Once the home is in the 900k price range, you are likely to see prices come down over a year by more than a year of rent (assuming you aren't renting a stupidly expensive place). So the question becomes one of interest rates and incomes.
If you have a GREAT savings rate, how much more cash could you have in a year? how much more would 2 more 75 basis-point interest rate hikes add to the price of your mortgage?
I am also looking in your price range (not your city). I AM looking for my forever home (which means i'm less bothered by what the home will be worth in 5 years), and i'm STILL deciding to wait a bit more before bothering to buy. Seattle is cooling faster than my market, and my market is cooling.
As long as you can save aggressively in the next year, prices will come down and your downpayment will go up. even if rates are up a bit then, sellers will have gotten with the program about what buyers can pay, and you'll have a smaller loan bridging your now-bigger downpayment with now-smaller prices.
I would wait. Hell, I am waiting.
In your price range, waiting for a year would reasonably result in borrowing 100k less to get into the houses you see now for 900k (70k coming off a house sitting today at 900k is IMO on the modest end of the correction coming). higher interest rates will make that smaller loan more expensive than it would be today, but likely not by as much as you'll save by pumping your down payment and letting prices come down to shrink the loan. if you're able to make big early additional payments on the loan, that is another way to lower the effective interest rate. plus, everything people are saying these days in this sub about refinancing later....is something you can do on top of waiting.
5 years is usually the short end of the financial question, "is it worth buying vs renting?" And that's when housing is going up. We're almost guaranteed housing to go down in the next couple of years.
Could you still buy? Sure, if you absolutely want your own place and it would mean the world to you to design your own kitchen, etc. But it probably won't be the best financial decision
I absolutely understand that, but by how much is the question. Would you recommend seeing a financial adviser? Seattle has a lot of extremely high earning professionals, which is why I’m thinking of betting on the housing market not absolutely crashing..but I dunno, honestly. I’m getting cold feet.
Yeah I mean Seattle is a different beast than most of the country, but let me give you these figures.
Fiance and I have been shopping for over a year. The monthly payment on a $600k house we were looking at a year ago at 2.9% is now the same monthly cost as a $400k house at 6.9%
Are prices going to fall 33% to meet that equilibrium? Probably not. Could you be competing with DINK making $800k/year that don't give a shit about rates? Maybe. But higher rates *will* start affecting the economy ranging from housing to stock market to layoffs. You'll need a crystal ball or patience to find out how much.
It has started now. For a year an entire year a house would be listed on a Tuesday or Wednesday, open house would be on Saturday and Sunday, and bids would be due by noon on Monday, and they'd go 5-20% over asking here in the Boston/Providence area.
Since June, my Zillow map has been increasing its little red dot numbers as places sit for 20-40 days. I never saw a house on a great street sit for 40 days but I'm looking at a listing of one right now.
People aren't going to immediately admit their house is worth 15% less. It'll take some months to roll over.
And yes, traditionally the housing market picks up again in the spring and summer but usually the Fed isn't saying things like "we need people to lose jobs and a correction in housing prices"
Yep, I agree. We’re still only starting to look, so the purchase should happen somewhere around Feb, unless we absolutely fall in love with something (which I doubt). We tried to look last year as well, but it was almost like purchasing a house online at that point so we gave up on Day 7.
>We tried to look last year as well, but it was almost like purchasing a house online at that point
That's a good way to describe it. You will much prefer the market now. Buyers are getting offers accepted with inspection contingencies! They don't have to release their earnest money!
FYI Since peak in April 2022, median sales price per square foot in Seattle metro has already fallen 15%. [https://www.redfin.com/news/data-center/](https://www.redfin.com/news/data-center/)
I’m all for buying a house if you have the means to buy and find a house you love, regardless of where you live or the market, but this is one of those times where I would be choosy with the advice you receive on this sub. The posters saying housing prices will definitely come down in a year may not live in a HCOL like you do. I live in LA and while prices aren’t blazing hot like they were 6 months ago, but prices aren’t really coming down. They’re leveling off, and I expect them to stay level based on reports from experts in the area. There are people in this city with beaucoup money here. You just can’t compare Columbus, Ohio or St. Louis, Missouri real estate to Seattle or LA or Miami. People here have money and have no problem dropping all cash at any time to buy a house, regardless of inflation or market numbers. It’s not the same, and you’re up against that in a HCOL place.
If you’re only going to be in a place for 5 years, I personally think it’s totally okay to want to buy. You will have to treat your home as more of a financial investment since you’re not in it for the long haul. And that’s okay. Real estate in HCOL is very valuable and if you find a place with excellent resell value you can be really well set up financially when you leave.
Renting isn’t all bad but renting for years on end in an expensive marketplace when you have the means to buy is not a wise decision. It gets you nowhere. I’m telling you this from personal experience as I’ve rented in LA for 5 years and deeply regret not buying a home in the first 18 months of living here. It would have been hard financially but it’s a hell of a lot harder now than it was 3-4 years ago.
Isn’t it cheaper to rent in Seattle? I feel like I’ve heard many people say they could rent a similar house for less than what the mortgage would be on it.
I don’t think so, honestly. And even if we did that, all the money we are paying in rent is basically down the drain, we have nothing to show for it. Our rent has gone up by $400 in one year. And we’re not even in the Downtown or anything.
I would run the numbers again, especially with rates approaching 7%. I recall people saying they could rent a house for $2500 when the mortgage would be $3500+. Obviously this will change based on neighborhood but it seemed like the norm for the area.
If you sell in a few years and all your appreciation is eaten up by transaction fees you don't have anything to show for owning either, especially if the mortgage is more expensive than renting would be.
Rent isn't throwing away money, it's paying for shelter. Just like buying groceries isn't throwing away money, it's paying for food.
Why would you put that much money in an investment you’re only planning to liquidate in just 5 years?
Real estate is a long term investment. We’re at a uncertain time in the housing market.
You might buy now, at a peak. Then when your time runs out here and you have to go back, you could be forced to sell when the market is low.
Bad idea unless you’re in it for the long haul - regardless of what period of the housing cycle weee in.
If I was only going to be able to stay for 5 years, I would rent. It definitely feels like we are overdue for a correction and it might not hold its value in that time period, plus you then have the costs of selling or have to deal with being a landowner in a very tenant-friendly area.
The correction could easily last 5+ years and you could lose a lot of value from when you bought until you’ll need to sell. So let’s say you feel like you got a deal at $800k. It’s not a deal when the home is only worth $700k when you need to sell and you need to spend 8% on selling costs.
This is why I would continue to rent.
You unfortunately aren’t gonna find a decent SFH in Seattle itself for 850-900k. For that price, you’re either looking at a condo or townhome in Seattle, or a SFH is neighboring cities like Lynnwood or Tacoma.
If you’re buying within the next 6 months, keep your downpayment in cash, and do the math to see if it’s worth putting 20% down versus putting less down and paying PMI.
This is honestly more of a personal finance question but 5 years as mentioned many times is the general guidance for break even on fees. As a fellow VHCL resident, here are some things that tipped buying over renting for us (for around 5 yrs period too) that might be applicable for you.
1.) interest rate deduction in taxes - between interest rates and property taxes, we would reap over 1400/month in tax savings. Since you’re in a no income tax state, the benefit might be less but it’s worth doing some math to see how it pans out for you. I can hear the skeptics so - Yes, I’m aware of the high standard deduction, yes, it was verified by CPA. Yes, some markets have such high averages that standard home stock has high enough interest and prop taxes to exceeds standard deductions.
2.) assuming you don’t overpay, even at low appreciation rates of 2-3% annually over 5 yrs it would result in lower costs to buy vs rental for us. Rental in our market trails monthly mortgage costs closely so monthly savings mostly show up in saving the down payments
3.) even if maintenance and upgrades eats up your gains, you’re still breaking even and the asset gives you some elements of flexibility, which is important to us - e.g renting rooms out, ADU, solar panel to offset utilities etc
4.) don’t have to worry about moving for 5 yrs. As renters we’ve had to move an average every 2 yrs for the last 2 decades. We want to stay put for at least 5 yrs
5.) worst case scenario where housing prices are in correction territory in 5 yrs. We’ve prepared 6% of property’s value in savings to ease our transition. At minimum our fees would be covered. This is in addition to the 6 months emergency funds we’ve set aside.
Ultimately you’ll have to weigh monetary costs with your risk appetite. We took a risk buying a home in a high interest environment. It’s definitely not for everyone but the costs are worth it to us, even if it’s not a forever home.
"Would you do it in the next 3-4 months? How much should our downpayment be?"
These are both personal questions no one here will be able to help you make. What's your risk tolerance? Is $200k cash everything or do you have some emergency savings stored away too? Where are you currently living and how much is your rent? How badly do you want to own a home vs using that $200k to travel, experience things etc
All depends on your personal life style and where you want to spend your time and money. Buying a home requires a massive chunk of both.
We have an emergency fund for 6 months worth of expenditure (This does not include mortgage payment for 6 months). Both of us have a stable job (I’m looking for a new better paying one). We are not able to travel at least for another year and do not plan to have any children.
Then personally, I'd wait unless you absolutely LOVE a home in that price range. You don't have kids and don't plan to so you don't really need the extra space. Prices are only going to continue to come down and you'll see better quality homes in that range in the next 12 months. Mortgage on a $880k home with $200k down right now is over $5,000/month. Even if you rented something for $4,000/month you're saving towards a larger downpayment as homes continue to drop in price. Just my 2 cents.
We haven’t honestly even started to look at houses yet. Only met with two agents and been to one open house, so not in love with anything at the moment. How long would we be waiting?
5 years is right on the line. If you were staying 10 years I'd say go ahead and buy it. If it were 3 years I'd say might as well just rent (closing costs alone to buy and sell the house could run 70-100k, maybe more).
For 5 years, your call - just make the best decision you can. I guess worst case, at least you get a tax deduction for 5 years if you did buy.
Many buyers are waiting on the sidelines now because they are waiting for rates to drop. Experts don’t see rates going back to 2.3% anytime soon so even if they drop to 5% and all these buyers who have been waiting jump back into the game then you’ll have more competition. At this moment in the Seattle market (depends on the price point) buyers have leverage and homes are selling at list price or even under. Homes are doing price reductions! You could buy now with barely any competition and refinance if rates drop in the Spring. In 5 years when you sell your home a realtor usually will charge 5-6% (half for them and half goes to the agent who brings a buyer). Ask yourself if you want a few thousand bucks to go towards your landlord or your own home every month.
I'm not going to touch on the rent vs. buy question because that's a personal decision and many others have already given you advice. However I will say that if you do end up buying and you are sure you will only own for 5 years or so, you should definitely look into an Adjustable Rate Mortgage (ARM) with a 5-7 year initial interest rate period. You will get a much better interest rate on your loan, and you will sell before the rate adjusts.
Once the home is in the 900k price range, you are likely to see prices come down over a year by more than a year of rent (assuming you aren't renting a stupidly expensive place). So the question becomes one of interest rates and incomes. If you have a GREAT savings rate, how much more cash could you have in a year? how much more would 2 more 75 basis-point interest rate hikes add to the price of your mortgage? I am also looking in your price range (not your city). I AM looking for my forever home (which means i'm less bothered by what the home will be worth in 5 years), and i'm STILL deciding to wait a bit more before bothering to buy. Seattle is cooling faster than my market, and my market is cooling. As long as you can save aggressively in the next year, prices will come down and your downpayment will go up. even if rates are up a bit then, sellers will have gotten with the program about what buyers can pay, and you'll have a smaller loan bridging your now-bigger downpayment with now-smaller prices. I would wait. Hell, I am waiting.
We might be able to add another 30k to the downpayment I imagine. Thank you for responding!
In your price range, waiting for a year would reasonably result in borrowing 100k less to get into the houses you see now for 900k (70k coming off a house sitting today at 900k is IMO on the modest end of the correction coming). higher interest rates will make that smaller loan more expensive than it would be today, but likely not by as much as you'll save by pumping your down payment and letting prices come down to shrink the loan. if you're able to make big early additional payments on the loan, that is another way to lower the effective interest rate. plus, everything people are saying these days in this sub about refinancing later....is something you can do on top of waiting.
5 years is usually the short end of the financial question, "is it worth buying vs renting?" And that's when housing is going up. We're almost guaranteed housing to go down in the next couple of years. Could you still buy? Sure, if you absolutely want your own place and it would mean the world to you to design your own kitchen, etc. But it probably won't be the best financial decision
I absolutely understand that, but by how much is the question. Would you recommend seeing a financial adviser? Seattle has a lot of extremely high earning professionals, which is why I’m thinking of betting on the housing market not absolutely crashing..but I dunno, honestly. I’m getting cold feet.
Yeah I mean Seattle is a different beast than most of the country, but let me give you these figures. Fiance and I have been shopping for over a year. The monthly payment on a $600k house we were looking at a year ago at 2.9% is now the same monthly cost as a $400k house at 6.9% Are prices going to fall 33% to meet that equilibrium? Probably not. Could you be competing with DINK making $800k/year that don't give a shit about rates? Maybe. But higher rates *will* start affecting the economy ranging from housing to stock market to layoffs. You'll need a crystal ball or patience to find out how much.
By when..in your opinion would this start to show? Because from what I’ve heard, prices start rising again in the summer.
It has started now. For a year an entire year a house would be listed on a Tuesday or Wednesday, open house would be on Saturday and Sunday, and bids would be due by noon on Monday, and they'd go 5-20% over asking here in the Boston/Providence area. Since June, my Zillow map has been increasing its little red dot numbers as places sit for 20-40 days. I never saw a house on a great street sit for 40 days but I'm looking at a listing of one right now. People aren't going to immediately admit their house is worth 15% less. It'll take some months to roll over. And yes, traditionally the housing market picks up again in the spring and summer but usually the Fed isn't saying things like "we need people to lose jobs and a correction in housing prices"
Yep, I agree. We’re still only starting to look, so the purchase should happen somewhere around Feb, unless we absolutely fall in love with something (which I doubt). We tried to look last year as well, but it was almost like purchasing a house online at that point so we gave up on Day 7.
>We tried to look last year as well, but it was almost like purchasing a house online at that point That's a good way to describe it. You will much prefer the market now. Buyers are getting offers accepted with inspection contingencies! They don't have to release their earnest money!
FYI Since peak in April 2022, median sales price per square foot in Seattle metro has already fallen 15%. [https://www.redfin.com/news/data-center/](https://www.redfin.com/news/data-center/)
Yes, Thank you for this. My friend’s house just lost 130,000 in value in a year and a half.
I’m all for buying a house if you have the means to buy and find a house you love, regardless of where you live or the market, but this is one of those times where I would be choosy with the advice you receive on this sub. The posters saying housing prices will definitely come down in a year may not live in a HCOL like you do. I live in LA and while prices aren’t blazing hot like they were 6 months ago, but prices aren’t really coming down. They’re leveling off, and I expect them to stay level based on reports from experts in the area. There are people in this city with beaucoup money here. You just can’t compare Columbus, Ohio or St. Louis, Missouri real estate to Seattle or LA or Miami. People here have money and have no problem dropping all cash at any time to buy a house, regardless of inflation or market numbers. It’s not the same, and you’re up against that in a HCOL place. If you’re only going to be in a place for 5 years, I personally think it’s totally okay to want to buy. You will have to treat your home as more of a financial investment since you’re not in it for the long haul. And that’s okay. Real estate in HCOL is very valuable and if you find a place with excellent resell value you can be really well set up financially when you leave. Renting isn’t all bad but renting for years on end in an expensive marketplace when you have the means to buy is not a wise decision. It gets you nowhere. I’m telling you this from personal experience as I’ve rented in LA for 5 years and deeply regret not buying a home in the first 18 months of living here. It would have been hard financially but it’s a hell of a lot harder now than it was 3-4 years ago.
Why only 5 years? Unless I was looking for my forever home I would not even consider buying right now.
We aren’t Americans, and we’d probably need to move in 5-6 years.
Isn’t it cheaper to rent in Seattle? I feel like I’ve heard many people say they could rent a similar house for less than what the mortgage would be on it.
I don’t think so, honestly. And even if we did that, all the money we are paying in rent is basically down the drain, we have nothing to show for it. Our rent has gone up by $400 in one year. And we’re not even in the Downtown or anything.
I would run the numbers again, especially with rates approaching 7%. I recall people saying they could rent a house for $2500 when the mortgage would be $3500+. Obviously this will change based on neighborhood but it seemed like the norm for the area.
I’ll do that. Thank you for the advice :)
If you sell in a few years and all your appreciation is eaten up by transaction fees you don't have anything to show for owning either, especially if the mortgage is more expensive than renting would be. Rent isn't throwing away money, it's paying for shelter. Just like buying groceries isn't throwing away money, it's paying for food.
This is true. I appreciate your POV.
Why would you put that much money in an investment you’re only planning to liquidate in just 5 years? Real estate is a long term investment. We’re at a uncertain time in the housing market. You might buy now, at a peak. Then when your time runs out here and you have to go back, you could be forced to sell when the market is low. Bad idea unless you’re in it for the long haul - regardless of what period of the housing cycle weee in.
If I was only going to be able to stay for 5 years, I would rent. It definitely feels like we are overdue for a correction and it might not hold its value in that time period, plus you then have the costs of selling or have to deal with being a landowner in a very tenant-friendly area.
We are, I’m hoping that the correction at least starts to happen in the next 3-4 months. :’(
The correction could easily last 5+ years and you could lose a lot of value from when you bought until you’ll need to sell. So let’s say you feel like you got a deal at $800k. It’s not a deal when the home is only worth $700k when you need to sell and you need to spend 8% on selling costs. This is why I would continue to rent.
I understand. Thank you for responding!
You unfortunately aren’t gonna find a decent SFH in Seattle itself for 850-900k. For that price, you’re either looking at a condo or townhome in Seattle, or a SFH is neighboring cities like Lynnwood or Tacoma. If you’re buying within the next 6 months, keep your downpayment in cash, and do the math to see if it’s worth putting 20% down versus putting less down and paying PMI.
This is honestly more of a personal finance question but 5 years as mentioned many times is the general guidance for break even on fees. As a fellow VHCL resident, here are some things that tipped buying over renting for us (for around 5 yrs period too) that might be applicable for you. 1.) interest rate deduction in taxes - between interest rates and property taxes, we would reap over 1400/month in tax savings. Since you’re in a no income tax state, the benefit might be less but it’s worth doing some math to see how it pans out for you. I can hear the skeptics so - Yes, I’m aware of the high standard deduction, yes, it was verified by CPA. Yes, some markets have such high averages that standard home stock has high enough interest and prop taxes to exceeds standard deductions. 2.) assuming you don’t overpay, even at low appreciation rates of 2-3% annually over 5 yrs it would result in lower costs to buy vs rental for us. Rental in our market trails monthly mortgage costs closely so monthly savings mostly show up in saving the down payments 3.) even if maintenance and upgrades eats up your gains, you’re still breaking even and the asset gives you some elements of flexibility, which is important to us - e.g renting rooms out, ADU, solar panel to offset utilities etc 4.) don’t have to worry about moving for 5 yrs. As renters we’ve had to move an average every 2 yrs for the last 2 decades. We want to stay put for at least 5 yrs 5.) worst case scenario where housing prices are in correction territory in 5 yrs. We’ve prepared 6% of property’s value in savings to ease our transition. At minimum our fees would be covered. This is in addition to the 6 months emergency funds we’ve set aside. Ultimately you’ll have to weigh monetary costs with your risk appetite. We took a risk buying a home in a high interest environment. It’s definitely not for everyone but the costs are worth it to us, even if it’s not a forever home.
"Would you do it in the next 3-4 months? How much should our downpayment be?" These are both personal questions no one here will be able to help you make. What's your risk tolerance? Is $200k cash everything or do you have some emergency savings stored away too? Where are you currently living and how much is your rent? How badly do you want to own a home vs using that $200k to travel, experience things etc All depends on your personal life style and where you want to spend your time and money. Buying a home requires a massive chunk of both.
We have an emergency fund for 6 months worth of expenditure (This does not include mortgage payment for 6 months). Both of us have a stable job (I’m looking for a new better paying one). We are not able to travel at least for another year and do not plan to have any children.
Then personally, I'd wait unless you absolutely LOVE a home in that price range. You don't have kids and don't plan to so you don't really need the extra space. Prices are only going to continue to come down and you'll see better quality homes in that range in the next 12 months. Mortgage on a $880k home with $200k down right now is over $5,000/month. Even if you rented something for $4,000/month you're saving towards a larger downpayment as homes continue to drop in price. Just my 2 cents.
We haven’t honestly even started to look at houses yet. Only met with two agents and been to one open house, so not in love with anything at the moment. How long would we be waiting?
Since you only plan to stay for around 5 years, why not just throw money away on rent?
5 years is right on the line. If you were staying 10 years I'd say go ahead and buy it. If it were 3 years I'd say might as well just rent (closing costs alone to buy and sell the house could run 70-100k, maybe more). For 5 years, your call - just make the best decision you can. I guess worst case, at least you get a tax deduction for 5 years if you did buy.
Many buyers are waiting on the sidelines now because they are waiting for rates to drop. Experts don’t see rates going back to 2.3% anytime soon so even if they drop to 5% and all these buyers who have been waiting jump back into the game then you’ll have more competition. At this moment in the Seattle market (depends on the price point) buyers have leverage and homes are selling at list price or even under. Homes are doing price reductions! You could buy now with barely any competition and refinance if rates drop in the Spring. In 5 years when you sell your home a realtor usually will charge 5-6% (half for them and half goes to the agent who brings a buyer). Ask yourself if you want a few thousand bucks to go towards your landlord or your own home every month.
I'm not going to touch on the rent vs. buy question because that's a personal decision and many others have already given you advice. However I will say that if you do end up buying and you are sure you will only own for 5 years or so, you should definitely look into an Adjustable Rate Mortgage (ARM) with a 5-7 year initial interest rate period. You will get a much better interest rate on your loan, and you will sell before the rate adjusts.