Inman Weighs In On Latest Washington Stats
Even Inman News is having a hard time denying the Nortwest's housing slowdown (link becomes subscription-only after today):
Home sales in western Washington declined for the sixth straight month in August amid surging inventory, while home prices maintained double-digit annual growth, according to the latest report from the Northwest Multiple Listing Service.It's an interesting implied assertion that prices will continue to climb indefinitely at a faster rate than wages. I suppose eventually only Bill Gates and Paul Allen will be able to afford homes, and anyone that allows themselves to be overtaken with costly indecision, not buying a home before they are priced out forever will just have to rent from the new upper class—the homeowners. Say, that sounds familiar...
...
In Pierce County, the "biggest story is the multitude of choices buyers are enjoying," according to NWMLS director Dick Beeson. "Many buyers feel empowered and are waiting to see if prices will start to fall," said Beeson, the broker/owner of Windermere Real Estate/Commencement Associates.
What these buyers might not realize is even though inventory has expanded, prices have continued to climb, so their indecision can be both costly and frustrating when the house they're considering gets sold to someone else, NWMLS reported.
Beeson expects prices will continue to climb, but at a more modest rate, probably in the range of 4 percent to 7 percent annually. Interest rates will remain very reasonable, he believes, and may even drop slightly.
(Inman News, 09.14.2006)
20 comments:
"prices will continue to climb indefinitely at faster rate than wages"
Right, and with that surging inventory, a correction around Seattle is only a matter of time. CA leads, PNW follows.
Tim, all this info pays off. Yesterday, I was able to convince a friend in Ballard not to buy now using an IO loan. She assumed that was her only choice ever, but she was dissuaded by the news. There's a lot of smart people out there who will act on good info.
Yeah, I've been talking everyone I know out of buying for the past 5 months. It was obvious then that any purchase would be underwater if you took the cost of the closing, then the cost of the upkeep, and the cost of the resale into account. Far too many people look at housing as a simple x - y equation, such that whatever they sold for minus whatever they paid is their profit. People always say "I bought it for 250,000 and sold three years later for 400,000" leading to the assumption that they netted 150,000. Take out the 24,000 they had to pay to sell the place, plus upkeep, etc, and the actual number is more like 100,000. Still not bad, right? Well, from here on out that math is more like "I bought at 400,000 and sold at 415,000 (or 400,000, or 360,000) three years later". Any way you run those numbers, you lose, especially compared to renting.
Good job, Dash Point.
You helped a friend save herself.
Buying just before a market crash is never a smart move unless you TRULY have money to burn (ie. lottery winners, massive inheritance, CEO's).
Everyone else is just asking for trouble.
Either they'll be financially strapped, paying a bigger mortgage than they needed to and kicking themselves all the way down as they watch the price of homes go lower.
Or, they squeeze themselves into too little space because that's all they can afford and kick themselves all the way down as they watch friends who waited get more house for less money in the ensuing years.
At this point, I'm still feeling sorry for that couple who squeezed themselves into a teeny tiny place in Maple Leaf last spring for 425K. Remember them? They were featured in the Seattle Times in the infamous "We Know Homes are Way Too Expensive But Prices WILL Rise Indefinitely So You Better Panic Now and Buy with a Toxic Loan, or Friends, or Get a Place that's Way too Small, Just Do Whatever You Need To to Buy Into This Market NOW" article.
in SEA you save $700/month by renting.
What people always seem to forget is that even though that $700 is not a lot of money - in a year you are saving $8,400. Now it sounds great. Also you don't pay for any maintenance or taxes (directly)
Saving at least 700 hundred a month gives you 8,400 a year, 16,800 in 2 years.
Not a bad amount to put towards a downpayment.
Especialy as the prices come down.
Check the "Neighborhood Price History" on the free web site WWW.propertyshark.com. It looks like the bubble started right after the World Trade bombings. The bubble popped this year? It is a very interesting chart if anything else.
that money is not working for you
Indeed, and in a down market, every single monthly payment dollar isn't working for you. Remember: you first work to increase the bank's wealth, then you slowly pay off your principle, which may someday total more than your home's market value. Oops!
Synthetik: spot on. With all this mythology about home ownership lending to quality of life, the reality is that money worries are in greater abundance for overleveraged home debtors.
"Saving at least 700 hundred a month gives you 8,400 a year, 16,800 in 2 years."
and you'd have much more savings than the average joe. we didn't even factor in interest off of a cd, MM and etc.
Ridiculous math indeed. Great justification though of paying money indefinitely versus the "chance" of losing money "if" the market tanks. Speculation must go both ways. Why don't you factor in tax benefits, decreased buying power as interest rates increase, or rising rents that are often as high as 15+ year mortgages as openly as you talk about prices declining. A very tough arguement historically both in market downturns and upswings.
I am so glad people are starting see how tranparently illogical "Buy now or be priced out forever" is. Why people ever fell for this in the first place is beyond me.
My boyfrind recently was talking to a friend who does accounting for his parents RE business, and explained to him we did not buy a house because we were priced out of a traditional 30 year fixed, our friend looked like him with amazement and said "what people can't afford these houses without IOs and ARMs" and went further to say "real estate only goes up."
Is all I can say is it will feel quite good to see this whacked out logic comes back to reality.
"Why don't you factor in tax benefits, decreased buying power as interest rates increase, or rising rents that are often as high as 15+ year mortgages as openly as you talk about prices declining."
rents as high as 15 years mortgages? where? prices will go down, people can't afford homes. it's not speculation when it's happened before. it's common sense.
when prices go down you'll see real quick that people won't care about taxes and interest rates, they just want out. they bought solely for appreciation.
seattle is just the last holdout. it seems to only be a year behind though.
Rents as high as payments on 15-year mortgages? Eh? For the same property? You're either a Realtor, an idiot, or both (most likely). Rents, by the way, will FALL, as desperate sellers turn to renting out the properties they stuck themselves with.
Speculation must go both ways.
Indeed. Let me know when we start speculating on the negative side. That will be a refreshing change of pace.
Why don't you factor in tax benefits,
Ok. Assume a monthly mortgage payment on a property of $1800 a month, using an I/O loan. Assume that you're doing reasonably well, and that you're in the 30% tax bracket. That means that, at most, you can deduct:
$1800 * 12 * 0.3 = $6480 per year.
In case you're having trouble with the math, that's $540 per month, under *ideal* conditions. So, you overpay by $700 per month, and gain $540 in tax deductions. You're still down by $160, genius.
decreased buying power as interest rates increase,
An illusion. It's been shown time and time again that the "buying power" of decreased interest rates are offset by the rise in home prices due to increased demand.
or rising rents that are often as high as 15+ year mortgages...
Can't talk about these, because they don't exist.
The only people trying to rent homes for the monthly price of a 15-year mortgage are flippers who are stuck between a rock and a hard place. Those homes don't rent.
Heh...yeah, show me a place within a 30 minute commute of downtown where the rent is the same as the 15 year mortgage would be...
some of the "improving" neighborhoods of Rainier would do :-D!
For anyone considering buying now, give them a copy of this week's Business Week's cover story: "How Toxic Is Your Mortage?". That ought to do it. It's a very thorough and terrifying article.
Can anyone run the numbers on appreciation at 4%-7% a year for the median house over a ten year period and the rate of general salary increases and show the affordability factor I am just curious
At this point, I'm still feeling sorry for that couple who squeezed themselves into a teeny tiny place in Maple Leaf last spring for 425K.
I wouldn't feel too sorry for them. MLS shows that the median SFH in Maple Leaf was $449K in March. In August it shot up to $472K
23K appreciation in 6 months...not bad.
Fool. Wait til they're losing money on that sucker at the end of this year.
San Diego's YOY median is now DOWN to what it was in April 2005.
Has anyone noticed how it's getting closer and closer to Seattle's?
Perhaps you're thinking that San Diego will get cheap and Seattle will become the most expensive town on the West Coast?
they are going to be there in Maplewood crammed into their itsy bitsy house for a good long while.
I'm hoping, sincerely, that they love it there. It's the only way to get "stuck" in an RE downturn is to love the place you are stuck in.
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