Well, thanks to the unbelieveably crappy housing market, my wife and I are no longer moving to Kent, unless we win the lottery in the next 10 days and can afford two mortgages and a new car. I will spare everyone the long and ugly details of what actually happened, but this article has some clues.
On the bright side, I will finally have some more time to blog again.
I wonder if the reverse would be true? If you had a house to sell in Kent and were looking to move into Seattle? Homes still turn in my suburban, unincorporated King County area with my particular neighborhood being especially popular given the quality of local schools, decent sized lots, access to the freeway, and well maintained homes.
Is your problem symptomatic of people leaving Seattle for the ‘burbs while nobody seems to leave the ‘burbs for Seattle?
I’m sure the gang at the Regional Justice Center will be disappointed that you’re not coming…
The Piper
That’s a drag, Lee.
It looks like the peak demand for the supply occurs in December and January. Can you put the Kent deal on hold and try again then?
This is the great paradox of real estate. The house you want to sell isn’t worth enough and the one you want to buy is worth too much.
A friend of mine has been trying to sell his home in Tacoma for almost a year. He bought his new place and moved in, expecting his old place to close within a couple of weeks (he had an earnest money agreement in place). But that one fell through, as did many others, despite repeated price drops. Now he can’t go any lower because he is at the “floor” (mortage balance + commissions and closing costs). It seems most of the recent failures to close were because the buyers just can’t get financing.
If you own a condo in Seattle, you must weigh the now vs. future. There is really no mortgage crisis as far as interest rates go. The problem is more ingrained than that. Cheap money has produced undesirable consequences which directly effect you.
The future may not be brighter for you, Lee. There are so many condominiums coming onto the market in the next 2 years that we could see a further downturn. Maybe not, but the indicators are lining up for a prolonged slump. So you should think very carefully about whether it is possible to dump that condo, as painful as it may be financially, and get into that house in Kent. Or even Puyallup. Houses tend to whether economic downturns better than condos do.
I am not telling you what to do, I am just saying that the risk on one side(condo) is worse than the risk on the other(house), in a shaking(not shaky) economic climate.
Lee,
Bad news. Sorry to hear it. On the good side “Seattle” would have missed you!
Barb and I nbeed to buy you that beer!
Providence may be looking after you here, Lee. If one accepts the possibility that the economy may be about to take an enormous dump, prudence might argue against taking on a bunch of additional debt. What you’re in might not be your “dream” house, but if the going gets rough I imagine you’ll have a better chance of keeping its modest roof over your heads.
@1
If you look at the charts in the PI article, you’ll notice that the numbers for King County as a whole are worse than the numbers for just Seattle.
@2
It looks like the peak demand for the supply occurs in December and January. Can you put the Kent deal on hold and try again then?
We thought about taking on some debt and going through with the move anyway, but we knew that if we didn’t sell by February or so, we were tempting a very difficult and untenable financial situation (not a good thing for a young couple thinking of starting a family soon).
@5
I actually have a house in Seattle, not a condo. And the yard I would have had in Kent was roughly the same size.
@7
The current state of the economy is definitely factoring into all of this. This just doesn’t feel like a good time to take a financial risk.
Sorry to hear, Lee.
Sharp economists like Paul Krugman and Dean Baker saw this coming. You can thank Alan Greenspan who, like a cheap hooker, blew up this bubble.
My question is….why the move? Why Kent? But I guess that is your business.
In 20 years the suburban lifestyle may well be a cruel and tragic joke. Maybe this is best for you, but I know that is little if any consolation.
Good luck and best wishes.
I was checking out some things today, and drove by a house I used to own from 1978 to 1980. I bought it for $51,000 and sold it for $56,000 or so. It’s on the market right now for $230,000. Wow!
Real estate is a good investment but only for the long term investor. You have to be able to weather the ups and downs. All that buying a house this month and selling it next month at a huge profit is just an anomoly. The real estate market doesn’t act like that for very long.
The market in Washington eventually had to correct because prices have gotten way ahead of people’s ability to pay the mortgages to buy the houses. The smart thing to do is just pay-down your current mortgage and wait for the market to improve for sellers. My guess is that’ll be in about 3 to 5 years.
Selling Seattle and moving to Kent? Is it because of kids?
Gosh, Lee, I’m sorry to hear about your troubles. Free markets can be a bitch! The oil stock I sold yesterday dropped $7 today — I feel sorry for whoever bought them from me. Good thing I have rabbit’s feet! To rent a rabbit’s foot from me, call 1-900-ROG-RENTS.
@11: The scenario you lay out shows a compound rate of growth (over 27 years) of about 5.4%. Now that is a nice return by historical standards, but hardly a “wow!”.
Piper @1: “Homes still turn in……my particular neighborhood.”
Obviously because your neighbors are desparate to get away from you.
@12
Selling Seattle and moving to Kent? Is it because of kids?
We don’t have kids yet, but that was part of the thinking, that it would be a good place for starting a family. My in-laws live near there too.
Sorry to hear Lee! Glad to see that you’re being careful to not get in over your heads. The housing market is getting butt ugly, so probably safer to hunker down and wait for better days! I have no doubt they will be coming around eventually.
On the whole, there’s much to be said for buying less house than you can afford (but big enough for your needs), living it in a long time, and paying it off. It can take a lifetime, but when the day comes that you can’t work anymore, you’ll be glad you did it that way.
There are three generations of hard work, frugal saving, putting away for rainy days, and inheritances tied up in the humble Rabbit abode; which, by the way, has only slightly more than doubled in dollar value over a period of 17 1/2 years. Adjusted for inflation, that’s zero profit. Houses, I have come to believe, are not investments. They fearing what the landlord will say if you put a nail in the wall to hang a picture.
They are mainly the peace of mind of not fearing what the landlord will say if you put a nail in the wall to hang a picture.
As far as kids, I think the best place is with people who luv ’em.
As far as Kent?
I got to, or is that too (2) Seattle in ’77 and I can only say with joyous certainty, I met wy wife in Ballard, and there, I violated, with concurrence, her.
Very good and numerous points I think. We’ll all have 3 million $$$ homes because the money won’t be worth nuthin’?
And here I am stuck in Vancouver (Near Portland Oregun). Eh, I look at it this way: Soooo the ONLY thing that COULD scarcely screw up….DID!
I especially think Roger Rabbit (RR) may have a clue in housing not being an invesment, just a “mode” for living. I saw it there when we left in ’90. And spread it has.
oFF TO BEER…
Just a thought.
Till later then
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
“One of the penalties for refusing to participate in politics
is that you end up being governed by your inferiors.”
-Plato
Visit: http://www.Sensibilist.com
In assessing future economic prospects, it’s important to remember that nearly all of the net job gains during Bush’s 6 3/4 years in office came from the housing boom and associated businesses (furnishings, etc.). Now that driver is gone, probably for years to come. The domestic manufacturing sector (what’s left of it) is not only strong but is selling primarily to business customers, so consumer wobbliness is less likely to trigger a downturn than in past recession scenarios. Stock market fundamentals still look good, and despite today’s dramatic selloff, I’m not concerned about stocks’ long-term prospects and I feel comfortable being fully invested with less than 5% in cash. While housing got overpriced in some areas, and we are seeing some illiquidity in the Seattle real estate market, I don’t think Seattle homes are overpriced compared to inflation-adjusted historic prices in this area, and I don’t foresee a correction in local home prices, as has occurred in some other markets. Seattle has always had a stairstep real estate market in which prices go straight up for a few years, then level off and stay flat for a decade, before readjusting to monetary devaluation again. The reason for this is Seattle’s boom-and-bust economic cycles. Real estate price appreciation is not as smooth or steady here as it is in markets with more diversified and stable economic bases.
Homes are different from other investments. People won’t take a loss on them. Virtually no one is willing to sell a home for less than they paid for it, and not simply because of leverage or distaste for losing money. Americans are so accustomed to thinking of their homes as appreciating investments that selling at a loss strikes a blow to the ego, makes one feel like a failure, provokes intense emotions. People simply won’t do it. Instead, they’ll hunker down and live in the place, for years if necessary, until the market comes back up to their selling price. And most people are able to do that, because they need a place to live anyway, and for most it only means waiting longer to upgrade. Others remake their present home by remodeling it, sometimes so extensively that it’s virtually a new house. But they won’t sell at a loss. That’s why it’s usually futile to wait for prices to drop, because they don’t drop, frustrated sellers merely take their homes off the market.
I believe the new price level for Seattle housing established in the last few years is going to hold up, albeit with less selling activity, but the appreciation in this market is behind us for the next 10 years.
I have lived in Seattle for 40 years, and this is the fourth time I’ve seen this cycle. It has played out the same way each time, and it will this time, too.
14
I actually ran the numbers myself, and, because I used the number of months from the purchase date until today, the compound rate of growth came in at about 5.28%. That’s respectable, but probably not as good as equity investments have been over the same period. Given favorable treatment of long term gains, the after tax implications are pretty good, but that’s in the hypothetical region now. I’m sure most of the “progressives” around these parts could somehow enact legislation to tie the minimun wage to the rate of growth in the real estate market, with downward inflexibilty when real estate prices decline, the minimum wage would be in the stratosphere. (That is, minimum wages only go up as real estate prices rise but do not decline when real estate prices go down.) The minimum wage at this point would probably be about $50 per hour. (Don’t have my financial calculator handy right now and don’t feel like starting Excel to ask the question, so I’ll just leave it at that.) Maybe tagging the minimum wage to real estate increases is something you guys should promote.
The “Wow!” comment was to call attention the fact that the house’s price was over four and a half times what I paid for it 29 years ago. I’m always intrigued by compound rate of return.
We’ve come a long way, I guess, from the Kent-bashing days of “Almost Live” Kent jokes about big hair and South King County hayseeds. As the spouse of a second generation Kent native, I am filled with exuberation with this development. Sadly, my wife still refuses to spend more time in Kent than absolutely necessary on state occasions like Thanksgiving and Christmas.
Lee,
As a Seattle parent AND knowing your energy, please do think of staying!
There are great advantages to raising kids in Seattle and those can increase.
With all due respect to the intellectual wonders and architectural diversity of
Los Angelesthe Eastside, Seattle is a very cool place to grow up in IF you have parents strong enough to manipulate the school system.On that topic, for all y griping, we “used” the system very well and frankly our kids got an education here they could not have gotten in any Eastside community or, for that matter at the private schools. We took advantage of programs the UW provides that are rivalled by few places in the US and found like minded parents (and worked our buts of in the District). We have a lot of friends, using variations on the theme (one set up one of Seattle’s best private schools). who also created great growing up environments.
I also think that there are intellectual advantages to growing older in Seattle. Again, for all my griping, I find it hard to imagine the lrvel og coffee shop. museum, political etc etc activity outside of Seattle!
Anyhow, make the kids man, you ans theher would be good parents!
Sorry to hear about the home situation.
The Seattle public schools aren’t bad – as SJ mentions above, they do require more direct involvement, a lot more sweat equity, than in the suburban schools around here. But if anyone is honest with you, you’ll find that the local private schools with the best reputations, plus the public school systems people most salivate for around here, often have huge volunteer parent efforts behind them (Mercer Island in general (which spends less per student than a number of districts in King County), Bellevue High School to a lesser extent). If you can put the time in, the fight will be worth it for your children.
I would have went for the Seattle public schools myself for my daughter when I lived in West Seattle, but had to opt out of that when I became a majority custodial parent – I would have had no personal time between fighting for her case (she’s an OK student that never makes trouble, but an excellent one if challenged and intrigued by the subject matter, and thus an easy target for falling through the cracks) and my relatively time-intense job.
The market is going to get softer over time – I figure over the next two to three years. the realtors around here will pull infinite stunts to keep “official” prices from falling, but I suspect there will a lot going on under the table within a year to ensure sales happen. (I saw some of this happen when my daughter and I lived on Mercer Island during the last tech job slowdown, around 2002.) I would be patient, start your family, and pay down the existing mortgage. Opportunities will come your way and you’ll be in a better place financially from which to consider them.
@28
SJ,
There are great advantages to raising kids in Seattle and those can increase.
I completely agree. My good friend has had his daughter in Seattle’s schools and has been able to find her very good advanced programs that would be harder to find in the suburbs.
@26 Just what this blog needs — another wingnut urging/alleging a minimum wage of $50 an hour. Of course the minimum wage could go down, if the currency deflated, but when has that happened? Not since the Great Depression.
The purpose of minimum wage laws is to prevent labor exploitation and enable low-scale workers to earn subsistence. Actually, they don’t, as the current minimum wage provides only about half of minimum subsistence, with the other half coming from taxpayer-funded programs like food stamps, medicaid, etc. Republicans who oppose minimum wage laws (and presumably want to pay their workers less than the legal minimum wage), in effect, want us taxpayers to pay their labor costs so they can pocket more profit. That’s bullshit.
As a denizen of Green Lake Park, all 17,942 of my children have gone to outdoor schools, which generally work out fine, except for those who didn’t survive the traffic education class.
Michael’s theory on real estate and investments:
Buy something you can pay off in a reasonable time frame, pay it off and live in it as debit free as possible.
Lee, if your wife had a kid tomorrow you’ll have six and a half years to work on building up a school you like in your neighborhood. Why not say put and fix up the community you’re in?
Roger at 31
Read the fucking post, moron! Where did I say the minimum wage should be $50 per hour? I said that if the minimum wage was tied to the rise in real estate values, with no retrenchment when vallues fall, then the minumum wage would be pretty high right now, like maybe $50.
You sure can be a stupid fuck, Roger.
“The purpose of minimum wage laws is to prevent labor exploitation and enable low-scale workers to earn subsistence.”
Spoken like a true government-dependent moron, Rog. You’re pathetic!
@30 .. t6here are a lot of other freebies in Seattle for kids that the ‘burbs can not offer., esp as kids get older.
The cultural mix, even hanging around Seattle Center in the summer is great, there are a lot of nort very well known programs aavil. around the UW, sailign in lake Union, the BG trail, biking along LW boulevard!
One lour kids were little, we paricipated in a lot of community ethnic activities .. from bon odori to the Greek festival.
Also in defense of the SPS, I dod a survey, admit. years ago, analyzing similar kids from a socioec POV. The kids who might be in AP at Mercer Islams, Lakesde, etc .. the Garfield kids did better! By the time kids are over 8-9, there are a lot of performances in Seattle .. dance, theatre, that are just not avail anywhere else. Seattle publ9ic Library, the Wooden Boat Center, SAM
Lee says:
@12
Selling Seattle and moving to Kent? Is it because of kids?
We don’t have kids yet, but that was part of the thinking, that it would be a good place for starting a family. My in-laws live near there too.
Great move Lee don’t pass it up if you have kids the Seattle School District sucks. I was in the same spot you were back in the 80’s, move from Bellevue to Redmond because of the air heads running the schools. Kepp the house in Bellevue and bought one in Redmond up on the Hill. It was tight for awhile but everything work out on tight budgets. If you are interested in to moving to a liberal city I have a house that we could swap. They have great schools and right next door to Canada, but the commute to Seattle could be a drag until the light rail shows up. Don’t let the Chicken Little’s disappoint your chances of getting a home. This is the time to buy, don’t wait.
SeattleJew says:
@30 .. t6here are a lot of other freebies in Seattle for kids that the ‘burbs can not offer., esp as kids get older.
The cultural mix, even hanging around Seattle Center in the summer is great, there are a lot of nort very well known programs aavil. around the UW, sailign in lake Union, the BG trail, biking along LW boulevard!
One lour kids were little, we paricipated in a lot of community ethnic activities .. from bon odori to the Greek festival.
Also in defense of the SPS, I dod a survey, admit. years ago, analyzing similar kids from a socioec POV. The kids who might be in AP at Mercer Islams, Lakesde, etc .. the Garfield kids did better! By the time kids are over 8-9, there are a lot of performances in Seattle .. dance, theatre, that are just not avail anywhere else. Seattle publ9ic Library, the Wooden Boat Center, SAM
You bet Seattle Jew you would trade your neighborhood for mine any day right. The only problem the kids in your neck of the woods can’t even shoot straight let along fight. Real redeeming qualities for survival in the city today. Topic not talk about in the schools but pratice on the streets. No Lee swap your house with someone on the Eastside your children will have a better chance to get into College. Remember they removed the shooting gallery from the Seattle Center back into the streets un-supervised. That means that the only one carrying is the cops, criminals and the mentality ill.
Roger Rabbit says:
I have lived in Seattle for 40 years, and this is the fourth time I’ve seen this cycle. It has played out the same way each time, and it will this time, too.
Rabbit was you the one to turn the light off in Seattle in the early 70’s? Now: what happen to Chicken Little? That was the time to buy not leave, but no guts no glory. Yep that is how the wimps loose and never gain. Plan, Plan not blame others for your misfortune, that’s why Roger still lives in a rat hole collecting his small government check. You hear him cry all day long how he is being taken advance of by the Republicans and not the Socialist Left. His down fall began when he join the Army and became a Lieutenant in charge of a small band of draftee’s in Viet Nam. You would think after serving their in Viet Nam he would never work for the government, but his retirement says different. Now you would think he would learn to never trust the government. No; he supports the Socialist Democrat Party hoping they will increase his hand-outs. Instead all he got for his effort is a box of rat poison. You really got to love those folks stuck on stupid. Funny Wabbit!!!!!!
@39 klake
You mean those iggorant Eastside kids who can’t start the beamer because the alc detector won’t let ’em ..oh!
I yu want to do the work, try taking looking at the scores on AP tests fro0m Garfield Ballard or Roosevelt vs scores at Lakeside. Yu might be surprised.
Also, sometime, when you get a chance, sit in on the APP classes. (Hint, APP only exist in Seattle, at least that was true the last time I looked).
The SPS DO have some wonderful programs, the problems arise because the admins who run the District are afraid that talking abut the success of the top achievers will make the bottom end look bad.
SeattleJew @ 41:
APP-like gifted and talented programs exist in Bellevue and Lake Washington school districts but under different names. Seattle’s program is great due to both their close links with UW’s programs and the “critical mass” factor (the district is large enough that a full elementary school, 90% of a middle school, and 30% of a high school can be dedicated to the best and brightest). If you can get your kids into the program, it’s a wonderful learning environment! Alas, I gather placement requires rudimentary literacy skills, which disqualifies most wingnuts.
Regarding real estate, while I feel badly for Will, broadly I can only say thank god! Yes, it’s nice when the price of your house is going up at 15% a year and we all get to pat ourselves on the back and say how smart we are. Unfortunately, since neither wages nor rents have been rising at that level, it’s clearly unsustainable.
My wife and I own a couple of income properties which have worked out nicely. We’d like to buy more, except we can’t afford them. Not that we don’t have money. When you break out the calculator:
(mortgage payment on 30 year fixed @ 80% of purchase price + insurance + tax + maintenance) professionals.
SeattleJew @ 41:
APP-like gifted and talented programs exist in Bellevue and Lake Washington school districts but under different names. Seattle’s program is great due to both their close links with UW’s programs and the “critical mass” factor (the district is large enough that a full elementary school, 90% of a middle school, and 30% of a high school can be dedicated to the best and brightest). If you can get your kids into the program, it’s a wonderful learning environment! Alas, I gather placement requires rudimentary literacy skills, which disqualifies most wingnuts.
Regarding real estate, while I feel badly for Lee, broadly I can only say thank god! Yes, it’s nice when the price of your house is going up at 15% a year and we all get to pat ourselves on the back and say how smart we are. Unfortunately, since neither wages nor rents have been rising at that level, it’s clearly unsustainable.
My wife and I own a couple of income properties which have worked out nicely. We’d like to buy more, except we can’t afford them. Not that we don’t have money. When you break out the calculator:
(mortgage payment on 30 year fixed @ 80% of purchase price + insurance + tax + maintenance) < rent
Operationally, you can’t make money on an income property, and will probably not be able to at current prices/rents for several years. The only reason for purchasing income properties at current rates is anticipation of rising real estate values. That is called speculation (aka gambling) and I’m again’ it. I prefer to leave that to professionals.
(dear moderator. Please delete first message, which suffers from gross formatting errors and FUBARing Lee’s name. xoxoxo)
@43 APP ,,, in the burbs.
I know the program pretty well, served as its president years ago. Without critical mass and without the interaction with UW and SCC this could not work. also, frankly, the diversity of the Seattle population helps too. I doubt APP works on the Eastside.
a. APP kids at the higher levels outrun most public school teacher’s abilities to teach content. Having a bigger system and the UW is a big plus.
b. The educational establishment is chronically opposed to the APP model. Teacher’s unions dislike it and in many ways APP is the antithesis of “gifted” programs. Politically , APPs survival requires a critical mass of parental support.
c. Diversity really improves APP. Esp in APP kids learn from each other, cultural, racial and economic diversities are huge pluses for these kids.
d. While Eastside kids have the same rights of access to the UW as Seattle kids , at this age as a practical matter, kids in APP benefit from proximity to the uW, esp in relationship to the kids who after APP move on to enter the uW at 13-14 (EEP).
The stupid thing is that Seattle does not celebrate its success.
SeattleJew @ 45:
Now that I’m back in Seattle, I have to drag myself out to DL one evening. It sounds like we have something to talk about.
Critical mass obviously matters for all the reasons you mentioned, and more. An APP program which makes up 90% of the school’s enrollment is not going to get short shrift from administration in the same way a G&T program which makes up 15% might.
The main thing I am curious about is your remark in c about diversity. While the Eastside is not as economically diverse as Seattle, it’s also not the white flight enclave it was 20 or 30 years ago.
While I am a big fan of diversity, the APP program which I have seen at Lowell does not resemble Seattle so much as upper-middle class Seattle. It is overwhelmingly Caucasian and Asian (for reasons I don’t completely understand, Blacks and Hispanics are grossly underrepresented in APP when compared to district enrollment as a whole), predominantly composed of parents with professional jobs, and almost to a one filled with two-parent families. (flipping through the Lowell directory last year, I found about 4 single parents in a student body of ~500. If you want your kids to be in Seattle’s top school, family values evidently matter. Whether the parents are male and female, male and male, female and female or even the odd triple doesn’t seem to matter as much).
While I know that I’m not the first person to observe this about APP, and I know the Seattle schools would like the program to look more like Seattle as a whole, at this point, it doesn’t so much.
I can not really speak about the current program but historically it was SPS NOT the parents, who opposed diversity.
We tried to reach out by sending parents t churches, etc, but the admin obstructed us, believing that there were too few kids in the minority community to be worth the effort. There is a long tradition in Seattle of this sort of racism. That said, the kids who get into APP represent an extraordinary group, not based on Mom or Dad’s money, with the kind of commitment needed to make this work.
Also I would remind you that AAP is in a divers schools .. esp Washington and Garfield .. and the APP kids mix with the other kids in all non academic activities. Wi in APP. there is the inevitable result of classism, but remember this is NOT a program for the gifted, it is ap rogram for the advanced, that is a critical difference. APP kids share a commitment to work and learning more than any sort of IQ or parental advantages. The diversity should be better and could be, but that will not happen as long as the District remains racist.
Finally, something to consider, while SPS APP is intended for the top few kids, there is nothing in the model that requires this. APP has always wanted to be part of a more wide spread effort at individual progress.