Real Estate people: I want to buy a house, advice?

[dknightx]

So here are a couple of recent articles regarding the seattle/bellevue housing market:

http://www.kristv.com/Global/story.asp?S=7164834
http://blog.seattlepi.nwsource.com/r...ves/125867.asp

Not really sure what to make of it. Right now renting is cheaper than getting a 30yr 400k 6% mortgage, but its getting closer.

[DesertCat]

[ QUOTE ]
So here are a couple of recent articles regarding the seattle/bellevue housing market:

http://www.kristv.com/Global/story.asp?S=7164834
http://blog.seattlepi.nwsource.com/r...ves/125867.asp

Not really sure what to make of it. Right now renting is cheaper than getting a 30yr 400k 6% mortgage, but its getting closer.

[/ QUOTE ]

[ QUOTE ]

But it's also possible that some are joining the ranks of international cities like London, Paris, San Francisco and New York, where costs are less tied to incomes, he said. "Now I'm beginning to think: Miami, Seattle, are they becoming superstar markets?"

[/ QUOTE ]

That's a scary quote from the Realtor's new economist. They fired the old one after they no longer liked being assoicated with his predictions. I'd take anything the NAR says with a grain of salt. They have one over-riding agenda, get people to buy, not rent. Their new economist knows what he has to say to keep his job.

And what does a $500k home rent for? According to Fortune the Seattle ratio is 38-1, so it should rent for about $1100 per month, or $13k per year. A $400k loan costs $24k, $100k down payment costs you at least $4k per year, and that's before property taxes, maintenance, and insurance (and tax benefits). Of course that rent sounds way low. But my guess is that owning a $500k house costs at least $25k-$30k per year, so unless it rents for $2k per month or more it's not very close.

[dknightx]

[ QUOTE ]
[ QUOTE ]
So here are a couple of recent articles regarding the seattle/bellevue housing market:

http://www.kristv.com/Global/story.asp?S=7164834
http://blog.seattlepi.nwsource.com/r...ves/125867.asp

Not really sure what to make of it. Right now renting is cheaper than getting a 30yr 400k 6% mortgage, but its getting closer.

[/ QUOTE ]

[ QUOTE ]

But it's also possible that some are joining the ranks of international cities like London, Paris, San Francisco and New York, where costs are less tied to incomes, he said. "Now I'm beginning to think: Miami, Seattle, are they becoming superstar markets?"

[/ QUOTE ]

That's a scary quote from the Realtor's new economist. They fired the old one after they no longer liked being assoicated with his predictions. I'd take anything the NAR says with a grain of salt. They have one over-riding agenda, get people to buy, not rent. Their new economist knows what he has to say to keep his job.

And what does a $500k home rent for? According to Fortune the Seattle ratio is 38-1, so it should rent for about $1100 per month, or $13k per year. A $400k loan costs $24k, $100k down payment costs you at least $4k per year, and that's before property taxes, maintenance, and insurance (and tax benefits). Of course that rent sounds way low. But my guess is that owning a $500k house costs at least $25k-$30k per year, so unless it rents for $2k per month or more it's not very close.

[/ QUOTE ]

yeah $1k/month is pretty low. My parents own a townhouse in a good area in bellevue thats worth about 550k, and they rent it for about 2.2k a month. so i would say depending on the area, rent for a 500k is about 2k.

When I buy, i was thinking of putting a down payment closer to 3-400k and getting another 4-500k in a mortgage. Is that a bad idea?

[scotchnrocks]

[ QUOTE ]


And what does a $500k home rent for? According to Fortune the Seattle ratio is 38-1, so it should rent for about $1100 per month

[/ QUOTE ]

Fortune is wrong. No way is it the average to be able to rent a half million dollar house for $1100/month.

[DesertCat]

Making a larger downpayment that necessary is essentially investing in an illiquid but very safe investment, your mortgage. You will only earn your after tax mortgage rate, i.e. If your interest rate is 6% you might earn 4% because you are losing your tax deduction on that interest (more in Seattle with no state income tax). Essentially its the same as finding a safe 6% taxable investment.

So the question is, can you do better elsewhere? You'll need a second or a refi to tap it later, possibly at much higher rates.

I think its almost always a good idea to increase your down from 10% to 20% because you'll lower the cost of your first, creating net returns on that extra 10% much higher than just the interest rate. But if you aren't getting a lower rate from going beyond that, you just measure it on it's raw interest rate.

[DesertCat]

[ QUOTE ]
[ QUOTE ]


And what does a $500k home rent for? According to Fortune the Seattle ratio is 38-1, so it should rent for about $1100 per month

[/ QUOTE ]

Fortune is wrong. No way is it the average to be able to rent a half million dollar house for $1100/month.

[/ QUOTE ]

What's the average home price in Seattle? I was thinking that maybe million dollar homes are renting for $2200 per month but that doesn't sound right either. The problem with macro analysis in articles like this is they don't give you enough detail to find their errors. While I don't doubt the general conclusion, each market is different, and they likely have gotten some wrong.

[dknightx]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]


And what does a $500k home rent for? According to Fortune the Seattle ratio is 38-1, so it should rent for about $1100 per month

[/ QUOTE ]

Fortune is wrong. No way is it the average to be able to rent a half million dollar house for $1100/month.

[/ QUOTE ]

What's the average home price in Seattle? I was thinking that maybe million dollar homes are renting for $2200 per month but that doesn't sound right either. The problem with macro analysis in articles like this is they don't give you enough detail to find their errors. While I don't doubt the general conclusion, each market is different, and they likely have gotten some wrong.

[/ QUOTE ]

median house price in seattle is ~220k, so for a house that size (which is about 900sq ft) 1100k sounds a *little* low, but about right. In the bellevue area, that same house probably goes for 200-300 more a month.