When I almost bought a rental property this weekend, a few readers chimed in saying “Ninja you are supposed to buy low and sell high. Right now you would be buying when the market is booming.” Comments like these are expected, especially when I’m always talking about Seattle Real Estate being in a bubble.
So why do I still check the local MLS listings every day, hoping there will be a place worth looking at? It’s simple really.
If you’ve read any news about real estate over the last six months, it’s clear the market has picked up. Some cities like Phoenix and Las Vegas jumping up 20%+ in the last 12 months. What was a $300,000 house one year ago, now goes for $360,000 after getting multiple cash offers. Same story up here in the Pacific Northwest. Inventory is low, prices are high.
There is no denying 20% year-over-year real estate appreciation is unsustainable. Eventually things will cool off. Maybe to a more normal 3 to 6% YOY growth. Maybe things will go flat for a while. Or, who knows, prices could actually drop. Thinking about the recent boom on an emotional level causes some to shy away (myself included at times). They are waiting for a correction that may never come.
Yes, Seattle prices are up 16% in the last year, but they are still 20% below their 2006/2007 peaks.
What’s more, even if real estate is in a bubble right now, it’s a completely different bubble than the last one. In 2006 banks were handing out money like candy. People with no income and no assets were qualifying for $500,000 properties. The market took a dump on it itself when these unqualified homeowners could no longer keep up with their 5-year jumbo ARM payments.
Sure the market is in a frenzy right now, but banks learned their lesson (at least temporarily) and are exponentially more picky in who they lend to. If you don’t have great credit, a significant down payment, and a solid income history, you aren’t getting a loan. Unlike 2006, most of the people buying houses now can actually afford their monthly payments. (random fact: 1 in 4 houses in Seattle receives a full cash offer)
All this is great, but there is really only one reason why Girl Ninja and I are still open to the idea of buying a house in a boom.
We don’t give a crap about price.
If we find a place we love, I don’t really care if it costs $350,000 or $400,000. All I care about is being able to comfortably afford the monthly payments. Sure, I could buy a house for $400k today, and three years from now it might be worth $375,000. But I’ve ALWAYS said, one shouldn’t buy real estate if they aren’t comfortable with the idea of owning the property for at least 10 years. I look at property values over the long haul, not the short-term. A $10,000 price difference today matters little when the house could be worth double 15 years from now. As long as rates are at all time lows, and prices are below their all-time highs, I say it’s still a good time to buy a house.
What say you?