Next Housing Market to Crash? Seattle

My girlfriend and I work in Lacey WA. Between us, we make about $100k/yr. I'm not sure if that is a lot of money or not as I've only been working for 2 years and haven't worked much before that.

Home prices in Lacey are falling like dominoes. However, they are still way too high IMO. I found a home I really like, and it is priced really well compared to other homes in the area. The seller is smart and is starting at a lower price than others in order to dump it before everything else collapses. I can afford the home, but my gut tells me I'll lose money if I buy it at this time. It's hard to know.

People who talk about home prices usually cite easy loans being a thing of the past but rarely mention interest rates. Most likely, the Fed is not going to lower rates any lower. I've noticed just in the past month mortgage rates have spiked up about a half point despite the extremely low short-term rate.

When I look at a house that sold in 2001 for $175,000.00 that has had the current price slashed by $50,000.00 so that it only costs $325,000.000, I have to ask myself--who will be able to make payments on that house when interest rates go up to 7.5%? IOW, when interest rates set to levels that can realistically combat inflation (weak dollar), what is going to happen to the price of a house that is already way out of line with rents and median incomes? What happens if the impending recession pushes interest rates to 8 or 9% or more?

House prices are a reflection of how much a family can afford to pay per month. Thus, when interest rates rise, house prices will fall. It is better to pay less for the house and more for interest than more for the house and less for interest because:

1) Interest payments are tax deductible.

2) You can sell the house and recoup the price you paid.

3) You can refinance in the future if interest rates decline.

I really, really want to buy a home becauseI commute a long distance to work every day, and it is taking its toll on me. I have found a home that I like that is priced well in today's market. However, compared to my salary, it doesn't seem like I'm getting that great of a house. Is it just me, or should a couple making $100k/yr with no kids be able to afford more than a 70's rambler in not so prosperous town?

Something is definitely wrong with this picture. It starts to become clear to me when I track the historical sales prices of the homes I'm looking at. Despite the recent price drops, in 2001, the homes sold for half of their current listing prices. I've read articles by the experts in an attempt to get a little direction on what I should do. The universal consensus is we are nowhere near the bottom as long as inventory levels remain unusually high.

Jonness of WA 1:14AM June 04, 2008

"As a Californian who invests in Puget Sound

4 years ago, I picked up 2 new construction properties in Pierce County. With 20% down and 6% 30 year fixes the cash flow worked. Of course that's not possible now. I'm looking to snatch maybe 1 or 2 more on the next dip.

I see the Puget Sound as the new NoCal Bay Area. 25 years ago, had you picked up 3 homes in 3 random suburbs for example San Jose, Walnut Creek, and El Cerrito you'd be sitting pretty now, regardless of bubble status."

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You sir, are a part of the problem, speculating real estate. If you aren't living here, stay in California.

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"As far as the whining about where one can afford to buy.. Well, there are still terrific bargains in the outlying areas. I see people simply being spoiled and/or too foolish to sacrifice a bit of convenience in order to purchase in the less than central neighborhoods."

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And how is paying $4.25/gal and commute times in excess of 90 min whining? It is neither practical nor good for the environment to be living in Federal Way just to save a buck. If I'm going to live there, I'll have to get a job in Fed Way or Tacoma... easier said than done.

This isn't about whining and complaining, this is about the fundamentals being poorly out of touch from the REAL WORLD, not the happy-fantasy one populated by mid and upper middle class.

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"I see people simply being spoiled and/or too foolish to sacrifice a bit of convenience in order to purchase in the less than central neighborhoods"

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And I see middle and formerly middle class people simply being priced out by greed in an over-inflated market. Once again, this is a terrible argument to justify and extra $150K just because your area code is 206. Look at my neighbors... one of them have 2 kids and live in a 1 bed apt because you simply cannot afford to live off of what normal people make. M.r Doll and his wife make together little more than I do, and have the lovely cost of child care and much higher health insurance to cover the kids. How is it reasonable for them to live in the outlying areas and both commute to town? Besides, I'm not certain what "outlying areas" are much cheaper besides Thurston County. Bellevue/Kirkland are outrageous, Fed Way/Burien/Kent/Auburn are all just as (and frequently more) expensive than Pierce County.

I guess I'm just one of those who is "doomed to discontent" because I am unwilling to pay an "uncomfortably expensive" mortgage that consumes 2/3 of my take home pay. And those same homes are more than 100% the take home pay of anyone unfortunate enough to make $10/hr or less. Of course, I guess I can also laugh since I'm not saddled with an ever-increasing ARM like a great many of the recent buyers in the area were snookered into.

This attitude is all part of the problem. And yes, I am frustrated... frustrated that a working man can't get a break even though his blood, sweat and labor helps keep this economy going in the first place.

Thorax O'Tool of WA 12:34AM June 03, 2008

Personally, I believe Seattle area prices are ridiculously high, but the demand keeps fooling me. Watch for the May stats. Seattle sales appear to be rebounding.

Will they go down? Sure; they always do, to a degree. The issue is how much and for how long. Regardless of frustration and anger with realtors' opinions, they seem to have a far more accurate finger on the pulse of the buying and selling public. Realtors don't 'create' the market place, they simply facilitate the transactions of the participants.

As far as the whining about where one can afford to buy.. Well, there are still terrific bargains in the outlying areas. I see people simply being spoiled and/or too foolish to sacrifice a bit of convenience in order to purchase in the less than central neighborhoods. Those folks are doomed to an eternity of discontent. With the new light rail system coming in, the less than trendy locations will enjoy a new found covenience and attractiveness. Its a personal decision to wear blinders, not something that is irreversably imposed on the buying public. It may well be uncomfortably expensive, but if one looks around, those that strategize and pay some dues are the folks that prosper.

30yearsinthebiz of WA 6:46PM June 02, 2008

Good to see the seven stages are still alive and well.

Though Seattle is _so_ special I'm sure it is immune- hey it worked more or less for the Silicon Valley- so far.

My poor friend bought up there 4 months ago. :P You guys are winning the propaganda war. Congrats!

Jeff of CA 11:12AM June 02, 2008