Yes, it’s a challenging time to be a home buyer in the Seattle area. Many are choosing to rent instead of buy. Or maybe they think that buying a home is impossible. But think of it this way: Prices will continue to rise, and interest rates will rise, too.
Here’s the story of a pretty average-priced Seattle home ($750,000) as of now:
- Price: $750,000
- Down payment: $150,000 (20%)
- Estimated monthly payment (principal, taxes, insurance): $3,361
- Interest rate: 4%
Then, prices increase another 10% this year. Interest rates rise too; now they’re around 5%. So you’ve waited one year and now things look like this:
- Price: $825,000
- Down payment: $165,000
- Estimated monthly payment (principal, taxes, insurance): $4,301
- Interest rate: 5%
Remember, this is the SAME HOUSE. The buyer is not getting a nicer/bigger/newer home. It’s the same older, smaller, house it was in 2017, just more expensive. $75,000 is a lot of extra dough to save up in one year! And don’t count on getting a $12,000 raise at work to compensate for that extra $1k monthly payment.
Since some of you are more into the numbers, that’s $75,000 more you’ll need for the down payment, and another $1,000+ in the monthly payment.
For the more graph-inclined, here’s what the average sale price of a Seattle home has done over the last three years:
The rate at which home prices in the Seattle area rise over the next five (or so) years may slow down, eventually. But it’s not going to happen overnight. And the prices certainly won’t go down. (Unless Amazon, Facebook, Google, Starbucks, and all the biotech companies suddenly crash).
I know, most of us don’t have much choice when to buy or wait: life happens and you need to do what you need to do at that time. But if you DO have the ability to buy now and you’re sticking around for at least 2 years, don’t wait. If not, keep saving and preparing for the increase. Best-case, price increases won’t keep skyrocketing like they have been, interest rates will stay low, and you’ll have a bigger nut to put down, decreasing your mortgage amount.