There is a real estate bubble in Seattle (Redmond: rent, condo)

[tommy64]

Originally Posted by KonaldDuth

Most people who "own" the $900k houses haven't paid it off. And they are paying ~$4k in combined mortgage, property taxes, maintenance, HOA dues, etc. Ok, let's say they've had it for a decade and only owe $500k on it. They are still not cash flowing it positive if they can rent it out $2,500/mo at the most.

Even someone who bought it 40 years ago and is mortgage free is getting at best a 5% yield on the equity value, which is really bad. Maybe this kind of scenario is a tax-writeoff strategy?

[Canamlian]

I lived in Melbourne for a few years and gross rental yields were below 4% and everyone was calling for a huge bubble burst. This was five years and prices have continued to climb while gross rental yields are now under 3%.

I don't know which side is funnier - the one continuously calling for a big bubble burst, or the one arguing it definitely won't happen. The ones who have been calling it for five years will pat themselves on the back of it does happen, even if prices are still 50% higher than when they started their chant.

[thatguy950]

Originally Posted by CrazyDonkey

Well, saying that it is simply "supply and demand" misses quite a lot. You have to look at factors that 1) inflate demand and 2) depress supply, beyond what would otherwise be the case, even in a very hot economy. How many "all-cash" speculators does it take to inflate values? Only one per deal...

No one who is making, or hoping to make, money from it wants the gravy train to stop. Stop it will, however. Seattle has always been a boom and bust town.

/thread

Pretty much sums it up.

We also need to consider people, nationwide and not just in Seattle, are once again swimming in debt. We've seen student loan debt balloon recently , credit card debt once again growing rapidly and with higher delinquency rates, and even subprime AUTO loan debt continuing to rise. Hate to say it, but yeah it won't take much of a correction to drastically drop home prices again.

[Blondebaerde]

Originally Posted by homesinseattle

Here's a recent and relevant Seattle Times article: Are Seattle housing prices headed for a crash? | The Seattle Times

"Tech-heavy metros have been the ones that have defied the slow growth that otherwise characterized the comeback from the recession. Population and jobs keep growing. Demand for well-paid tech workers is very high here (see this and this). And, significantly, Seattle is cheaper than the Bay Area while offering amenities that attract top talent."

That about says it all, at this moment in history. What happen to American can-do spririt, as people left the Vietnam War to go into auto manufacturing jobs, all you can eat? These days, it's meritocratic and about nerd skills. Times change.

What I perceive as non-sequiter posts about "fairness" and "bubbles" are a bit odd to me, given the underlying themes are usually about discontent due to choices made, and outcomes therein, that keep most people poor. It's a free forum, but the underlying lack of insight into macroeconomic forces is what I find surprising. Joining with 10K chummies to decide what is "fair" tends to be what fring-y social movements are made of. Stopping by to listen to Communists and Trade Unionists c. six years ago during Occupy Seattle (Westlake Center) really solidified it for me: Crazy, capital 'C'.

[Ira500]

Originally Posted by tommy64

Even someone who bought it 40 years ago and is mortgage free is getting at best a 5% yield on the equity value, which is really bad. Maybe this kind of scenario is a tax-writeoff strategy?

When an investor buys a house to rent out, they're usually borrowing money to do it. And if they're borrowing money to do it, if it's a 900 thousand dollar home, they're going to be forking up additional money in addition to the rent received to make the payment. So why do they do it? Part of it is the tax benefit. But a bigger part is speculation, a belief that the increase in value the house achieves is going to more than make up for the losses incurred during the ownership. Sometimes it works out. But people's memories are short. A lot of people bought houses to rent out in 2005-2006, and four years later, values were down around here by 25-50%. Very few people predicted it, and they don't predict it now. But the predictions of real estate professionals depends on whether they personally benefit from it.

[jm31828]

That has to be the outlier, then. My neighbor's house is valued at $600K and renting for $2850 per month.

[homesinseattle]

Guys, I'm not commenting on the past or future. I'm just saying, we are not in a bubble. This has nothing to do with rosy optimism (something I'm sometimes accused of ) or vested interest. Ask any economist with half a brain. They will concur.

[tickyul]

Even if it IS(?) a bubble, Fedgov will not let home/property values fall too far.

[Ira500]

Originally Posted by jm31828

That has to be the outlier, then. My neighbor's house is valued at $600K and renting for $2850 per month.

No, it's more that when you're looking at a 900,000 dollar house, there's not a huge demand to rent it. Most people looking to rent want something less expensive, or they would just buy it. So you will find better deals for rent on more expensive houses. And those tiny micropod apartments, all 175 sq ft of them rent for close to a thousand dollars, making them really expensive per square foot.

[noah]

I get a kick out of how people, especially realtors right now respond to the word bubble, trying to convince everyone no way no how. Could it ride for a long time? Sure. But when you rise this fast and this quickly you don't just keep it up or slowly ease into 3% a year appreciation like many are now saying.

There are just a ton of good jobs and buyers right now like everyone has mentioned but who knows what the future holds. This coincides with such a strong run in the market too, what happens when everyone doesn't feel so rich. Amazon has recently dropped 12%, what happens if it drops 50%. These things can and do happen. The numbers like rent to income ratios are starting to get strained and eventually either wages need to go up a lot more or rents need to cool. Wages are up something like 25% but housing is up 100%, do the math. Credit is pretty easy again with 600 credit score and 3.5% down getting you a house. On the other side cash buyers are increasing comps very quickly causing the next house to sell for so much more and appraise. I know its Seattle and things are different here.