Rain City Guide

1. Comment from synthetik
Time June 16, 2007 at 5:54 pm

Can’t wait to see what will happen when rates go over 7%!

2. Comment from Rhonda Porter
Time June 16, 2007 at 6:09 pm

Why would that excite you, Synthetik?

3. Comment from ARDELL
Time June 16, 2007 at 7:48 pm

He wants prices to go down so he can afford to buy something.  After the prices go down, he’ll want the rates to go down too

4. Comment from sandy
Time June 16, 2007 at 10:22 pm

its always a cat and the mouse game. Ardell are you seeing broad trends of price declines coming on the east side?

5. Comment from ARDELL
Time June 17, 2007 at 8:13 am

Sandy,

I’m not seeing price declines, I’m seeing price reductions. The trend of pricing much higher than the last sales is continuing. Some will still sell at huge appreciation levels, some won’t. Those that won’t then reduce, but not to a point where the price is declining, just to the point where people can’t raise the price as high as they wanted.

What I am seeing is a hint that appraisers are getting tighter. Will know more on that in a few days. If appraisers won’t appraise with an appreciation factor, that could spell more trouble for market prices than the interest rates.

6. Comment from Rhonda Porter
Time June 17, 2007 at 8:22 am

Ardell, I actually just had a transaction close where the appraisal came in low on a purchase. In this case, the home was overbid and closing costs were added on top of the bid price. There were no comps to support how this contract was written…I plan to blog about soon. I just waiting for this deal to close…last week it did.

7. Comment from ARDELL
Time June 17, 2007 at 8:30 am

A year ago and the year before that, you could overbid and stack costs. I haven’t had any issues with my transactions, but am in escrow with appraiser coming out tomorrow on one that fell apart before us on appraisal.

Story was that the appraiser would not go over the last comp. “no comps to support” is common. You can’t have appreciation if appraisers won’t permit the appraisal to go over previous comps. That is the definition of appreciation…more than anything has ever sold for.

It’s a misnomer that appraisers only use comps. No one would have seen prices rise as high as they have if appraisers only used comps. If they start doing that now, they may create a flat market.

8. Comment from Rhonda Porter
Time June 17, 2007 at 8:46 am

In this case, the home was overbid significantly. The appraised value still came in higher than the list price plus closing costs. Just not as high as the bid amount. The other issue was finding comps with the similar square footage for the main floor…this was a small split entry.

There was nothing to support the price this home was bid up to. And…this was 100% financing. Not much wiggle room for anyone with this scenario.

9. Comment from ARDELL
Time June 17, 2007 at 8:55 am

As a seller’s agent, I often counsel the seller to not take the highest price, if the costs are stacked, in a multiple bid. Better to counter the buyer who has the most money down and no stacked costs, than to take the highest bidder with stacked costs.

Sounds like they didn’t review the offers correctly unless ALL the offers had stacked costs.

10. Comment from ARDELL
Time June 17, 2007 at 8:59 am

Sandy,

See Rhonda’s comment “The appraised value still came in higher than the list price plus closing costs. Just not as high as the bid amount.”

So the market IS pricing much higher. No price declines. The appraisers are the key to how high appreciation can go, not the market, at present. Buyers will pay more than the apprisers wil allow, as in Rhonda’s case.

If the buyer doesn’t have the extra cash to bridge the gap, or is unwilling to do so, that could hold appreciation back a bit from “what the market will bear”.

11. Comment from ARDELL
Time June 17, 2007 at 9:02 am

Sandy,

Just noticed your “Eastside”. The one I am working on that didn’t appraise in the last sale that “fell out” is on Eastside. Still, the seller is looking at a price of about $100,000 more than he paid 18 months ago, even if we drop it back to appraised value. So no on the “price decline”, just maybe an appreciation cap of less than market forces would permit.

12. Comment from Rhonda Porter
Time June 17, 2007 at 9:04 am

I’m not an agent, however, I would think more down payment would be better than stacked cost. Plus, it indicates that the buyer is more qualifed. I don’t know what the other offers were. I did contact both agents to see if they had other comps or supporting data that could help the appraiser.

13. Comment from Bill Waters
Time June 17, 2007 at 12:15 pm

As long as people have cash to cover the difference between the appraisal and the sale price, why would “tight appraisals” have much influence on appreciation? Or are we talking HUGE shortfalls, like $50K or more? Seems hard to believe that on a $500K purchase, +/- 5% needed in cash would kill the deal. Sure, it’s unfortunate for the buyer to have to dip into savings or borrow against an IRA/401K, but for a house you love that seems like a small sacrifice to make.

14. Comment from synthetik
Time June 17, 2007 at 7:46 pm

Ardell,

I am not excited to buy something, I could easily pay cash for a home now, but that would be financial suicide - as you are aware. I have no interest at buying at the peak.

The higher interest rates go, the more pressure is put on people with adjustable mortgages. And more severe for the short term, the more buyers are priced OUT of the market as rates rise, having a ripple effect up the homedebtor foodchain. Johnny 500K can’t sell his house to Joey 300K because Joey can’t get financed. Johnny can’t buy the 800K home and so it goes.

I’ll be looking at buying something when prices return to fundamentals… when renting is about the same price as buying.

If the interest rates are 15% then, I can either wait, or buy anyway - I can always renegotiate my interest rate, put more money down on my LESS costly home… but current FB’s of today don’t have that choice - they can’t renegotiate the price of their house!

15. Comment from ARDELL
Time June 17, 2007 at 10:09 pm

Bill,

In my experience, people “bid out” to WIN more than because they love the house. They get caught up in the excitement. When the dust settles a week or two later and an appraiser is telling them they are “overpaying”, they take a step back. By then they often have the home inspection as well and reality sets in.

In Rhonda’s example, the people didn’t have the money or they wouldn’t be zero down and stacked costs. Generally, I don’t think we are currently in an environment where people want to overypay for property.

16. Comment from ARDELL
Time June 17, 2007 at 10:12 pm

Synthetik,

It sounds like you predict a lot of heartache and angst could result. So how would you answer Rhonda’s question as to why you are excited to see what will happen if rates get to 7% or more. Why the exclamation point? How would that be a good thing?

It looks as if you will be happy if people get hurt by all this. I’m sure that is not the case, but we’d like a response to your !

17. Comment from SS
Time June 18, 2007 at 10:57 am

Count me in with Synthetic as someone who cant wait to see interest rates go up. Why? It actually makes it easier for me to buy a house when rising interest rates weed out the gamblers who are driving home prices up with the help of their zero-down loans. In other words, I’m excited to get a chance to be a homeowner and by a return to sanity in the housing market.

Do I have any sympathy for all the sheeple who will get into trouble when interest rates go up? Excuse me when I say no. They should look to the NAR and every other organization that stampeded them into buying houses they could not afford for sympathy. Unless you were defrauded into getting a loan you cannot afford, you should not have been in a situation where you would not be so badly affected by a modest rise in interest rates.

18. Comment from Alan
Time June 18, 2007 at 11:17 am

It looks as if you will be happy if people get hurt by all this. I’m sure that is not the case, but we’d like a response to your !

I don’t get too much sympathy for moving to a market where I am completely priced out ten years into my career after owning my own home for the past 9 years in markets that did not appreciate as rapidly. In fact there are plenty of people who are happy as clams with the appriciation they have seen here. Some of them even brag about it.

Why shouldn’t I be happy if prices fall — even if some other people are hurt in the process?

19. Comment from ARDELL
Time June 18, 2007 at 12:09 pm

Alan,

I agree that should prices fall, that would be good news for many and OK news for many sellers too. They will still by and large have plenty of appreciation.

But when someone suggests that higher interest rates will cause foreclosures, and that foreclosures will cause a leveling off of prices, I can’t see any “happy” in that. If prices come down due to supply and demand…oh well…market forces prevail. But to be happy if people can’t make their mortgage payments…I just can’t go there.

Feeding off someone’s misery is not a good thing to hope for and gleefully await.

20. Comment from ARDELL
Time June 18, 2007 at 12:25 pm

SS

I totally understand the whole “I wish prices would go down so I can get in” mentality. I have had very few situations in my 17 year career where a seller was forced to sell because they couldn’t afford their mortgage. Almost none actually. I have had the pleasure of helping people forced to sell for other reasons, and I never wish hard times on anyone, and actually enjoy helping people through some hard times.

Most price declines come from supply and demand issues or buyers wanting “more value” for their money. I have never seen or heard people wish for others to get in over their heads in order for prices to come down for them, on such a large scale.

How high is too high is difficult to define. I remember thinking the DOW shouldn’t get over 3,000.

Wishing for bad things to happen to people so one can benefit from their misery is just a bad kharma thing to do? Don’t you think? If prices do ever come down here, I hope it is supply and demand and caution and not because many have had to suffer to create that.

21. Comment from ARDELL
Time June 18, 2007 at 12:27 pm

Oh and for ALL people waiting for HOUSE prices to come down, seriously. Buy a condo or townhome first. Getting your dream home as your first purchase is just not realistic. Get some appreciation on something smaller first. Those who have are not whining now.

22. Comment from Rhonda Porter
Time June 18, 2007 at 12:49 pm

Ardell, I totally agree with you…especially with comment 21. I’d like to add that the people who are waiting should try to consider moving further out of the city or higher priced areas as well. My first house was in NE Tacoma and at the time, I worked in downtown Seattle. It was not a pretty commute even back then (getting out of NE Tacoma is a bear alone…let alone what happens once you reach I5)…but it was my house and it allowed me to purchase my next home from the appreciation.

I also do not relate to anyone who wishes ill will on complete strangers! It’s pathetic.

23. Comment from ARDELL
Time June 18, 2007 at 1:24 pm

Rhonda,

I don’t agree with the going further out theory. Better to buy in the highest appreciation area, to speed up the process of being able to move up to single family.

If you go where properties are currently more affordable, you are by definition going to an area with lower appreciation, which could defeat the purpose.

Better to find the highest appreciation location and buy an older two bedroom condo or townhome that you can put some upgrades into, or just some cosmetic improvements. Or a small rambler that you can upgrade. Should have some photos soon of a house in Seattle where the owners went UNDER what they can afford for their first single family house. We found one for under $370,000 and they are making it look better already. I’ll try to post before and after photos, though they won’t be selling it.

Great to get those improvements done right away, so you can enjoy them before you sell.

24. Comment from sandy
Time June 18, 2007 at 2:08 pm

I find this whole thought of prices should go down totally pathetic - its like wishing evil for others. Hey there are many who paid 20% down and bought to the end of the appreciation cycle - they will hurt too. And thats not fair - wishing bad for them. Ugh.

25. Comment from ARDELL
Time June 18, 2007 at 2:16 pm

Sandy,

Do you hear people wanting that out on the Street? Or is it just “a blog thing”? I only hear it from “bubble people”. I rarely find it in conversations in real life.

26. Comment from SS
Time June 18, 2007 at 2:32 pm

This is in response to the sanctimonious moralizing from Rhonda and Ardell:

1. I will not summon up false tears to say that I feel terrible that someone went into foreclosure when they should not have stretched their budgets to buy their home in the first place and HELOC’d their Vegas vacations and what not. As I wrote earlier: if someone was defrauded, they have my sympathy. If they went into this with visions of using their home as a piggy bank, tough luck. They made homes out of reach for many people by their actions and spent most of the housing boom telling everyone how their homes were appreciating at 14% a year.

Ardell, as to wishing people to get in over their heads, this takes the cake. Who did that? Heard of the NAR? If anything, people who did not get sucked into the frenzy did just the opposite. Your historical revisionism doesn’t wash.

2. Ardell: Regarding my whining: I considered the alternatives to buying and found that renting works beautifully. I have a great apartment at a rent thats less than half of what I’d have to pay if I bought a comparable condo. I can save money, walk to work, enjoy the city, travel because I can afford it. I will buy a home when I’ve saved enough money for a good down payment *and* homes are affordable. The affordability is key. To paraphrase Warren Buffet: What is is worth and what am I paying for it? Those answers have to be close. If they’re not, buying a Condo, starter home, whatever makes no sense. I am sorry that seems like whining to you.

3. Rhonda: You think its pathetic when people wish ill on others? I agree. What do you think about an industry that pushed people to buy houses when it was clearly not the responsible thing to do because they make their living off the transactions? How about loans where the 50% of the income went towards paying off the loan? Is approving loans that will cause the borrower a world of hurt similar to “wishing ill of someone”? I don’t relate to such people either.

Finally, actions matter when it comes to Karma. Says so in the Gita.

27. Comment from Bill Waters
Time June 18, 2007 at 2:53 pm

The “move further out” option only works if your hourly wage is low enough to justify the added time of commuting. Say commuting in from Tacoma adds 1.5 hrs a day on your commute, that adds up to 33 hours a month. At the average wage of $30/hr, you’d need to cut your mortgage payment by more than $990/month just to break _even_.

28. Comment from Rhonda Porter
Time June 18, 2007 at 3:11 pm

Bill, how did you know I was paid peanuts back then? I was a Title Technician for a title insurance company. Actually, we wound up doing very well when we sold that home in just a year…so factoring that in, I would say the (suck) commute was worth it. My interest rate for my FHA loan back then was…11% and I was THRILLED.

29. Comment from tj
Time June 18, 2007 at 4:27 pm

I agree with SS and Synthetik, to wish that higher interest rates will help getting prices back to a level that is supported by sound fundamentals is not bad. But to actively encourage people to invest in a decelerating hosuing market as a good way to build equity can easily be very bad advice that can cause pain and tears for the takers. There are far better and more flexible investments to build equity for a future home purchase.

30. Comment from sniglet
Time June 18, 2007 at 5:20 pm

Rhonda Porter said: “this was 100% financing”

Are there actually people buying with 100% financing or option ARMs in the Seattle area? I thought this kind of funky product was only used in the sticks. Why would anyone use these new-fangled exotic mortgages if they could actually afford a home (i.e. with 10% or 20% down)?

In fact, since our region is doing so much better economically today than a decade ago, I would expect that we would have a lower percentage of 100% finance loans being used than in the ’90s.

31. Comment from b
Time June 18, 2007 at 6:05 pm

sniglet -

I hope you are kidding. How many young people do you know that have the $100k+ in the bank to be able to afford a starter home (or even condo) in this market? The entire reason prices and appreciation are sky high is due to 100% or even 103% mortgages pushed by real estate agents and brokers who wanted the comission and didn’t care if they were going to ruin the people buying the house. Personally I think such irresponsible lending should be criminal, considering it harms not only the borrower, but everyone else in the market with false manipulation of prices. Witness this blog, with people pushing getting a condo to get on the appreciation gravy train, 100% LTV mortgage, buy now or be priced out forever you dirty renting idiot. Any sort of slowdown in appreciation to normal levels means that guy is going to be SOL. But what do they care, since they got their 6% and bought a new Hummer with it.

32. Comment from Matthew
Time June 18, 2007 at 6:07 pm

Inventory sure is high in King County right now…..

33. Comment from SS
Time June 18, 2007 at 6:55 pm

Sandy, you’ve made me see the light. May the appreciation cycle never end. Houses need to keep appreciating at 14% irrespective of wages, population growth, or job growth. It is the fault of all these people with evil wishes who refuse to borrow and get with the program. Not fundamentals. Not borrowers borrowed to the hilt beyond their means. Not of all the “trusted fiduciaries” who gave them wrong advice and raked it in. Ugh! Ugh! Ugh!

34. Comment from Jazen
Time June 18, 2007 at 8:04 pm

I think Rhonda is right and we should really get into the real estate game before it becomes to expensive to play.
God, are you all really that stupid? Real estate NEVER goes down, so if some homes have appreciated 200% in 5-7 years, so what? They will continue, it will all continue and you are all fools for staying on the sidelines.
Right Ardell and Rhonda?

35. Comment from Matthew
Time June 18, 2007 at 8:04 pm

If you bought into the largest debt bubble in the history of the U.S. at its peak, good luck! Not like there weren’t warning signs EVERY-frickin-WHERE!!!!

36. Comment from sniglet
Time June 18, 2007 at 8:28 pm

b said: “The entire reason prices and appreciation are sky high is due to 100% or even 103% mortgages pushed by real estate agents and brokers who wanted the comission and didn’t care if they were going to ruin the people buying the house”

This isn’t what I’ve been seeing on web sites like Raincity. I’ve read Ardell and Rhonda talk at length about how people shouldn’t over-extend themselves. I can’t believe that either Rhonda or Ardell would ever support, let alone encourage, their clients to get 100% or option ARM financing.

37. Comment from ARDELL
Time June 19, 2007 at 8:06 am

Thank you Sniglet. I have never in 17 years had a client who used an option arm or any arm with less than 5 years at a fixed payment.

I’m remembering a woman who I was assisting in the purchase of a condo back in 2005. When I realized she couldn’t afford what she wanted at zero down and stacked costs, I did not sell anything to her. She bought something using a different agent, and when she couldn’t afford the payment, she blamed the lender.

That said, I have assisted people buy with zero down and stacked costs as long as their income and debt ratios supported the payment. I myself bought with less than 10% down more than once in my life. I bought my first house with $500 down. So I don’t use downpayment as a measure of affordability, nor does a lender. A lender uses “reserves” and income and debt ratios, not downpayment.

I do think 10 year interest only and 5 year fixed are suitable for many people. I like to see the payment fixed for at least 5 years.

Government loans support the theory that buying a house without a downpayment gives many a “leg up” into home ownership. Many people in this Country would not be homeowners today without these valuable zero down programs.

38. Comment from Bill Waters
Time June 19, 2007 at 8:50 am

Ardell, am I correct in assuming that you did not represent yourself in the purchase of your home?

39. Comment from ARDELL
Time June 19, 2007 at 9:25 am

No. Why would you think that?

40. Comment from Dustin
Time June 19, 2007 at 9:27 am

Comment from Bill Waters removed for revealing personal information

41. Comment from ARDELL
Time June 19, 2007 at 9:28 am

Bill,

I did not represent myself on the purchase of my first or second homes as I did not become a real estate agent until just before I sold my second home. Once I was licensed, I represented myself on almost all of my purchases and sales.

I tried to hire an agent a couple of times, but one guy said, “I’ll make sure you will not pay a dime more than the house is worth!”. I fired him on the spot. AS IF we can value a property to the dime.

42. Comment from Zag11
Time June 19, 2007 at 9:30 am

“No one would have seen prices rise as high as they have if appraisers only used comps. If they start doing that now, they may create a flat market”

Really? didn’t use comparable sales to value a residential property? what did they use alternately, the income approach, or the replacement cost approach? Because they had to use one of the three according to USPAP standards

43. Comment from ARDELL
Time June 19, 2007 at 9:47 am

Bill,

You are correct that my home purchase was the “craziest” thing I have ever done, and I am the first to admit it. The story of what I did and why, would make a great blog article (or WE or Lifetime movie). Though I clearly would not recommend it to my clients. I don’t consider myself to be “one of my clients”, but seriously it was a valiant effort and so far working well.

Where can you publicly see the terms of my loan? My purchase is clearly a “case study” LOL! But it has a whole lot more to do with my fighting deperately to gain some toe hold, for the benefit of both me and my children, after coming out of a 20 year marriage 3,000 miles from anyone I knew. It’s a huge continuing struggle. And if I fail, and I may, it won’t be for lack of giving it my all.

My girls have learned much from my struggle, and how I have handled myself during difficult times. My short term handling in crisis gave them the time they needed to recover from all that the divorce caused them. They are now all doing well, or at least much better, and if that is all I will have accomplished from this, that is enough for me.

There is not enough written about relocated wives, and relocated wives who then go through a divorce at the other end of the road…all alone. It’s not a pretty story, but I’m not whining!

I did what I had to do, and I don’t apologize to you or anyone else. I did it for my girls and they will always hold that courage under fire in their hearts. They respect me for it. You can think whatever you want. There have been many times when being fair to my clients could have meant that I lost my house, and I still fell on their side at my potential great peril.

Struggles prove who you are. Grace under fire is an opportunity, not a shortcoming.

44. Comment from ARDELL
Time June 19, 2007 at 9:52 am

Zag,

70% appreciation can’t happen over a two year period, if all were using comps alone and not an appreciation factor. Comps alone equals a flat market. If nothing can sell for higher than a composite of the last three sold…how do you account for property appraising at all time highs? They did. So it couldn’t be on comps alone.

I watched this in CA where prices jumped to incredible highs…and they appraised. Appraisers do factor in the propensity of the market. Appraisers have a gas peddle and a brake peddle.

45. Comment from Rhonda Porter
Time June 19, 2007 at 10:08 am

Appraised values always lag behind “list price” or what homes sell for…they’re based on data that is at least 30 days old if a home sold the day it was put on the market.

46. Comment from sniglet
Time June 19, 2007 at 10:08 am

ARDELL - June 19, 2007
Aredell said: “10 year interest only and 5 year fixed are suitable for many people…..I have never in 17 years had a client who used an option arm or any arm with less than 5 years at a fixed payment”

Wow! I am surprised that there are people actually getting 100% loans. But it must be far fewer people using these kinds of loans in the Puget Sound area than there were in the ’90s, right?

Is Ardell’s experience of eschewing customers who use option ARMs similar with most realtors in the Puget Sound? Isn’t it only realtors in less prosperous areas who would even consider letting their clients use option ARMs?

47. Comment from Rhonda Porter
Time June 19, 2007 at 10:23 am

Bill, I thought that the county removed Deeds of Trust from public records? You can see that one was recorded, but you can no longer pull the document.

48. Comment from Bill Waters
Time June 19, 2007 at 10:27 am

“70% appreciation can’t happen over a two year period, if all were using comps alone and not an appreciation factor.”

Some might argue that having home prices increase in excess of buyers ability to save money simply because other people are willing to borrow that money today rather than wait, is something to be avoided, not something to be encouraged.

I see your point on the appraisal restriction, but you seem to be side-stepping the key issue. That is, people are free to “overpay” as much as they desire IF they are using their own money. If they want to overpay using someone elses money then the lender has every right to say no.

It seems quite apparent in retrospect that alot of the recent appreciation has been due solely to banks willingness to let people overpay using borrowed funds.

49. Comment from Rhonda Porter
Time June 19, 2007 at 10:36 am

The county has removed loans that are a couple of years old, too. You would have had to accessed it (if by the county on line) sometime last year.

I’ve been following this because I have written about the county posting Deeds of Trust in my newsletter and was waiting to blog about it…since then, they have removed Deeds of Trust from their on line site. It’s still public record, but not available without physicially going to the county or a title company.

Seems like a lot of effort for ???

50. Comment from Adrianna
Time June 19, 2007 at 11:45 am

Re #52 - that’s kinda creepy, I gotta say. In fact, it’s a lot creepy.

51. Comment from tlw
Time June 19, 2007 at 11:46 am

Comment #43 reminded me of Godfather (Part I):
Don Corleone: work my whole life - I don’t apologize - to take care of my family, and I refused to be a fool, dancing on the string held by all those bigshots. I don’t apologize - that’s my life

52. Comment from ARDELL
Time June 19, 2007 at 2:33 pm

Sniglet,

Can you define option arms for me? I don’t want to mis-speak. What is your definition of an “option arm”?

53. Comment from Rhonda Porter
Time June 19, 2007 at 2:44 pm

Ardell, there are 5 year fixed period ARMS that offer 10 year interest only payments and are NOT option arms. Both Fannie and Freddie offer this product that is popular in many places, including Seattle. Some people actually opt for these mortgages even though they qualify for a fully amortized 30 or even 15 year fixed but they would rather invest there money (difference in payment) elsewhere or they do not want to pay down their aquistion mortgage balance for tax purposes. It’s not all about squeezing into the most home. We have seven year interest only mortgage and did so for just those reasons. It made sense for us. It’s important to work with a Mortgage Professional who will review your possibilities and help develop a plan that best suits one’s personal goals…more important than chasing an interest rate! I say this as I’m trying to save a person who started with Lending Tree over a month ago and is having a horrible time with the lender who promised the lowest rate…didn’t work out for them…and now rates are much higher and he’s closing later. Off topic!

54. Comment from Rhonda Porter
Time June 19, 2007 at 2:56 pm

Bill, I agree with Adrianna…yes it’s public record. The intent of public record was not for the snoopy public but to help impart notice that property has been transferred to mortgaged (among other things). It’s especially odd when you comment about someone’s information when your name is “blacked out” so no one really knows who you are.

55. Comment from ARDELL
Time June 19, 2007 at 3:26 pm

I’m sure what I’ve said in the past, though I can’t check everything I’ve said so must simply rely on truth, that I only review a client’s ability to purchase based on a rate of 5 year fixed or better. If the client chooses less than a 5 year term for tax reasons or any other reason, that is between the client and the lender. So if they qualify at a 30 year fixed and choose a 1 year arm for their own reasons, that’s not my business.

As to my personal situation. I believe my second was shorter term but not my first, my intention being to pay off the second, but not the first. But I have to dig out my papers, time to do that anyway. Bill seems to know my personal business better than I do And I agree with Adrianna that is very creepy. As to my statements regarding “client advices” I do not consider myself to be my client. That just seems too “Me, Myself and I” doesn’t it? I am a Gemini, but that’s taking “the twins” to the extreme to say Ardell is Ardell’s client. A bit of a stretch, Bill.

56. Comment from ARDELL
Time June 19, 2007 at 3:31 pm

tlw,

Well, that is my culture. I don’t deny it. My grandmother bought her house by savng quarters from pasta sales. Just how we are.

57. Comment from sniglet
Time June 19, 2007 at 3:40 pm

Ardell said: “Can you define option arms for me? I don’t want to mis-speak. What is your definition of an “option arm”?”

The definition I use for an “option” ARM is any kind of loan that allows negative amortization payments (i.e. payments that are so low that the principal would never be reduced). Most option ARMs only allow these low payments (which result in negative ammortization) for a finite period of time.

58. Comment from ARDELL
Time June 19, 2007 at 4:17 pm

Thanks sniglet. No, I have never. Just wanted to be sure. Though I have heard they may make sense for some people on a late in life cash out refi. But that has nothing to do with buying real estate, so I have never seen option arms used. But I reserve the right to use one if and when it makes sense for me to do so.:)

Speaking of which, I just turned 53. I’m two years from my bank pension. Anyone know how old I have to be to get a Senior Discount on my taxes? Is it age only? Or do you have to qualify by other factors in addition to age?

59. Comment from Rhonda Porter
Time June 19, 2007 at 9:38 pm

Hi Ardell, I believe there are income limits to receive the Senior Discount on your property taxes.   

Option ARMs may be referred to as “pick a payment” and are often times the low low rates you receive in the mail with the fine print at the bottom of the marketing piece.  The negative amortization (also called deferred interest) increases the mortgage balance when the borrower selects the low payment option.  Once the mortgage hits the set “cap” (which can vary) or ceiling, the mortgage reamortizes based on the remaining term at the higher loan balance.  I’m not a big fan of this program either.  I think in some cases it works…but often times another mortgage is better suited.

60. Comment from ARDELL
Time June 19, 2007 at 11:18 pm

Bill,

You crossed the line. I never post personal info about my clients on a blog. “Stories” without names is one thing…posting someone’s mortgage particulars is another. But I don’t have to tell you that. You know you crossed the line. I answered it honestly. Best I can do with it. Not the end of the world. I’ll live.

Blogging entails a level of responsiblity not to reveal client particulars. Not sure why you checked my info way back when and kept it this long to reveal to the world. Adrianna’s right. It’s a bit creepy. But I’ve seen worse and have had worse done to me. Not a huge big deal. I don’t have any big secrets to hide.

So is being a blogger like running for office? Gives people the right to poke at you from every and any angle? We’re all learning. Hope you learned that sometimes it’s just a little too creepy.

61. Comment from ARDELL
Time June 20, 2007 at 6:14 am

Synthetik,

I really don’t get you at all. Why do you talk like that? People call me and say I want to buy a house or I want to sell a house. How am I “steering people” ?

62. Comment from Rhonda Porter
Time June 20, 2007 at 6:25 am

I don’t relate either. When clients come to me wanting to finance a home, I review all of the options…if they’re unsure or uneasy, one of those options include waiting to buy or just not doing it. I don’t “steer”…I provide information and advice…it’s up to the consumer to make an informed decision on their finances.

63. Comment from Adrianna
Time June 20, 2007 at 7:59 am

Bill - I get that it’s public information. I just don’t get how it’s any of your business. And the fact that you looked it up YEARS ago and still remember the details - THAT is what’s weird. Spin it however you want.

64. Comment from ARDELL
Time June 20, 2007 at 9:04 am

Bill,

I don’t disagree with you there. But your assumption that everyone who buys a home as they best can is “a flipper” has obviously been proven an incorrect theory. Even if I do sell it now, it wouldn’t make me a flipper. Just a buyer with a short term need that has been fulfilled.

I’ve thought about this, and I don’t find your motivations to be as “creepy” as some others. I think the answer to your question is that I have not had any clients with the same motivations as me. I advise them what I would do if I were THEM and in THEIR circumstances. Should I have a client with similar goals to mine, maybe I would advise them to do what I did. I just haven’t had clients with the same “buyer profile” as me.

As to moving here “to make a fast buck in a hot market”. LOL You’ve GOT to be KIDDING! You think prices are high here? You think THIS is a fast market? That’s a joke. Do you know where I came from?

I came here because my children can not even HOPE to own even a little studio condo where I was. I came here because Seattle was a SLOWER MARKET and MORE AFFORDABLE for the long term needs of my children. I came here to give THEM more options to buy a home and raise a family.

You couldn’t be more off base about me Bill. Why Seattle? Because it is the ONLY place on the West Coast where I have a family member, my sister. Because it is a short flight to my adult children who are not all here…yet.

Moving here while one was just finishing High School was the hardest decision I have EVER made, where I put Long Term Goals ahead of my short term comfort. I just knew somehow they would be better off with more and better housing choices. Not to mention a better quality of life and a kinder more moral society. You are the exception to that rule. Stop looking for a Monster behind ever Realtor’s sign. You won’t find one here. I’m just a Mother, a single Mother, doing the best I can with what life handed me five years ago.

65. Comment from ARDELL
Time June 20, 2007 at 10:04 am

Rhonda,

See what happens when you post Friday rates on Saturday LOL It turns into “Whacky Wednesday”. Kim is freaking out.

66. Comment from Rhonda Porter
Time June 20, 2007 at 10:42 am

Wacky, indeed! I have a hard time dealing people who feel like they must try to find fault about somebody instead of focusing on what’s good.

IMHO it would be totally different to ask someone about their personal information (regardless of if it’s public or not) than to post it “in their face” and to put their own twist on it.

A mortgage does not define a person and there are no bad mortgages (even an option ARM–all though I’m prejudice against them–can be a proper tool for the right person/investor). There ARE bad plans or lack of planning/strategies for mortgages. This is why it’s important to work with a Mortgage Professional.

Ardell, your mortgage best suited you at that time. Why you have the mortgage you do is really nobody’s business but yours, your Mortgage Professional and those you trust with your finances.

I am always amazed at how comments create a life of their own away from the post.

67. Comment from Dustin
Time June 20, 2007 at 10:57 am

PLEASE NOTE

I’ve been busy this past weekend with personal stuff and too far removed from RCG. I had no idea people were posting personal information about Ardell’s mortgage (even if it was public record… personal stuff is off-limits for this site!) or I would have deleted the comment immediately in order to nip this conversation before it went on this long!

I’m now going back and deleting stuff, so don’t be surprised if you see some changes to this tread.

Sorry if it messes up the numbers when people are referencing individual comments, but I simply don’t have the time to correct all the details…

68. Comment from tj
Time June 20, 2007 at 11:02 am

Ardell wrote this:

” I came here because Seattle was a SLOWER MARKET and MORE AFFORDABLE for the long term needs of my children. I came here to give THEM more options to buy a home and raise a family.”

Funny, I hear quite a lot of people discussing leaving Seattle these days of the same reasons. To give themselves a chance to own a good home and raise a family without having a debt monster breathing down their necks for the rest of their lifes…

69. Comment from ARDELL
Time June 20, 2007 at 12:21 pm

I guess it’s all relative tj. Back in 96 when my husband asked us all to move to the West Coast because he was in the technology field, I said no and we went to Florida, which was quite affordable. But the CA bug was in his blood. He still lives in CA in one of the most expensive towns in the Country. So here was more doable than there for me and mine. There are cheaper places than here, of course. But I really love Seattle. If it comes down to it, I’d rather rent here than live somewhere else, at least until I retire, whenever that is. Not sure where I would retire to…depends on where my girls end up.

For now, I love being a homeowner and I love my house. But I don’t have to have it like I did two years ago. It worked out for me.

70. Comment from tj
Time June 20, 2007 at 1:17 pm

Ardell, I agree with you renting surely seems like a good way to be able to enjoy the many virtous of the Seattle area in the current market. Many thinks we will see a 20-40% decrease of relative prices in the next 3-5 years so there is definately hope for the many median income familes that are in somewhat despair today over not being able to own a decent home in the area they love. I think even the impatient and currently unaware will be on the sidelines if/when the mass-psykology turns as a result of a non-apreciating market. This should help speed things up to get prices to a lower level that really is a positive for everyone except for the ones that gambled on apreciation to support their homes or lifestyle.

71. Comment from ARDELL
Time June 20, 2007 at 1:42 pm

I don’t intend to rent tj. Just saying that’s a “worst case scenario”.

My mistake was renting in the first place at the time of the divorce. I used up my resources by renting instead of buying then, and I would have doubled my money or more had I bought then instead of renting. But I just couldn’t do it with all that was going on. Plus at that point I wouldn’t have tried to get a mortgage as I didn’t know what the future would hold for me. Not that we ever do, but I had to stablilize and renting was a huge mistake before I bought the house I’m in.

I never think you go totally to the sidelines and wait. That is from my old job where you never went to total cash betting the market was going to go down. You might increase your cash position and reduce your stock position. But playing the all or nothing game rarely works out. Better to choose wisely and modestly. That’s why I tell people to start smaller and ugly. Plenty of room for advancing value that way.

Problem is many want to buy a beautiful needs nothing home. That is just not a good strategy all the time and requires constant market appreciation. It’s a fool’’s game for an investor, but a comfortable choice for most home buyers who are more concerned with “home” than “investment”.

72. Comment from tj
Time June 20, 2007 at 2:08 pm

Taken the costs of investment and leveraged risk with a home purchase it could become one of the worst investment for a non-rich individual. The cost of investment puts most eggs in one basket. If you instead rent the same place and get help help to spread your investment risks to minimal cost and flexible investments you should sit in a much safer and historically better performing situation. And in todays house market where it seems we are at the top of a downslope of home prices it’s even more important to stop and think.
I’m happy for you though that you bought an sold a home in a time where apreciation was historically high enough to leave you with a good profit in short-term but to take that as the norm and advice it in todays market could put the takers in a very serious situation should something unexpected happen to their income as foreclosure, blemished credit and loss of downpayment + all costs involved in the home purchase and interrest paid. This is risks some are willing to take when buying the home they want but not so sure about a starter/investment home to build equity.

73. Comment from Rhonda Porter
Time June 20, 2007 at 2:14 pm

TJ, I’ve helped many people become homeowners who were what you might call “non rich” over the past seven years. They have all done quite well with the appreciation they have gained from being homeowners. The appreciation is something they would not have benefited from as renters and I would bet most would not have invested in other avenues to have what they do today from being a home owner.

Owning a home is not for everyone but neither is renting. It’s a personal choice. I don’t think you’ll find anyone at RCG who will say that everyone should buy a home and you won’t find us saying everyone should rent. Yet “bubble bloggers” all seem to say that everyone should rent and only fools buy or the rich.

74. Comment from tj
Time June 20, 2007 at 2:44 pm

Rhonda, I’m not debating renting over owning as a way of living I’m saying that a home as an investment is an extremely risky one for the non-rich. For a rich person a home investment is a small percentage of a well balanced investment portfolio. A house as an investment for a non-rich perso is not a good investment strategy.
The typical home buyer invest most of his/hers assests combined with borrowed money in a house which makes the risk spread extremely low and the risk highly leveraged. And as we know home prices can go down as well as up which if you are unlucky can put you in dire straits that a balanced investment protfolio of flexible investment will not. I.e you can convert your investments to “safe havens” as cash on short notice with minimal cost.

A home as a home is something different. Owning is preferable over renting for most but as an investment to build equity a home can be very risky and a poor strategy.

I do believe prices are inflated far beyond sound fundamentals but I would not call myself a bubble blogger who thinks everyone is better of renting forever. Though, if you can’t afford a home without stretching or use of exotic mortgages I think you are better of renting until you can.

75. Comment from tlw
Time June 20, 2007 at 2:45 pm

Rhonda/Ardell,

If one heeds your advice in comment #21:
Oh and for ALL people waiting for HOUSE prices to come
down, seriously. Buy a condo or townhome first.
and buy some small house now, how many year s/he or they would have to stay before selling the house to gain some equity so that the gain would offset the expense?

Would you provide a breakdown of the gain and estimate expense? I’m only looking for some rough estimate.

Let’s assume the following:
- a house of 500k
- annual appreciation of 7% (or 14% or any number you pick)
- a household income of 100k
- a tax bracket of, say, 25%
- tax, home insurance, maintenance and repair.
- last but not least, 6% to pay for the real estate agents when selling the house in order to realize all the equity gain

Please point me to previous post if this topic has been covered on this blog.

76. Comment from Rhonda Porter
Time June 20, 2007 at 2:51 pm

tj, I agree with you here: “if you can’t afford a home without stretching or use of exotic mortgages I think you are better of renting until you can.”

Stetching might be okay depending on how “stretching” is defined. If stretching means that your mortgage is a bit more than what you pay in rent and you have savings to fall back on in case of an emergency, then it could be a “healthy” stretch. Having to do an option ARM to get into a home and/or getting a mortgage and not having enough funds to have a life or to do maintainance/improvements to home–are probably cases when someone should rent instead.

77. Comment from Rhonda Porter
Time June 20, 2007 at 2:51 pm

TLW, how much are you planning to use for down payment and closing costs?

78. Comment from tj
Time June 20, 2007 at 3:04 pm

Rhonda, stretching would be to have a very thin margin to live of after all your expenses are paid (Make yourself the biggest favour ever and don’t forget to max out your 401k as part of expenses ).
It has nothing to do with the cost of renting vs owning.

tlw, I hope this example is not part of this discussion. Predicted apreciation does not do anything for investment strategy. No one knows the future but you should try to invest to be flexible for different scenarios. 7% or 14% apreciation can just as well be depreciation. ( Some say this is more likely for the next couple of years ). I’m not saying either. I would definately not like to be hold accountable for a 7% yearly apreciation as a foundation for others financial decisions.

79. Comment from tlw
Time June 20, 2007 at 3:06 pm

Let’s assume 10% down payment and 1% closing costs.

Feel free to estimate a different scenario where 0% down payment and stack costs.

80. Comment from tlw
Time June 20, 2007 at 3:12 pm

tj, I understand perfectly that “past performance does not guarantee future results”. I’m trying to point the “holding period” that one has to endure when this “condo or townhome” is not exactly one’s dream home.

I’m sure there must be some blog or site where you can plug in numbers for these scenarios. Just haven’t seen it yet.

81. Comment from ARDELL
Time June 20, 2007 at 5:27 pm

tlw,

I can tell you that a client of mine who bought zero down and stacked costs in Summer of 2004 for $135,000 sold his condo in Juanita for $206,500 in August of 2007. Does that help? I can tell you that a client of mine who bought in June of 2005 for 104,500 with all costs included can sell it today for $165,000 to $170,000. A client of mine who bought in December of 2005 for $580,000 just sold for $850,000. The last one was an investment property sold for “lot value”. So the value of the dirt on that one exceeded the appreciation on the building.

My general point is that you make it look better when you sell it than it looked when you buy it. My first client put hardwood floors in the living room and dining room and hall of his condo. Did the work himself. That’s about all. One should not buy only expecting “appreciation”. A little sweat equity. Make ugly prettier. Maybe buy a house with no offstreet parking, and add a garage.

I have a client who bought a little house in Seattle last month for just under $370,000 and she could probably turn around and sell it for $40,000 more right now, just based on the changes she made to move into it.

Buying something that needs nothing is riskier than buying something that you can cosmetically improve. Problem is many want something that needs nothing, and then they want pure appreciation to guide their future. Not realistic. Never was. You can’t predict that event. Yes, it happens sometimes. But you don’t buy thinking that way. Buy something you know you can improve.

Ugly condos are cheap and easy to improve. Ugly townhomes are a little harder to improve.

82. Comment from ARDELL
Time June 20, 2007 at 5:32 pm

BTW,

I am NOT saying you should BUY a condo if you don’t want to buy anything period. I am saying if you want to buy a house some day in the future, and can’t afford one now, then buy a condo you can afford now. so you can later trade up. I can’t tell you how long it takes because it depends how much you earn. Now and then. Buy something that is less than you can afford and is ugly. Improve it.

Very few people go from renting to owning their great forever house.

83. Comment from Rhonda Porter
Time June 20, 2007 at 5:42 pm

For me, I was driven to buy a home…I don’t force that on anyone. I think I had a “need” to do so because of growing up in rentals…having to move and never feeling like we “owned”. We lived in some good neighborhoods…had my mom bought the house we lived in back in the early 80s (and she could have), her financial picture would be drastically improved.

I bought my first home at 21 years old and it had nothing to do with making a profit or return. It was all about “owning” and having roots planted somewhere. I was the first person in my immediate family to own. This house is much like what you describe, Ardell…except that it was “further out” too. We just had to paint, rebuild the small front deck and add a fence…we did not intend to sell the home so quickly, the improvements were just for us (my son’s Dad and I), however I did find another home that I wanted just a wee bit (and I mean wee bit) closer in and newer. That home, which did not need as much as the first home, did not provide the same return as the first home. I think you’re right on, Ardell!

84. Comment from ARDELL
Time June 20, 2007 at 5:55 pm

Here’s what happened to my Seattle buyer a few months ago. Went all the way up to a house that sold for $445,000 and it wasn’t any great shakes anyway. So I said let’s go back down to under $400,000, and found one for about $365,000. Why stretch up to something you’re not crazy about anyway. So spend less and make some changes. $365,000 for North Seattle was dirt cheap. No way she won’t be able to sell it for more than she paid for it someday. It’s worth more already and it looks so much better already.

If you’re worried about prices, time to make wise decisions and roll up your sleeves. They’ve been working at the house painting and making changes for almost a month. It looks like a different house already. Seller put in a brand new heater before it closed. It had a good roof. They put in new windows. Sometimes buying less than you can afford is better. Make it better and stay for five years.

85. Comment from ARDELL
Time June 20, 2007 at 6:00 pm

“Leave a place a little better than you found it.” Good rule of life.

86. Comment from tj
Time June 20, 2007 at 6:22 pm

I don’t know if this is common but the ones in my circle of friends who rents are in there upper 30s and early 40s and rent houses on the east side with current values of $500k and up with their families. I’m pretty sure non of them are especially interrested in living in a sub $200k condo if you can find one on the east side.

I do agree though that if you can afford the risk of a loss and are as well versed in the market as Ardell is there can still be low-end profitable flips to made if you are handy and know your stuff. I’m however not qualified at all to make that judgement. It still seems risky to me taken the leverage of the mortage. Noone would recomend you to lend $200k to buy one stock (even if it’s Micorsoft)It’s just not good investment strategy. I guess flipping is not really comparable though since you actually perform labour and it’s not a pure investment.

87. Comment from ARDELL
Time June 20, 2007 at 6:41 pm

I don’t like pure flips, tj. I’m just saying improve while you live in it. I’ve always done that, even before I was an agent, as did everyone I’ve ever known. It’s not a flip, it’s just the right way to do things.

My sister has rented the same home in Seattle for 7 years. She’s quite happy there. Renting is fine as long as you aren’t crying that you can’t buy anything while you are renting. Many are very happy renting. My advice is for those who seem to be angry that they can’t buy a nice house. Happy is good!!

88. Comment from Matthew
Time June 20, 2007 at 6:43 pm

Why did my comment get deleted? It was civil and raised a valid point that TJ just reiterated.

Many people don’t view condos/townhouses as viable options to “get into the market”. The fact that condos have become todays “starter home” just shows you how out of whack and unaffordable this market has become.

89. Comment from Rhonda Porter
Time June 20, 2007 at 6:44 pm

Happy is great! In fact, my 14 year old son just invited his girlfriend and her mom to come over and enjoy the evening with a glass of wine (none for the kids, of course).

Cheers!
I’ll be away from blogging for a while.
Got some Rev. Al Green on…life is good!

90. Comment from ARDELL
Time June 20, 2007 at 6:59 pm

Matthew,

See comment 67. This post is in moderation. We rarely do that. I’m sure your comment had some kind of flame, or it wouldnt’ be deleted. Some commenters are going straight to moderation. We cleaned it up a tad. Just deleted generic bashing. I think your comment was fine until you threw a random bashing comment at the end for the fun of it. Try to refrain from doing that. Thanks.

91. Comment from ARDELL
Time June 20, 2007 at 7:05 pm

Matthew,

My first home was an attached home and I was a Bank Officer and my husband a tech guy with a master’s degree, and we were 30 ish. Not out of whack to start out at less than single family detached. Many of my relatives lived in very nice attached homes all their lives. People in single family unattached homes were rich people.

Seattle is just not one of those cities that was built out as attached housing, as many others were. So land values have accelerated the values more here. I’m glad they are adding townhomes into the mix in Seattle.

92. Comment from tj
Time June 20, 2007 at 10:11 pm

To finish up my comments on this thread I would like to add that Matthew made a very good point earlier. If you are lucky and get equity growth of your starter home your goal home probably apreciates even more in dollars effectively widening the gap if you sell at high profit. If home values depriciate the mortgage can become a rope around your neck.

Again, a better and less risky strategy for most would be to rent and invest your own money wisely so that you can time your purchase when the gap either has narrowed or prices are where you can justify
a purchase for yourself depending on what your current barrier for buying is.

Last an apology to tlw, I do think an excerise in a hypotethical apreciating market to see where you make a real profit would be valid to the conversation. I misunderstood it as an attempt to prove that buying is a good investment strategy since apreciation is always at least 7% a year. Peace and out.

93. Comment from tlw
Time June 20, 2007 at 11:53 pm

tj, no need for an apology. I didn’t clearly state the point I’m trying to make, which is there must be a “holding period” for the property before any profit can be realized. For a market with a lower appreciation rate, the holding period is even longer. For a depreciating market, you’re stuck with the property or will have to sell at a loss when you need to. If you sell before realizing any profit, guess who makes all the money? The real estate agents when you bought the house, the loan originator, the lender, the home insurance company, and last, but not least, the real estate agents for selling the property.

94. Comment from Rhonda Porter
Time June 21, 2007 at 5:49 am

“a better and less risky strategy for most would be to rent and invest your own money wisely so that you can time your purchase when the gap either has narrowed or prices are where you can justify
a purchase for yourself depending on what your current barrier for buying is”.

If your rent and mortgage payment are the same, you’re probably better off with the mortgage payment. At least then you’re paying yourself equity (even though it’s small) and you have appreciation.

Comment 93 is right on with regards to needing to retain the property in order to gain appreciation/profit. As far as who makes money, of course the professionals who helped the buyer through the process are going to get paid and they should be.

I’d write a post about a typical work day for me but it would probably make you all catch a bunch of zzzzs! I don’t just lock loans and deposit commission checks. There is actually a lot more to being a Mortgage Professional. I haven’t been able to participate as much as I would like to with commenting in this post because of dealing with a couple of transactions that are very time consuming and one of them, I probably won’t be paid on. I’m trying to help the buyer STAY with his (crappy) lender so he can have a better rate.

95. Comment from synthetik
Time June 21, 2007 at 7:43 am

Rhonda Said: “I bought my first home at 21 years old and it had nothing to do with making a profit or return. It was all about “owning” and having roots planted somewhere.

I bought my first house at 21 too, in 1991. It was mainly because I could have a house twice the size and pay about the same as a rental. You can’t do that anymore - not even close.

At the time I was renting a 900sq foot apartment for $360mo and was able to buy a 1900 sq foot place for less than 70K, with a payment around $450/mo.

Homeownership is great when it makes financial sense. I didn’t become a renter until 2003.

Yes, I agree that renting isn’t the greatest scenario - but I am avoiding financial armageddon and paying about 1/3rd to 1/2 what I’d pay if I were to get back into the market now. We love our place in Capitol Hill and we don’t have to worry about rents going up due to speculation.

The other big bubble markets are currently experiencing a decrease in rents due to an increase in the number of available units.

96. Comment from Flotown
Time June 21, 2007 at 11:39 am

I’m a prospective first-time homebuyer and am looking at a condo around downtown seattle. I’m single and want to live in the city. I could rent or buy fairly comparable product, but it will obviously cost me more to buy. I’ve run the numbers (all the buy v. own worksheets) and I would need 5-6% annual appreciation to make it worth it financially assuming a 2-3 year hold. I want to live in SF home at some point in the future.

would you advise that I get on the equity train now, or just pocket what would be the down payment and the $900 per month delta between my $975 a month and the $1875 a month mortgage/HOA/insurance that I would be paying for a similar place

97. Comment from Rhonda Porter
Time June 21, 2007 at 11:53 am

Flotown, how much are you planning on using for the down payment?

98. Comment from tj
Time June 21, 2007 at 12:36 pm

Rhonda, I think you might have missed the real point I and Matthew was trying to make:

You commented:
“If your rent and mortgage payment are the same, you’re probably better off with the mortgage payment. At least then you’re paying yourself equity (even though it’s small) and you have appreciation.”

The point was that if you buy a starter to gain equity for another purchase you will have to sell at an apreciating market to realize that gain. In an apreciating market your goal home has likely apreciated more than your starter putting your goal further away than when you started. If you do the transaction in a depraciating market you can have a major issue with your mortgage. If you instead invest your own money in a balanced investment portfolio that grows independent on the housing market you can time your purchase of your goal home when the housing market is cool and thereby narrowing the gap. And you can sleep soundly when your investment grows instead of worrying about your mortgage, unexpected income changes or maintenance costs.

99. Comment from ARDELL
Time June 21, 2007 at 2:27 pm

Flotown,

Assuming you are single and have no pet issues, better to rent if you plan to leave Seattle in 2-3 years. Same as knowing you have to sell a stock in 2 years. Don’t buy it if you know you don’t have at least a 5 year timeframe to play with, unless you can afford to lose it.

If you have two big labs and 4 children…renting is not so easy. Better to buy a place than rent.

If you are coming knowing you are leaving…beter to rent if you are talking downtown Seattle. Eastside would be different.

100. Comment from ARDELL
Time June 21, 2007 at 2:38 pm

tj,

Your logic is correct. But all too often people just don’t save it or invest it wisely. So it just doesn’t work that way in reality. But those who bought something first did do better than those who thought they were going to save. Another reason it works is because most people who buy a condo or small home first are young and their income increases by the time they buy the house, moreso than middle aged or older workers.

I don’t know where to get the income stats, but if you just got out of college, I would think maybe your income grows more in the next 8 years than it does after you are working 15 years. That was the case fore me and my husband. He got his master’s degree and switched jobs and tripled his income from the time we bought our starter home, to the time we bought our bigger home. My income doubled during that same period.

Not sure how you factor in the “starting salaries” of young people vs. incremental increases of most older people.

There are a lot of factors involved, many more than an excel spreadsheet will hold. We just know too many people who did this and for whom it worked. Just had a couple who did this. Bought a townhome, lived there for 3 years, took the net proceeds of $100,000 and bought a house. During that time they also finished more higher education and had higher incomes too.

Not sure how to factor in that higher incomes part. Personally I don’t feel secure in that method with new townhomes or new condos. Only ones that can be improved. Small houses even better, but not as doable.

101. Comment from tj
Time June 21, 2007 at 3:31 pm

Ardell, I think you are right that some do not have the discipline to save and invest efficiently and that a “forced savings” plan as a mortgage can work in ideal conditions. Though the risk is very high and if you can’t manage your own money you should probably not take on a several $100k mortgage. You know many it did work out for but unfortunately we already hear in the press of many who it did not work out for and they are in pretty bad situations.

102. Comment from Flotown
Time June 21, 2007 at 3:37 pm

I don’t have to leave, just used that as my minimum window for holding to avoid taxes. I want to make the best financial decision so I can live in a nice place in an in-city seattle neighborhood some day.

Rhonda, I can afford no more than $20 k down

103. Comment from ARDELL
Time June 21, 2007 at 8:45 pm

tj,

When you are buying for appreciation, you need to know that is what you are doing and buy appropiately to the objective. I saw a property selling short in Kirkland. It was in the one place that was known to have a problem and the person overpaid for it and it was new.

Problem is that people think they can buy anything it it should appreciate, and that is not the case. Some will appreciate more than others, and you have to purchase wisely. Too many simply buy something that doesn’t need any work and then want it to appreciate regardless.

104. Pingback from Seattle Washington Online Resource Information Center » Blog Archive » Agent responsibilities and help for Limited English Proficiency clients
Time June 21, 2007 at 10:31 pm

[...] Friday s Rates on a Saturday I’m sorry for posting rates a day late. Since I also have Friday’s rates at Mortgage Porter, I’ve been trying to post rates a bit later in the day at RCG in case we have significant price changes during that day. Yesterday, however, got away from me and sometimes other things, such as business, has to come before […] [...]

105. Pingback from It’s Friday and mortgage interest rates are… | Rain City Guide | A Seattle Real Estate Blog…
Time June 22, 2007 at 1:11 pm

[...] Just for giggles, I have added the change to the rate from my previous Friday’s rate post. [...]