There is a real estate bubble in Seattle (Kirkland: renters, HOA)

[KonaldDuth]

I see houses valued at $900k renting for $2,400/month. Do that math on that.

[American Expat]

Originally Posted by KonaldDuth

I see houses valued at $900k renting for $2,400/month. Do that math on that.

Right, no way that works out. My son in Kirkland was trying to buy a bigger house and he would at least make a chunk on his house he bought there in 2011 but $900K is what it takes to buy a decent family home in Kirkland.

[homesinseattle]

Konald, for better or worse, the laws of supply and demand are firmly at work here in Seattle. The buyers and renters are real, the jobs are real, the prices are still half of San Fran. People want Seattle to be what it was. Me too sometimes but that's just not the case anymore. That's not a bubble.

[James Bond 007]

As much as I hate to admit it, no there is no bubble. The demand is genuine, there is no big surge of sub-prime borrowers, only a moderate amount of overseas investors, etc. It's all about job growth, and well-paying job growth for that matter. Been going on several years now.

[homesinseattle]

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

[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.

[mhays25]

Lack of for-sale supply is clearly a problem. It's far easier and cheaper to build rentals (vs. dealing with condo liability laws), so those prices aren't skyrocketing to the same degree.

We could slow condo price rises pretty easily by building a lot more condos. We could slow the townhouse price issue by upzoning a little more of the city to allow them. Same with accessory units. But traditional houses with yards are a limited resource anywhere close-in, and are becoming a luxury item. My preference would be to allow townhouses in more areas, because that demand has a lot of overlap with the demand for traditional houses.

[leastprime]

Originally Posted by KonaldDuth

I see houses valued at $900k renting for $2,400/month. Do that math on that.

Depends
28,800/900k = 3.2% yield.
Add in 1/27 depreciation to a 25% marginal tax and you could get 5% total yield.
{Ignoring tenant and monetary risks}
Our Seattle property yield(s) are a bit higher but lower than the old "standard" metrics.

[Ira500]

Originally Posted by leastprime

Depends
28,800/900k = 3.2% yield.
Add in 1/27 depreciation to a 25% marginal tax and you could get 5% total yield.
{Ignoring tenant and monetary risks}
Our Seattle property yield(s) are a bit higher but lower than the old "standard" metrics.

There's also property tax, insurance, maintenance, etc. Typically, the property tax on a 900,000 dollar house will run around 11,000 dollars per year, and insurance will run 1500 or so. And that's assuming you're paying cash. So the only way you'd get that much yield is if you didn't pay property tax, or insurance, and nothing needed repairs or maintenance. 35 or so years ago in Seattle, you could make actual positive cash flow from houses even including the mortgage payment. My ex and I were paying 300 per month rent for a small house at 17th and Denny. The landlord gave us first crack at buying it before he put it on the market. He wanted 36,000 dollars. Savvy investor that I am, I told him that no one would ever give him 36,000 for that house. It sold last summer for 700 thousand.

[KonaldDuth]

Originally Posted by leastprime

Depends
28,800/900k = 3.2% yield.
Add in 1/27 depreciation to a 25% marginal tax and you could get 5% total yield.
{Ignoring tenant and monetary risks}
Our Seattle property yield(s) are a bit higher but lower than the old "standard" metrics.

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.