on TV. Bravo Channel. Gotta go have some laughs. Bye.
S-Crow
32 comments:
7310 23rd Ave NW 575,000 573,000 --
$417K 1st mtg./$98,700 2nd Mtg.
The owner then bought a house at 313 NW 81st Street for $885,000 with a $840,000 mortgage...
THE TWO INCOME BABY BOOMER TYPES WITH THE BIG BUCKS AREN'T IN THE REAL ESTATE MARKET
The average incomes realitors always reference are way too high. The 55-56 YOs (who control 80% of the country's wealth) simply aren't in the real estate market.
Now let's get down to earth, the college graduates with a communication degree make a starting salary of $22K on the average. Times two, ya get about $40K enterring Seattle's market.
Ya need $59K to qualify.
End of argument. Pop goes the bubble.
Did we really need a whole post to allow meshugy to beat at his chest?
Isn't that what he wants, to be noticed? It's kind of obvious that he is just a real estate shill.
Anon 8:36,
Although I don't often agree with Mesh, I think this was a fine way to look more closely at the data he presented. He did some homework and shared it, and S Crow took it a step further to see what was behind the numbers.
It turns out that the majority of these buyers used either 100% financing or had a very small down payment. That is the very type of argument that people on this board have been using in response when Mesh asserts that rising prices are due to strong fundamentals (ex. wage/job growth). I think it's pretty evident from this data that job strength doesn't have much to do with it. People who have money to burn could easily put more down on a house.
So I don't think we need to get uppity about S Crow exporing some data that Mesh gave in a post. Isn't the point of this blog to look at, and talk about, the situation and the data that supports it?
"Now let's get down to earth, the college graduates with a communication degree make a starting salary of $22K on the average. Times two, ya get about $40K enterring Seattle's market."
Now, suppose that there are close to 1000 22 year olds being moved to the area (per year) by Microsoft at a salary of roughly 4xs that of a communications grad...
Forgot to add one thing... A lot of the new grads at MS are married or dating other MS employees = damn near 200k a year combined income at 23 years old.
A worthless personal experience, I know...
Both my wife and I and a friend and his wife bought our houses with 80/10/10 loans last year. We got both our loans fixed (5.5%/6.5%), while our friend got a fixed first an adjustable 2nd. Both of us had the money to put down, but we didn't want to. The friend ended up paying off his 2nd just a couple months ago, after selling a home out of state. We have a 10 year balloon on our 2nd, which we don't forsee having a problem paying as we plan to have the house totally paid off in another 11 years.
We have the money to pay off our 2nd right now, but we don't feel the need to. We have a healthy savings account and excellent cash flow (PITI = 16%).
I'm not saying this to be snobby or superior, just that sometimes there is more to the story than the initial numbers suggest.
I've worked in software technology for 17 years.
1st year rookies at MS do not make $88k a year. Some might, but not the majority.
I'll look for data to back this up.
I have plenty of data sitting on my desk... How about this, the majority of what see would indicate that is the average starting salary.
That's good data, Anonymouse.
But I have a hand-written note in my pocket that says otherwise...
I would be more than happy to give details but not at the risk of my job.
S-Crow...thanks for taking a closer look at the data. I'm pretty sure that house on 23rd was a cash deal. It was sold in 3 days and the for sale sign was down a few days later. It showed up on the tax records immediately.
No doubt that some people are stretching to buy these houses. Hard to really say without fully evaluating someone's finances. An ARM in of itself is not a bad thing. But I agree there are many people are using them to buy way more then they should. Will they go down in flames? A few probably will...most I think will just have to make sacrifices to keep up with their payments.
However, others have used ARMS to their advantage. One of my employees is the most financially conservative guy I know. He saves every cent...never eats out or buys nice clothes. He and his wife bought a house in Ballard in 2002 for around $260K. He got an ARM with a teaser rate of 4%! It readjusts in 7 years...but he figured he could pay the entire house off before the reset. Guess what? He'll have it paid off next year...2 years before the reset. Good for him...
RE: the job situation. Just from casual observation, they loyal heights area that I've been watching (98117) transitioned from a blue collar area to a white collar area over the last 10 years (mostly the last 5). Just on my street we have 3 guys a Boeing, and about 6 with various Tech industry jobs. And 1 carpenter who rents.
Zip shows 98117:
Average Income: $75,078
Median Mortgage Debt: $43,203
Average Net Worth: $144,957
Median Home Equity: $103,203
Blue Collar: 20%
White Collar: 80%
Owner-Occupied: 9,251
Renter-Occupied: 3,621
Median Age: 39.35
Those rentals in Ballard are in pretty crappy locations...very far N. I think you actually proved the opposite...it's very hard to find good affordable rentals below in Loyal Heights/Sunset Hill (W. of 15, S of 80, n. of 75th.)
Usually they're outdated, small, and in a bad location. Like the one you posted...and not really that much less then owning. The few nice ones rent at about what you'd pay to own.
The problem with these rent/own comparisons is that it's very hard to quantify to quality of a house. You can't make a good comparison unless you've got very similar houses, in the same condition, and same location. Comparing a house n. of 100th to a house in Loyal Heights doesn't make any sense. The one N. of 100th is less desirable based on location alone....and might also be crummy.
But people actually out there in the market are making these comparisons in a very detailed way...like we did. We checked out rentals...they simply didn't compare in quality and location. Not to mention you never know when you're going to get booted or have your rent raised. Don't get me wrong, I think renting is the way to go for a lot of people. But if you're spending over 1.5-2.5K a month you're probably better of owning.
Forgot to add one thing... A lot of the new grads at MS are married or dating other MS employees = damn near 200k a year combined income at 23 years old.
If not more. Truly Seattle is the new playground of the rich. I hate to be a bluecollar worker in this town, I guess they can all move to Tacoma or something.
Nice rentals are easy to find and can be had at 1/2 the price.
1/2 the price? you're confusing a monthly cash outlfow with lasting value. Of course there is answering your childrens' questions about why they live in a rickety house. Oh wait, daddy thinks he knows what he is doing.
Why buy when you can rent a 3 or 4 bedroom HOUSE in Seattle for half the price?
Exactly synthetik, this is the meat of the matter and the tell-tale of the housing bubble/bust. As R.Shiller points out the rent to buy ration is the equivalent of the P/E ratio of stocks. What dividend does your investment payout? The true idea behind stock ownership is capitalization on the dividend and not 'a sale'... although it seems it rarely works out that way...
In a healthy market the P/E ration is about 1.1, with a slight advantage to the ownder, i.e. 'how much can my property ear?'
As we've found out on the Tues. open thread, the owners of the Qwest building figured out that a 10 yr. lease is more profitable than selling it off as condos. Probably because the commerical RE market in Seattle IS healthy to a certain extent, dogged by an unhealthly teetering residential market.
Just my $0.02
Ballard Home - 913 NW 97TH ST - 2590sq ft 3/2
That's one block off of Holman Rd. About as sucky a location as you could imagine.
N Ballard - 10302 12th Ave NW 98117 - 1530sq ft 3/1.75
this one is pretty good. Only problem is that it's way far north...and still pretty close to Holman. I But I think it may be far enough to prevent too much traffic noise. At $1700 it's not much cheaper then owning. In Loyal Heights it would rent for over 2K a month. I think Zillow is way off on this one...it's worth about 400K. So you'd be paying about 2K a month to own.
You bought right at the peak - it could happen to anyone.
April 2005 the peak? Zillow shows that my house appreciated 25% since then. MLS shows I could sell it for 70K more then I bought it.
Anon 11:33
Per your RE training, you are forgetting the owning involves cash flow to get "lasting value". (That is, to look behind the RE facade - buying, owning, and selling all have related expenses.) It costs money to get at that money.
Expenses do not only apply to renters.
Expenses do not only apply to renters.
Bullsh*t.
April 2005 the peak? Zillow shows that my house appreciated 25% since then. MLS shows I could sell it for 70K more then I bought it.
While I do agree with you that spring of 2005 was clearly not the peak (spring of 2006...maybe?), you're monkeying a bit too much with the Zillow numbers there.
Without revealing specific personal info...
Sure, according to Zillow, your house has appreciated 25% since April 2005. But you conveniently fail to mention that you purchased it for 13% more than the April 2005 "Zestimate." So if the current Zestimate is accurate, you're looking at more like 11% "appreciation" since April 2005.
In reality though, it's all a moot point, since you don't realize any actual financial gain until you sell, which you have made quite clear you are not interested in doing at this time.
But you conveniently fail to mention that you purchased it for 13% more than the April 2005 "Zestimate."
the Zestimate is about 13% off because they rated my house as a 3 br, 1ba, 1380 sq. ft.
However, it's actually 3 br, 2 ba, 1800 sq. ft.
So it has been about 25% appreciation. I have a friend at Zillow and he said that usually the zestimates are lower then market value because they're based on the county records which are often inaccurate. Many people have had additions, remodels, etc which don't show on the records.
I have a friend at Zillow and he said that usually the zestimates are lower then market value because they're based on the county records which are often inaccurate.
Then why did you use Zillow orginally to talk about your home's appreciation in this thread?
It's all relative...be it 1,380 sq ft or 1,800 sq fr. It still went up about 25%
Meshugy,
What are your prop. taxes like? It looks like your assessed value was about 320K in 2005.
Wow, I see your house was oringally purchased in 97' for under 170K. Someone made bank....
What are your prop. taxes like? It looks like your assessed value was about 320K in 2005.
We pay $200 a month in taxes. Our total payment per month (i.e. taxes, interest, principal) is $2,400.
Wow, I see your house was oringally purchased in 97' for under 170K. Someone made bank....
They did a major remodel, added a bathroom. Redid the basement and kitchen, did over 10K in pro landscaping, new roof, new heating system, new wiring, etc. They put in about $150K. They rolled their profit into a bigger house 2 blocks away (around $550K).
I am renting a 700K home for 1900. It is 5 bedrooms and I am splitting the house with a guy from work.
So, $950 out of my pocket. I have a couple grand to play with each month and live great. 5 grand goes into investment accounts each month.
I am not sure if I am making the right decision. I guess when I retire in a couple years at the ripe age of 34 this huge sacrifice in renting may finally pay off. Crossing my fingers...lol.
Another horrible thing about this renting thing is while I am at work my landlord is at my place doing winter maintenance. I feel bad but he should be gone by the time I get home. I will invite a couple girls over to the hot tub while my money grows in much safer and higher paying investments than a mortgage bound asset. Then, when I do retire I will travel the world forced into a lifetime of banging supermodels. My life will be full but it won't be complete. I will never own a piece of dirt that I can call home. I will be poor by any realtors standards. I am feeling the pain.
Please name these double digit year over year returning assets that you speak of...
If you want to talk trends I could name thousands of current and historical investments that got triple those returns every year for three years. The only reason to bail water is if its your boat. Just remember I am on the shore soaking up the sun puffing a Siglo while two blondes apply copious amounts of lotion to my torso.
Housing won't be going anywhere but down in the US in the next 5 years. The days of double digit appreciation are dead and buried.
Still curious about Anon 12:24 who apparently is an owner with no expenses??!!
Sounds like someone's not paying their property taxes, home insurance, mortgage and upkeep.
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