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Friday, February 05, 1982

02.05.2007 - Monday Open Thread

This is your open thread for Monday, February 5, 2007. Please post random links and off-topic discussions here.

48 comments:

T,V & Mr.B said...

MattG,
Yesterday you posted,"I'm buying a condo in issaquah right off of the 90, i'm nervous as hell based on all of these posts. It is under 220k for a 2/2, i'm a first time buyer doing a 30 year fixed, 10% down, 80/10 mortgage. I can easily afford my PITI. Is this not a good time to buy, even if you consider staying in the place for 3-5 years?"

You are buying wisely, loan wise. without a crystal ball, who can say what the value of your condo will be in 3-5 years, but if you aren't stretching yourself, you really don't have a lot to worry about as long as you are not buying it for an investment. Will you be pained to see a better deal down the road? Maybe, but as long as you are happy with what you have, enjoy where you are, it really doesn't matter what goes on around you.

T,V & Mr.B said...

Hey, just found out that David Kostin - Chief Sector Strategist, Goldman Sachs will be in Seattle at the 4th Annual CFA Seattle Forecast Dinner,Date: 3/15/07 at the Grand Hyatt Seattle.

http://www.cfaseattle.org/ssfa_cfmfiles/cal/eventlist2.cfm?id=443&t=g&d=Z

this is the guy who said that homeowners had treated winfall gains from rising house prices as if they were "recurring income" using home equity withdrawls to subsidize over-stretched lifestyles and that this artificial boost to the economy is now dropping substantially and causing discretionary spending to drop for the first time since the dotcom bust.
He said that "Housing will be the straw that breaks the camels back"

biliruben said...

repost from previous open thread:

Mattg - It's up to you.

There is a chance that your Condo will be worth significantly less than you pay for it 3 to 5 years from now. No matter what anyone says on this site or anywhere else, they can't tell you how big a chance or how much less.

Read. Educate yourself. Make an informed decision.

If what I consider the the worst case scenario happens (there are those here who think this is conservative) then come 2011, when you go to sell and you may only find a buyer willing to pay 140K for your "220K condo". That means you will probably have to pull out your check book and write a check for 50-60K to sell.

For most people, that means they won't be able to move, or they'll have to rent it out.

If the Realtors are right, your condo will at least keep pace with inflation, and you'll be fine.

My recommendation is to look at rents in the area, see what you can rent for a similar apartment, and wait out this period of uncertainty. My guess is the renting will be significantly cheaper than your mortgage, though I don't know Issaquah at all.

What I can feel comfortable with telling you is that you won't be priced out of Issaquah condos over the next 3 years.

T,V & Mr.B said...

I've been looking at a house in Edmonds since May of 06, just keeping track. It was listed at 719,000. I spoke to the Realtor during an open house at the time and the seller refused to drop it even a penny. Still on the market, I think lower now, 690?K If I remember right. Still has a long way to go before it is worth it. Cool house, just needs some work.

Brettro said...

Hi everyone, I've been reading this blog for a while and have found it very valuable. I'm currently a renter, paying off debt before saving for a downpayment. Does anyone have any suggestions on who to talk to about the best way to approach this? ie, pay off ALL/SOME/NO debt before starting to save for a DP, or maybe saving AND paying off at the same time... I want to make sure that I'm using my money in the most effective way. I know this isn't really on the topic of the blog, but I'm just looking for some suggestions on who to talk to.

matthew said...

Bretto,

I was in the same boat as you not so long ago. I was paying off all my debt, and saving for a downpayment. I figure that I would wait things out to see how the housing market plays out around here while I paid off all my debt. I am now debt free and able to save quite a bit of money. As soon as the drop in prices hits, I'll be in a good position to buy.

Unified Policies said...

dDoes anyone know of any stats regarding the migration of home buyers from Seattle to Tacoma? It is hard to understand the seemingly incredible values in Tacoma. The neighborhood just above the Dome has great views, freeway access, and is near the light rail. The prices are crazy low - there must be some catch. Maybe market equilibrium will occur soon enough.

Just Wondering

Grivetti said...

The prices are crazy low - there must be some catch.

near Hilltop, sort of the mid-80's Puget Sound version of South-Central L.A. known for its gang problems

DebtFree said...

Bettro,

The king of debt free living is Dave Ramsey. He uses a "simple" approach to becoming debt free.

Try www.daveramsey.com, books or see if his radio show is local to your area.

Dean said...

Hi,
I've been reading this blog for the last week and as a prospective homeowner I'm wondering how the bubble will effect outlying areas. I am currently renting in the Olympia area. Do I need to worry about the bubble as much or is it going to effect mainly Seattle and the immediate surrounding areas. I can imagine there being a ripple effect but to what extent. Any thoughts or comments would be appreciated. Thanks!

plymster said...

Brettro,

About 12 years ago, I was in similar straits: Living paycheck to paycheck, paying off student loans and credit card debt accumulated while starting out. The first thing I did was concentrate on credit cards. Then I socked enough away in a liquid investment (MMAs and CDs) to pay for 6 months expenses (in case of job loss and unforeseen expenses). Then I started working through my medium-term, low-interest (car and student loan) debt.

Then the Tech crash hit, and I whittled down my savings for about a year. Since then I've built my 6 months expenses up to a 1 year's expenses and invested the rest.

Looking back, I don't think I would've changed my strategy.

1. Pay off high-interest debt
2. Build up liquid savings to cover 6 months expenses
3. Pay offlow-interest debt
4. Start investing

Good luck. By the time you're debt free, maybe home prices will be sane again.

Tom said...

this is greatest flip i've ever seen.

bought in Nov. 2006 for $625K
now for sale for $840K.

http://www.redfin.com/stingray/do/printable-listing?listing-id=476056

biliruben said...

I generally agree, except for student loan debt. As long as the monthly payments are not causing undue hardship and don't effect your prequal much, I wouldn't make it a priority to pay off very-low interest debt.

I am taking my sweet time paying off student loan debt that only runs at 2.75% interest. I have been doing much better than that in the stock market (or even a simple savings acct) with the money I would have used to pay it off.

It depends on the interest rate.

CC debt, however, even at 6.99%, is really nasty. Pay that stuff off, and don't carry a balance if you can avoid it.

If you are worried about your FICO score, there are some counter-intuitive recommendations out there to boost it, however. That's a completely different question, and the answer isn't simple.

Richard said...

When I see a place for sale like this it really makes me wonder how many vacant houses there are around here.

18540 151ST AVE NE
WOODINVILLE, WA


Purchased 1/2005 for $384K, NEVER LIVED IN! Now listed at $645K ($625K on craigslist).
MLS: #26149403

shotsix said...

Does anyone know of any stats regarding the migration of home buyers from Seattle to Tacoma? It is hard to understand the seemingly incredible values in Tacoma.

I have been very curious about that myself. Tacoma has some desirable pre "world class" Seattle attributes, and affordable properties within walking distance of Sounder train and light rail. Anyway, I drove down there last weekend for a closer look at the Hilltop area. It is a little (maybe more than a little)dodgy, but not so much as to take it off the list of alternate possibilities. The thing that scares me the most is the commute (1 hour each way on train, or crazy traffic). But, man, those home prices do make you drool.

DebtFree said...

Has Seattle affordability really come to looking at homes in Tacoma Hilltop? What color are you going to paint your house, red or blue?

T,V & Mr.B said...

If this guy is correct, http://www.marketoracle.co.uk/Article303.html

how low are the Tacoma houses gonna go?

I don't think it is gonna resort to Seattle working people resorting to living in Tacoma if they can just be patient.

B said...

Had a typical Seattle market experience this weekend.

Was out jogging around with my spouse in tow, and decided to pop into an "open house" in a nice neighborhood bordering a ... not so nice neighborhood.

After Bantering(R) with the Realtor(R) and her Prodigous Realtor Cleavage(R) for a little while, she started to drop lots of financing and FHA assistance hints, and of course 80/20, 90/10, or 100% financing, and "creative mortgages". Not really being in the housing market, I wasn't aware how common this is. Apparetly "a LOT" of buyers are still using these. I asked some questions, and came away with the impression that nearly all the buyers (esp first time) this agent works with are using > 80% financing, with many well above 90%. The whole concept of a 'down payment' is approached as a frustrating hurdle to overcome by creative means, or circumvented somehow; an injustice, not a lending requirement. She mentioned that with so many people having debt load, that it's hard to get approved for some of the most aggressive loans, but there are various ways to "make it work if you're interested". Apparently she sympathizes with these people, because "it's hard". Are these the same people getting in bidding wars with borrowed money and driving up the prices?

Also what is it with houses approaching a half million dollars, reeking of cat-piss? Can we get some sort of public health education about why it's best not to live with an animal that urinates in your living space? Or at least can we get an MLS tag that indicates whether a "pet person" owned the place in the past so it can be avoided? Pet smells = fixer, in my book.

Another question. Townhomes approaching a half-mil, what is with the chintzy college-apartment-style electric wall heaters? Is this really acceptable?

T,V & Mr.B said...

I just saw that there are 2.1 million vacant homes for sale right now. I noticed that a lot of houses I am looking at around here are vacant as well. I wonder what that percentage is or if there is even a way to find out?

Did the aliens take all the people?

rentalbliss said...

Agree Tacoma and especially Hilltop would neverr have been thought of as livable only 5 years ago. Extremely high crime, poverty and horrible school system. When I lived in Tacoma about 7 years ago people would avoid even driving through parts of Hilltop. Seriously rethink that one there is a reason it is so cheap.

shotsix said...

What color are you going to paint your house, red or blue?

I don't get that one at all. However, it definitely would not be for everyone (Tacoma hilltop). But, for the a youngish/childless person looking for an affordable/un-flipped "craftsmen" home in a pre-Frasier Seattle like environment that is going in the positive direction ...then it COULD be an option.

shotsix said...

When I lived in Tacoma about 7 years ago people would avoid even driving through parts of Hilltop. Seriously rethink that one there is a reason it is so cheap.

I remember my dad telling my older brother basically the same thing when he bought his first house a few blocks from Madison and 23rd in the early 90s... My brother often reminds my dad of this when we're walking down to Trader Joe's.

plymster said...

What color are you going to paint your house, red or blue?

I believe this is a reference to the gang activity that Hilltop is reknowned for. Crips are known to wear blue, while Bloods wear red.

Regarding Madison and 23rd, I recommend that you don't travel by foot from that corner to Madison and 17th (where Trader Joe's is). Madison and 22nd is the home of Deano's, reputed to be a crime hotspot according to a friend of mine who's a prosecutor in Seattle. Somehow gentrification hasn't caught up to this block yet.

Neither has it done much to clear the area of the vagrants and visitors who roam the surrounding neighborhood asking for the time (4:20 is the correct answer, I believe). Strangely, auto theft is quite high in Capitol Hill as well.

But I'm sure Hilltop will have better luck...

biliruben said...

IIRC from the article last week, the national vacancy rate is 2.7% (it's never been over 2), but Seattle was only 1%.

T,V & Mr.B said...

1% vancancy on houses and condosfor sale huh? So 70 homes vacant in King county? (assuming 7,000 active listings) Hmmmm. I must just be lucky at the ones I like then, because I would say that at least 25% of those I think are decent are vacant.

shotsix said...

...vagrants and visitors who roam the surrounding neighborhood...

A few meters worth of seediness, yes..but, for the vast majority of the neighborhood a block or so off of the 23rd and Madison arterials, it's really cool. Nice houses, safe streets (typical Seattle safeness), cafes, etc. It would work for me, if I could afford it. It's not Mayberry, but typical in-city nice.

biliruben said...

2005 vacancy rates by MSA

In 2005 the total MSA number was 1.9, and Seattle was 1.0. Central cities are usually higher. Burbs are lower.

I can't find the 2006 numbers broken out by MSA. I don't think they are out yet. The more expensive houses tended to have a bit higher rate.

There is lots of info at the census bureau. Bang around and see if you can find something enlightening for us.

Wanderer said...

Plymster, if the red and blue reference didn't connect, I doubt the 4:20 referrence is going to do much better. But I still like it.

biliruben said...

The Dwelling Co.s Windemere Place provides us with an excellent opportunity to compare renting to owning a new townhouse in-city.

I don't know exactly how much Patrick, or the buyer patrick represents paid for it...

...ah. Yes I do. Ton paid $544K last October for the townhome he's now trying to rent. A bit of a discount to the advertised $559,990 they list on the website. Good for him for not paying full price.

Anyway, Say Ton put 20% down on a 30 year fixed (I wish we could still access Deeds of Trust). That means he's scraped up 110K + closing costs to buy the place (with the lost opportunity costs for that money that entails), and is now paying a $3258/mo nut Not too bad, if he's making at least 12K a month. Maybe he is.

Except he's not living there, so he has to pay his own mortgage as well. He also misses out on the tax breaks associated with living in the home.

Except he's trying to rent it out $2195. Barely 2/3rds of his nut.

I can't really think of any reason he would be doing this besides pure, unadulterated speculation in vast, immediate appreciation.

The very definition of a bubble.

jujin said...

http://windermere.com/index.cfm?fuseaction=Listing.ListingDetail&ListingID=17328441

Do you think this is a bad buy condsidering that powerlines are very close by?

biliruben said...

Jujin - See my posts in this thread where I discuss these very townhouses. I live up the street and toured them.

Man. They must be offering some very hefty incentives to buy-side realtors to move these things.

Richard said...

RE: The Dwelling Company homes.

They seem to have sold comparatively fast. There are a few other new construction town homes a short distance away on 40th that have sat unsold since late summer - which is surprising since Sand Point way is alot busier/noisier street than 40th. Then again, the others border on Windermere.

T,V & Mr.B said...

I absolutely love how the Seattle PI editorial Board writes a little blurb about the housing problem and the ramifications of it and end the "article" with..."This must change. People do need to have a place to live, but with money left over to eat."

Way to solve problems guys...keep it up

FinanceGuru said...

biliruben - I think you meant to say 1% of houses in Seattle are vacant, not 1% of houses for sale. As this would make sense with your statement, just got the wording wrong.

T,V & Mr.B - This might make more sense about his statment earlier.

At least we have below avg vacancy of houses in the city. Appt vacancy in Seattle is currently 3.3% as referenced to the MSN article I posted on last week. The Seattle Times reports the avg rental rate in Seattle is going up to $980/month from $930 last year (+5.4% YOY).

biliruben said...

Actually, all I referenced was the Homeowner Vacancy Rate. I didn't define it, but you apparently don't know what the definition is, FinanceGuru.

How it is defined is this ratio x100:

Vacant year-round units for sale only
--------------------------------------
owner occ units +
vacant sold but awaiting occ. +
vacant year round for sale only

biliruben said...

So to address your concern, tvb, it has to be vacant year round to qualify. You probably are looking at many houses that are vacant for shorter periods of time. This will probably change as the sellers continue to take a powder, however. The flippers, developers and other sellers will begin to get squeezed unless they are well capitalized.

This is just a survey based on a mere 72000 homes nationwide, I think. You can click through to dig around for confidence intervals and such, but my point is these are simply estimates.

MisterBubble said...

"Appt vacancy in Seattle is currently 3.3% as referenced to the MSN article I posted on last week. The Seattle Times reports the avg rental rate in Seattle is going up to $980/month from $930 last year (+5.4% YOY)."

Yeah. Tim also spanked you on that post, when he pointed out to you that the number cited by the Times came from a landlord-consulting service (not exactly an unbiased source), and that they were probably using mean rents from apartments of all sizes and markets, rather than something sensibly normalized.

Do you really think we're so dumb that we don't remember the previous arguments against your handy-dandy factoids? Stop being a weasel.

T,V & Mr.B said...

bilruben,
The Census Bureau Stats were helpful and I appreciate your explanation. It does make sense, considering they have to be vacant for a year.
I sure am seeing a lot of homes for sale that are vacant. I also saw massive of desparate open house signs scattered all over the east side. Don't know if anybody else noticed those.

FinanceGuru said...

Mr. Bubble "they were probably using mean rents from apartments of all sizes and markets, rather than something sensibly normalized."

The stats Tim quoted were more focused, yet you need to take a whole market perspective. Both stats have their place to reference the total market, not just a segment.

I was mainly trying to stress the point that the Seattle market has higher demand than the national market for housing at this time...Thus the increase in supply of condos/townhouses/houses. The vacancy rate was quoted for the entire Seattle/Bellevue region, not just the city.

My main point is that rents are heading upwards at a quicker rate in the past few years. Just google about Seattle rent, vacancy rates and avg prices...

T,V & Mr.B said...

Finance,
Have you tried to rent a place lately? You are f'n loony. People are begging you to take their place and when you don't, they ask you what is wrong with it. Get real, look around, quit playing with your little numbers that you get wrong, and just look around.

Richard said...

While I definitely see an increase in asking rents, it's puzzling that some rental agencies are offering for rent houses and townhomes at rates no higher than they would have rented for 3 years ago. And it's not just individual landlords doing this - it's in rentals being listed by professional management companies.

There's a investors SFH in Meshugy's neighborhood, listed at $1500/month for 1700 sq ft. Purchased in late 2006 for $410K. That's less than $1/sq foot for a place in a "hip hood".

Oops... they droped the asking rent to $1450 since I last checked.

7503 Jones Ave

FinanceGuru said...

www.google.com

Search it. Overall rents in the Seattle area as a whole are increasing. Some places might be lowering rent, yet you can always find a deal if you look hard enough.

Please show me stats that counter my arguement of rising rents...and not just a few properties, the overall market please. Thanks.

Richard said...

financeguru, that's part of the problem, the property types that are seeing the most rent competition are not the ones covered in the reports on the apartment market.

Perhaps that's due to marketing ineffieiencies in properties with less than 20 units.


The place I pointed out isn't that good of a deal - it's outdated and poorly laid out. You can find new townhomes with granite countertops for similar rates. That is a deal.

It's no secret that the numper of apartments at large complexes has been dropping due to condo conversions - the growth in rental inventory has been in the units not covered in the "reports" you're speaking of.

The Tim said...

FG, let's assume for a moment that your figures are accurate.

assuming 20% down, ignoring insurance, taxes, upkeep, and HOA dues

July 2005
Rent: $930
Med. Home: $340,000
Int. Rate: 5.70%
Mort. Payment: $1,579
Rent for 59% of the (overly simplified) cost to own

July 2006
Rent: $980
Med. Home: $390,000
Int. Rate: 6.76%
Mort. Payment: $2,026
Rent for 48% of the (overly simplified) cost to own

I guess I don't see your point. Sure, rents are increasing, but as long as home prices are increasing faster, it makes more and more sense to rent with each passing year.

Also, it's utterly impossible for such a trend to continue forever, and if you believe otherwise I suggest you re-think your self-applied 'guru' title.

FinanceGuru said...

The Tim - Yes, you are correct it is more affordable to rent than own. Im not debating that, its just others have been claiming that rental rates have been declining when they have not.

In your example is good, except that mortgage rates have not increased to 6.76% on avg (a change of 1.06%)...It is not that dramatic of a change in affordability. The current 30-yr is ~6.34%, or about the same as a year ago.

http://www.msnbc.msn.com/id/7148582/

My condo Downtown was $240K (got a good deal) and would rent for approx $1150 to $1200 (as my neighbor with a similar unit is renting his for $1174/month)…this includes a parking spot that some people without cars are renting for $175/mo.

FinanceGuru said...

Oh ya, and mine is a corner unit...and the same size (actually 4 sf larger), so would probably rent for slightly more.

Amir said...

>Appt vacancy in Seattle is currently 3.3% as referenced to the MSN article I posted on last week.

Yep, that's why there are so many apartments giving away "free rent" on craiglist; as well as others giving away free furniture and no rent until April, etc.

Nice one, "guru". WHat a joke.

synthetik said...

Does anyone have a Puget Sound Business Journal (online or print) account they could email me?

There's a front page story about the slow sale rate of downtown condos. I picked up a copy at my new apt. and briefly skimmed over it. Something about Treo only pre-selling 18 of 128 units in 2 months - as well as many other downtown condos having similar issues.

I tried to access the story via web but it requires a password/subscription.

my email is synthetik23 [at] gmail.com. Failing that, I've e-mailed the publisher for a copy of the story.

Thanks!