What is currently happening with Seattle real estate (or any other ‘hot’ area)?

Parent Cafe
1

Disconcerting to see prices rise so rapidly. Great for those who already own property. Insane for anyone hoping to purchase. Our young adult child with a decent (not Tech) income, was hoping to purchase soon. As they save to help qualify for a down payment, housing prices are soaring even faster, creating a never-ending spiral.

It is hard to advise a young adult. I also feel for them. Not only did their college costs spiral out of control. Now it is their housing.

They would love to be close enough to the city due to the awful traffic, but I find it hard to support purchasing a NYC sized studio for $350k+. It has long been the financial advice to only purchase if you plan to remain for at least 3-5 years. These tiny studios may be fine now, but many young single adults may find themselves in pairs, or even wanting to start families in 3-5 years. I’m wondering if there will still be a demand as these incoming professionals out grow their space. OR, will it simply follow the way of NYC, and they’ll learn to adapt to 400SF studios?

While visiting, we decided to visit several small open houses in the West Seattle area. Many listed over $500 - $600/SF in areas that were still spotty, with many surrounding homes needing maintenance. They were clean and staged, but not fully updated (unfinished floors, older painted cabinets). Realtors have all advised potential buyers to bid quickly on nearly anything, so obviously the demand is present.

Those from the East Coast would probably just laugh, but rents are also spiraling higher. The news recently reported that average Seattle area rents have even surpassed Boston!

Like the Market, I realize real estate value can rise and fall, but until the Great Recession, it was historically a somewhat stable place to invest such large dollars for the long term. It was also a way to invest and build your community. Now I’m seeing a similar scenario to that of the early 2000’s, with less access to financing, because the numbers are so high.

Is the exponential rise likely to continue to match the East Coast & California? Everyone assumes it will continue to rise rapidly, since that is all most young adults have experienced. Wait and hope for another “correction”? Or is this just the new normal, and the fear of purchasing at a peak is no different from the fears of our grandparents’ generation who were burned by the Depression, and never fully relaxed even if they did recover?

2

When I started looking at houses in early 1980s in HI, I kept thinking prices were insane and would get better. In that time they doubled and then rose more. My friend on the other hand managed to lose money on a house she and her H bought, also on Oahu, and u know others who have as well.

3

When we were young, in SoCal, we were advised to get in the market and get in quickly, in hindsight, those 14-17% interest rates were more painful than should have been entertained. All along the west coast I have seen prices go up and then down, and then up and down some more. I am advising my Seattle DD not to buy for now, I remember the rush of 2006-7, I had spent a great deal of time in CA and saw the downturn start there in 2006 whilst the Seattle papers were gleeful that CA went down, but Seattle was still going up. They forgot that the markets in the west have a real factor of interdependence. We saw people take huge losses on property purchased in 2006-08, I sold and bought a home then, both at prices that were too high. We have friends who bought a vacant lot, waterfront, not in Seattle, and it still is nowhere near the 2008 price.

4

People talk about the crazy price of homes in San Francisco as if it is a new thing. When my wife and I lived in San Francisco in 1980 we were both working, making good salaries as new MBA’s. Look at what a new MBA gets now from a top school, x2 - we were making the 1980 equivalent. And guess, what? We could not afford to buy a house in San Francisco. We looked, and decided we did not want to buy a small 1 bedroom condo which was all we could afford in SF, so we started looking in Berkeley. Well, we couldn’t afford a house in Berkeley either. We finally found affordable homes in Oakland - not the hills of Oakland, but the “flats” as we called it, even though most of our friends in San Francisco thought Oakland was one big bad neighborhood. So we decided to buy a 4 bedroom, 75 yr old house in Oakland, and even then we still needed help from my mother with the down payment and an employee rate (I worked for a bank) mortgage, (special employee rate was 13.5%), and I remember using credit cards for everything including groceries for a few weeks after closing because we used every available penny of cash savings to buy that house.

My point of all this is that super-heated unaffordable housing is nothing new for some of these areas.

5

This article is several years old but interesting in that it discusses affordability vs. economic mobility/opportunity. I do think young people would benefit from looking strategically at where to start a career and adult life.

https://www.theatlantic.com/business/archive/2014/11/why-its-so-hard-for-millennials-to-figure-out-where-to-live/382929/?utm_source=atlfb

6

Truth is that the market has priced out most ordinary people. I’ve lived here since birth and I don’t see how my daughters will ever be able to afford to buy anything. Homeowners deliberately underprice homes to prompt bidding wars; there is no way a 3BR/2 BA house in Greenwood will sell for $400K.

The suburban Seattle city I live in still has some affordable homes, but the zoning has changed due to coming light rail and 7-story apartments are going to be allowed in what has been zoned single family for over 55 years. Even with light rail, there really isn’t anything much here. No destination anything but good public schools.

If there’s a big market correction combined with visa issues for tech workers and more Boeing jobs leaving the state, prices will fall, IMO. Lots of housing being built could create a glut, prompting lower rents, but it will surge again.

Of course, a lot of this is driven by the too-high (IMO) salaries paid to 25year olds in tech, bleh. I should just accept it, but it’s pretty much destroyed the neighborhoods and it makes me cranky.

Good values in Burien and White Center, but lots of Sea Tac noise. Maybe Lynnwood to the north.

7

Seattle shocked me when we were out in Anacortes, both the traffic and the prices! I love to poke around with real estate and was truly surprised at the values out there.

Prices plunged in 2007-08 in south Florida, and our house value cut almost in half. It was sickening. But stuff is right back up, and past, the highs of 2005. We sold last spring after the market came back some and bought in north central Florida. This market bugs me too, but in different ways.

I don’t know what the answer is with real estate. I’m hoping if the interest rates tick up a little, there will be a slight downward pressure on prices, especially for cash buyers. But in certain markets you never know.

8

The answer is not millenials and their obscene salaries. It is foreign money being parked here just in case. This is from 2015:

http://www.seattlemag.com/article/how-foreign-investment-changing-our-neighborhoods

And this trend accelerated when Vancouver began charging foreign RE buyers that extra tax…

http://www.seattletimes.com/business/real-estate/seattle-becomes-no-1-us-market-for-chinese-homebuyers/

9

My youngest brother and his wife bought a very small house in the Maple Leaf neighborhood for $300K in 2005. Today, their house is worth about $550K. It is too small for their family, but they can’t afford another house in their neighborhood, and they don’t want their kids to have to change schools.

10

Massmom, I am sure the building department would be happy to charge them a few thousand for some permits… :wink:

11

Thanks Doschicos. Timely article to share with my D, as she and her colleagues are in the midst of debating the value vs opportunity topic. Not quite sure if and when ‘social mobility’ discussed in the article applies. It may be true for business / tech majors, but doesn’t really help many of the other professions with less opportunity for such high future (or current) earnings. The larger and more popular cities do offer more jobs, and therefore perhaps a wider safety net should a job change be necessary. But it doesn’t allow those professions in the mid-range to be able to add to the fabric of the cities. Nothing new for San. Francisco of course. I’ve read that teachers & nurses and other necessary support personnel (police, fire, etc.), necessary to the fabric of the city, cannot afford to live there.

Also very interesting articles BB! Many cities are experiencing a shortage of supply with increased demand, partially due to demographics (aging Boomers staying put, and their children now wanting to purchase) – but it does help explain the higher spike in Seattle.

12

Yes, my kids aren’t in the tech majors/jobs either. We have talked about strategically looking for places where they can have job opportunities but also a somewhat manageable cost of living and lifestyle balance. There are places that are considered hip enough for a young recent grad yet much more affordable than SF, NYC, Boston, etc.

13

More on the subject of Seattle RE:

http://www.rsir.com/blog/2017/02/wall-street-journal-for-chinese-homebuyers-seattle-is-the-new-vancouver/

14

High cost of living is why DH and I left Silicon Valley several years ago and moved to Arizona. We wanted to be able to afford to purchase a home and not have to live like paupers in a run down 1 bedroom apartment for the rest of our lives. I’m so glad that we left.

15

I think most people are just able to adapt to the rising prices. You just need to make changes to your lifestyle to accommodate the extra cost. People in LA, NYC, and Boston have been doing this for decades. Piece of cake. Nothing to worry about with rising prices. It is a blessing to be in a real estate market in high demand. it all comes down to location, location, location. Seattle is a wonderful location.

16

BB, I thought the Asian buyer thing was mostly East Side/Bellevue/Kirkland or The Highlands/Woodway/Broadmoor/Mad Park and not so much the everyday sort of homes in Seattle proper.

Younger colleagues of my husband who have spouses/friends at big tech are buying $700K homes as teardowns. We’re in our 50s and have 2 homes that don’t have mortgages adding up to that. The income isn’t coming from the spouse who works here, so we assume (in one case at least, correctly) that it’s coming from the 30-ish tech person.

After seeing Vancouver and what happened to so many homes up there, lived in or not, I dread a wide-spread situation like that here.
What I’ve read about it happening on the east side gives me the willies. Homes should be lived in.

17

If Asian buyers are pushing other buyers further out, that increases the competition for houses in those areas, too, and drives the prices up. Sad. I dread living next to one of those ghost homes.

I would not have thought that the Asian money was a real thing until we saw the droves of young people walking through open houses texting photos to someone, presumably, their wealthy relatives. Niece who was here last summer taking a college class said that her Chinese classmates did not care about their grades - they were here to shop and scout RE for their families.

18

A house is for rent on our little cul-de-sac, I am guessing in the $3000/month range. The family has one child and is moving to the #1 school district in our state for his HS years. These have been banner years for RE agents. New homes near us start at $1.1M.

Boeing is cutting their 777 line in half next year and that will have a big impact on housing, layoffs and cash flow issues by end of 2018. The effect will spread through the area. I would hold on for now with renting.

19

Maybe this will take some pressure off the South Lake Union rents…

http://www.geekwire.com/2017/amazon-confirms-plans-for-new-office-in-bellevue-with-employees-set-to-move-in-this-summer/

20

Prices here are frightening. I know more than one family who have thrown ridiculous asking amounts and sold with multiple offers (like14 million…sold all cash for 15…million). Other homes…75 million…Please note: these homes are not our house.

BUT, lots of young people are going to the VALLEY. With a purchase price of around a million they can a nice home with a yard and a pool. Public schools range from good to very good. The “problem” is that socially you become a pariah…which is stupid. i.e. “valley people”. If my kids move to the valley we will sell this house (which I love more than it decent) and move to the top of Encino (geographically) or Bel Air. I want to be here for my kids. We want to be here for our kids. And two homes that I have looked out (on 1/2 acre) would sell here…right now for $15 plus million…as opposed to 2 in the valley.

Oh…and private schools are inching toward 50,000 per year per child.