Thursday, August 04, 2005

America's Riskiest Real Estate?

In my attempt to educate myself on the real estate market of Seattle I have been reading anything and everything I could lay my hands on for the last few days. Today I found a couple of articles that I thought were interesting:

America's riskiest real estate: In this article the author talks about the coming real estate bubble burst. Boston tops the list as the city most at risk for decline in prices followed closely by New York. Seattle actually comes out at near the bottom although it's still not as safe as some smaller east coast cities.

Seattle Times also had a good article this past weekend titled "Distorted prices or room to grow?" This article does a good job of presenting conflicting expert opinions on the current state of real estate in a manner accessible to novices like me. The article also talks about the rising interest rates and its potential impact on the economy in general and affordability for first time buyers in particular. I have already been thinking about ARM vs fixed rate. An ARM in 1977 would have made sense considering interest rates were as high as 18% but at today's low 4-5% rate a fixed definitely seems the best choice. Even if interest rates fall it can't fall that much (and if it does I can always refinance) but if it rises it can rise quite a bit.

I found a house today. Sort of. It's a 2 bedroom, 2.5 bathroom townhouse in a great neighborhood. The price is $367,000. Considering most of the houses nearby are valued at a million or more I think $367,000 is a great price. It's a lot smaller than the million dollar mansions of course but it's the perfect starter home for 2-income young families and the school district is one of the best. I am thinking ahead to when/if I have to sell the house. The proximity to park, school, highway and the fact that it's in an established neighborhood can only count in its favor when the day comes and that's a plus. It doesn't have the stunning water view of the Kirkland highrise condo but it has a nice trail leading into the woods nearby which has a very fairy tale-ish Little Red Riding Hood feel about it that's rather charming.

My FICO score (I got all 3 credit scores last week) is +/- 714 which is lower than the 720 desirable to lock in the best rates. I also just signed a lease on a new apartment and if I break that I have to pay a $2,000 early termination fee. I am wondering if I should talk to my real estate agent (oh yeah, I got an agent too) about the house. But then, I don't know if I am going to buy it. On the other hand if I wait another 10-12 months like I originally planned I would have spent another $10-12 thousand on rent and prices may go up even more by then. It's hard to know what to do.


At 8/04/2005 6:50 PM, Blogger Monty Loree said...

Hey MMB thanks for coming by today and commenting.

Wow. the seattle market sounds pretty steep.

If your fico is 714, that's too bad that you're 6 points from getting optimum interest rates.

I wish I could help you with the 6 extra points. here's a tip though, before you enter into any type of agreement where you authorize the creditor to do a credit check, make sure you have a reasonable deal.

As you may or may not know, credit checks cost you approx 6 points for each credit inquiry done. I'm not sure on the exact amount that a credit inquiry costs.

Thanks again.

At 8/05/2005 10:22 AM, Anonymous Ankur said...

property buying is never easy,,because of large amount and uncertainity of future prices

At 8/05/2005 5:11 PM, Blogger mmb said...

I didn't know that about credit inquiries costing 6 points each. I just signed a new apartment lease last month and I also applied for a couple of new store cards around that time (stupid 10% discounts) so that's 18 points right there? Ouch!

At 8/07/2005 8:30 PM, Anonymous seattlemama said...

That's not a bad price for Seattle. We bought our home for 215k 9 months ago and it has already gone up 140k. We are thinking of selling and pocketing the 140k. On the other hand you are buying a house that the current owners probably paid a lot less for so you may want to think about that.

At 8/09/2005 12:38 PM, Blogger mmb said...

I know! My coworker bought his house for $200k a year ago and now houses in his neighborhood are $360-$370k. It definitely is not a buyer's market right now. I think I will keep renting for a while. I have a small but cozy 654 sq feet apartment with a view of the Sound! That view alone is worth a million bucks. What I really want is a condo with the same view but it's out of my price range unfortunately... for now.


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