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Contributor
David_Losh
Posts: 30
Registered: ‎12-20-2011
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Re: Feeding Frenzy for Houses in Seattle

You would have to define " I can see signs that the economy is improving" before you take on a half of a million dollars in debt no matter how low the interest rate is.

 

Let's look at $500,000 of debt, at least on Queen Anne. If you bought a bed, for no interest, would you over pay just because it was no interest?  People do it every day, so why not you? Eight hours of the day is spent in that bed so you deserve the best. Isn't that the sales pitch?

 

Now many here will want to tell me that a house is a home so it is irrelevant that you are taking on this debt? You might tell me that a home is an asset class. Let's go with the asset class because that is all that matters.

 

You've obligated your family finances for this $500,000 worth of debt for what return? You have expenses, you have improvements, you have taxes that off set those tax advantages. The only appreciation you get is the amortization of the mortgage, if the price keeps pace with inflation. If the price goes down, even just a little bit, say 5%, or 10% that leaves you with a hole.

 

I know everybody has to live somewhere, but Real Estate is a business, and you need to park the emotions at the door. There is always a sales pitch, but in this case it is $500,000 of debt with interest payments no matter how low the payment that will double the price paid for a property. Is that home, for your children, really worth $1,000,000?

Contributor
Photomax
Posts: 28
Registered: ‎03-30-2012
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Re: Feeding Frenzy for Houses in Seattle

David,

 

I get what you are saying...

 

But, not everyone can wait forever or enjoying renting for the long haul. There IS an emotional component to home ownership. People enjoy owning their own home. Some people thrive on fixing and improving aspects of their homes, and then sitting back and exulting over their achievements. There are several basic human needs: water, food, love, sex, etc. Shelter is one of these basic desires and needs. Improving on one's shelter is a basic human trait. No one will make the same effort or enjoy the same level of pride with a rental. 

 

Of course you have to make smart decisions about the costs, location, size and debts with home ownership... 

Redfin Partner Agent
AdamMorrow
Posts: 117
Registered: ‎06-24-2011
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Re: Feeding Frenzy for Houses in Seattle

 

The question regarding the pros and cons of renting vs. buying has been addressed in another blog. What I can say without reservation is that for people considering buying a home, the question is, if not now, when? There has been no better time to buy a home based on the significantly reduced prices combined with historically low interest rates (There is no comparison  to the depressed market in the 80s. In many areas, almost one out of every four homes is either a short sale or foreclosure). People can speculate about what the market is going to do in the next few years, but the chances of buying a home for significantly less than the current market, in my opinion, is not going to happen.

 

Some of David's points regarding the general financial benefits on the buying side are well taken, but I respectfully think they would be more applicable in a more stable market, not this one. In the current market, the general analysis regarding the various aspects of appreciation is fine, but what was not addressed in the analysis is one of the most important aspects of buying a home from an investment standpoint - what was the purchase price of the home? Buyers have been able to purchase some homes in this market that were ridiculously below market value. As a result, from day one, they have achieved instaneous and significant equity going forward. For shrewd buyers, the opportunity to find a great home at an amazing price has not been an option for decades.

 

Again, what I am saying is not a general analysis of buying a home versus renting a home. My focus is very specific to the opportunity available in this market at the present time.

 

 

Adam Morrow | Real Estate Attorney | Broker | Sound Counsel Realty | Redfin Partner




Super Contributor
oddman
Posts: 295
Registered: ‎10-26-2009
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Re: Feeding Frenzy for Houses in Seattle

DW,

 

You guys are right it is closer than I thought. But not "pre bubble".

 

It  works if you stick to rents as method of valuation.  I have reall trouble with this metric,  it works short term but we can not  assume it will hold up over the longer term. And the rental market looks bubbly to me.

 

Price vs.. Income is in my view a much stronger method to determine to affordability of housing for 1st time buyers. 

 

 

Tim  declared  295K for King as the TOP end of the market bottom.  and 220 as the over correct.

 

Using Tims own numbers  we still have a ways to go.

 

 

""" would indicate the King County median would “bottom” somewhere between $220k and $295k""

 

"""While still down more than 4 percent from March 2011, last month's march 2012  median sale price of $330,000 """

 

Since Tim started working for Redfin in 2010  he has taken a more and more rose tinted view of the Housing market. One can almost see the low tide of his forecasts dovetail directly with his employment.

 

 

 

 

 

 

Regular Contributor
JaimeV
Posts: 77
Registered: ‎04-04-2011

Re: Feeding Frenzy for Houses in Seattle


You've obligated your family finances for this $500,000 worth of debt for what return? ...

Is that home, for your children, really worth $1,000,000?



1) A place to live

 

2) Your question is: "Is a $500K home really worth $1 million over the life of the loan / time you live there?"

 

...a) $2,000 / month rent x 12 months per year x 50 years (assumed adult lifetime) = $1.2 million spent on shelter.

 

Equity = 0.

 

...b) $2,000 / month mortgage x 12 months per year x 30 years mortgage + (annual repairs of $10,000 / year x 50 years assumed adult lifetime) = $1.2 million spent on shelter.

 

Equity = Value of the home in 50 years. Probably more than $1.3 million assuming it grows at 2% inflation.

 

///

 

Of course, there's property tax and down payment that doesn't get invested elsewhere, etc etc etc etc etc. But, shelter costs money no matter how you slice it.

Redfin Staff
The_Tim
Posts: 123
Registered: ‎07-14-2010
0

Re: Feeding Frenzy for Houses in Seattle


oddman wrote:

 

Tim  declared  295K for King as the TOP end of the market bottom.  and 220 as the over correct.

 

Using Tims own numbers  we still have a ways to go.

 

 

""" would indicate the King County median would “bottom” somewhere between $220k and $295k""

 

"""While still down more than 4 percent from March 2011, last month's march 2012  median sale price of $330,000 """

 

Since Tim started working for Redfin in 2010  he has taken a more and more rose tinted view of the Housing market. One can almost see the low tide of his forecasts dovetail directly with his employment.

 


Sorry, your attempted ad hominem attack fails.  The post you're quoting from wasn't written by me, it was written by another contributor, Deejayoh.  Here's the link that you failed to include so others can see for themselves and read the entire post in context:

 

What does Personal Income tell us about near future home prices?
By deejayoh on June 1, 2009

 

Have a look at the most recent home price vs. income or home price vs. rent data for yourself.  You're accusing me of somehow "tinting" my view of the housing market because of my employment, but the data itself is what has improved.  If you believe there hasn't been improvement, let's see the data you have to support your claim.

 

Also, it's worth noting that I made my official guess as to where the bottom would be in February 2009, well before I started working at Redfin: Bottom-Calling: So Where’s the Bottom?

 

So my personal bottom call for the Seattle real estate market, given the information available in February 2009, is December 2010 at 36% off the peak. As with my likelihood ratings on the individual forecasts, this is a totally subjective determination, assigned according to my gut feeling after working with the data. Treat it accordingly.

How does that fit in with your claim that my view has been getting "more and more rose tinted"?

 

I'll extend the same invitation to you that I gave to all the real estate cheerleaders during the boom: You bring the data that supports your view and I'll give you a guest post on my site to make your case to all of my readers.

Tim Ellis | Redfin Real Estate Scientist
Silver Regular Contributor
DWBowers
Posts: 622
Registered: ‎01-02-2008
0

Re: Feeding Frenzy for Houses in Seattle

Who said I borrowed $500K?  No, I didn't borrow that much money.  I took advantange of the government subsidized low interest rates and borrowed $350K.  My partner and I can easily afford the monthly payments on one income.  We do not live beyond our financial means at all.

Contributor
David_Losh
Posts: 30
Registered: ‎12-20-2011
0

Re: Feeding Frenzy for Houses in Seattle

Really that is how it's supposed to be, you should be able to get your home paid off, and that should be a current mind set.

 

My opinion is that going forward people should be very concerned about the debt they take on. If you are paying for a home with a kitchen remodel, and financing that over thirty years, that is a net loss. You should look at Real Estate for what it is, a lot, with a structure. You can change the structure anyway you like, but get the best deal you can.

 

Never buy in a frenzy. Real Estate is an investment with defined returns, Wait, and buy what makes sense. There is a deal a day in Real Estate, but you have to look for it.

 

You have to keep your eyes open, or make those connections that include pickers, Real Estate professionals that are looking for property for sale.

 

I need to go to work, but wanted to say, never buy in a frenzy, step back, wait until the market cools, and make the best deal you can for something you can pay off, or get a return on.   

Regular Contributor
Tom_Tugboat
Posts: 62
Registered: ‎02-23-2010
0

Re: Feeding Frenzy for Houses in Seattle

David,

You are preaching to the choir here. This forum has the largest collection of bear market folks I've ever seen.

 

Each one here has said the exact same words to others that you are using.

Contributor
puppymac
Posts: 32
Registered: ‎08-28-2010
0

Re: Feeding Frenzy for Houses in Seattle

did you not say in another thread that you put 50% down? also you must be super sharp selling your house in 2007 and now buying and talking up the market in 2012? can i go down and bow to the almighty now or should i wait?