3/13/07

Getting Real on Real Estate

So we're house shopping. We have been armchair hunting since first moving here in summer of 2005, at which time house prices in our neighborhood were below the $500,000 mark.

Since that time, home prices in our belly of the woods have risen markedly by about 16% each year since 2005 and 2006 respectively, bucking both the regional and national trend.

Which brings us to early 2007. Housing bubbles abound nationwide, but not here. There's some flattening but that's in the new-build outlying areas or in pockets of Seattle proper. The grim reality is that there is a ton of dot-com money here, a fair percentage of northern California migrants and a diverse, booming industry afoot here with Microsoft, Boeing, Starbucks, Costco and well, name your dot.com - it likely has an office here.

Tiny Bubbles - near the Sea
When we first moved here, we strategically chose to rent in central pleasantville bedroom community in hopes that our son would make it into an immersion school nearby. It's a fairly central area minutes to downtown and points north, south and east. It was really a great choice. Still is. Shopping is close, the schools all take great pains to brag about how they are some of the county's best, and the district is inordinately safe.

In fact, I have to say, crime stats were much higher in each and every neighborhood we called home over the years in Canada. People leave their doors unlocked, garages wide open - it's extraordinary really, when you think about it.

And alas, although our son didn't make it into that particular school, the local sloppy-second feeder school (plan B) was reputedly touted to be top notch, as well. Emphasis on well. Well, either we've been lied to and these schools really aren't as schmidthot as their whitewash varnish, or, this is as good as it gets. To be fair, much of the statistical information is driven by silly demographic profiling and not-so-silly funding. And so because we happen to live in an affluent pocket of Puget Sound that receives a decent level of taxpayer funding and PTA-driven fundraising, it tends to look a tad rosier than some. It's all relative though.

So this new fear-based construct, coupled with the fact that our son was admitted entrance into a more rigorously-academic lottery school, means I feel a bit tied to making a home purchase decision within the boundaries of this school district for not altogether rational reasons. But you're probably thinking, what's the problem - a focus on district means we can limit our home search efforts.

Here's the thing. There's a huge price to be paid for this so-called quality education experience. According to a report just released last week, the average schmuck looking to buy a home in the area we're in needs to make $124,000 a year. The lowest figure I saw in the district was $89,000. Is that unbelievable or what? You're probably thinking we must live in mansionville. Not.

We currently rent a mid-70s, 3-bedroom plus den rambler with double detached garage. Think Brady Bunch with less space, less kids and no maid. Not to mention no family room, no basement, no spare room. Square footage pn this home was purported to be about 1900 sq ft. but we have since learned that square footage figures in the US tend to include attached garages, below ground developed areas and in our case, our outdoor courtyard. Which means they lied. We're probably living in closer to 13o0 sq ft. and even that is bound to be a stretch.

THE SCHMIDT HOUSE (circa summer '05)


So anyways, that's fine, we're on the hunt for something larger but larger, of course, means costlier. A 2800 sq ft mid-70s tri-level just sold for somewhere in the neighborhood of $700,000 a few blocks away. Nice enough house, good size yard, but nothing great. The reality is that if we want to buy-in closer to that $500,00 price tag, we'll be buying ourselves a fixer-upper that will require somewhere between $50 and $100K in renovations. That's just the reality.

And to buy a new-build here? Hah, good luck. It means spending a minimum of $800,000, a price, incidentally, that will not necessarily guarantee you a lot larger than 5,000 sq ft. or a view of anything but your neighbor's siding. And let's not even speak of the number of listings in this market over the $1 mil mark.

On second thought, change my mind: let's do. There are approximately 30 or so single-family home listings under $700K, and most of them are pretty darn forgettable. But over the $900K benchmark, there are some 250+ ~ and most of those sport a $1.5 mil pricetag or better. I mean worse. Some go as high as $15 million. Quite a few are $7 million but most are sitting right about $1.9 million. I would say that's more the median price point on the market right now. It sure as heck ain't $500K, but for those Californians who've moved north, it's a steal of a deal.

It's a crazy kind of boomtown we've transplanted ourselves into here, and while it's a great place and vibrant and community-oriented and ever-expanding and has the potential for investment growth with real estate, we're starting to question if this choice is real for us, being that we are so many years removed from getting our green card and guaranteeed double income earnings. We can afford to live here and are fortunate to have a very good standard of living, it's true, but at what price?

Part of me thinks that buying in here and tripling our mortgage debt could pay-off for us in the long run - we can write-off our mortgage interest on taxes, we stop pissing away money to someone else's mortgage payments and we get in on the low, low end of an ever-increasing millionaire homes market.

But another part of me thinks the whole thing is crazy, absurd and just wants to pack it all in - say bye-bye to hubby's decent contract wages and steady overtime pay; see ya to the great locale and milder winters; adios to the bigger pond sports and activities for the kids, etc., etc. - and hightail it to the nearest small town across the border, where the pay would suck but we could buy a house for cash, I could work (7/11 is even starting to look appealing), and we wouldn't be feeling as though we had sold our souls to a mortgage company and the big city rat race, where money must figure uber-prominently if you are even to dream of staying afloat.

And I'm not the only one. Check out what another frustrated local, Beast Mom, and her readers have to say about this issue.

It's ironic, dontcha think. It's all so ironic. And it all points to the ever-increasing gap between the haves and have nots. Living, breathing proof of a disappearing middle class. It's downright disturbing if not depressing because if this generation struggles with these big market plights, imagine the lot in life our kids will face.

Have I ranted enough? Well, not really.

Secret Agents
We're not going to give up quite yet, although we have given up on our deadbeat realtor, who has earned a perfect track record of being late and ill-prepared for every single one of our home showings and/or appointments. Not to mention that we knew more about the properties we were going to look at than she did, thanks in large part to the folks at zillow.com.

In fact even without her having given us the address of a property we were going to visit the other day, (she inadvertently dropped the last name of the homeowner into the conversation), we found the address on Dex and the house history and schtick on zillow. She seemed really taken aback that we knew so much when she had told us virtually nothing at all about the house other than an approximate locale. In fact she was so bewildered that it makes me wonder if agents really get how much the buyer/seller game has changed. And let's face it, caveat emptor is as prevalent a consumer credo now as it has ever been.

I've also given up all hope that a decent copywriter exists in the local real estate market. One who gets that home shoppers just might possess some small measure of intelligence at least some of the time or worst case, maybe have read Freakonomics and are onto their game, which ya gotta know, is not entirely a skill-based activity - I liken it more to dice-rolling than anything.

The property descriptions kill me. Do realtors read the descriptions they write? I'm thinking not. I mean, come on: Charming? (outdated). Designer paint? (dark or busy). Cozy? (you need to step outside to turn around).

And what is this west of market and east of market thing? What the hell does that mean? If you know, please, please clue me in because I have no idea what that means. East is east and west is west, and never the twain shall meet in the market? I've only seen these as descriptors for schwanky homes so I think it has something to do with style, but what do I know? I fell into the "read the Freakonomics book" category.

But how crazy that realtors will use industry acronyms and buzzwords that the buying public doesn't even understand. And how crazy that they get paid several thousand dollars commission and yet it's left to the buyer to verify property figures, zoning and square footage. Half the time, the listing agent doesn't even take the time to list the feeder schools, (buyer to verify, they claim), much of the time the descriptive copy is typed in all-caps with hordes of typos and a good percentage of the time, they don't load interior photos. And for this, and the gift of a standard real estate contract and some ugly housewarming plant, they expect their hefty commission.

It's especially refreshing then to see new flat-fee and fee-for-service entries into the market.

Ziprealty promises its clients a 5% rebate on their commission, although in fairness, their agents are purely Web-surfer reactive and not necessarily as seasoned as their biggie brand brokerage counterparts.

And Redfin, another newbie online brokerage, claims even lesser commission fees (2/3rds commission refund) and thus, larger savings to the buyer, but buyer beware: you will do the bulk of the work and you need to be savvy to home buying and selling. Which we aren't, hence our hesitation to buy a for-sale-by-owner home off craigslist.

Buying a home in Canada is a vastly different process. There are way more closing costs here and it's much less a one-stop-shop process; hence, we really do need to work with a traditional realtor. Which sucks, because finding a decent realtor who will attentively and intuitively work in your best interests - it's like trying to match socks from the dryer. Not to mention that the model is so archaic and dysfunctional.

Then there's the foreclosure market. Another excellent way to buy a home - especially these days with people in debt up to their yin yangs and home prices skyrocketing - but there again, you have to know what you're doing. I'm going to keep my finger on this pulse just in case, with help from the guys at ForeclosurePoint.

And if the finger crossing doesn't work, I may have to bite the bullet and buy me a lucky real estate talisman from my friends at Archie McPhee. What the heck, if it worked for Kristi, it can work for us, too.

13 comments:

Jeri said...

Oh my gosh! Those home prices sound unreal. I haven't looked at Seattle side prices recently, and it's amazing what even lower end real estate is going for.

We bought in the Puget Sound area 2 years ago, moving south from Alaska with some equity, but certainly not mountains of cash. Both our offices are in downtown Seattle, but we knew we couldn't afford to live close in without bankrupting ourselves, as well as putting our kids in poorly rated big city schools.

After looking at various options (Auburn? Snoqualmie? Lynnwood?), we chose to buy in Kitsap county and make the ferry commute. We like the much slower pace and rural feel over here, as well as the prices. We wanted to buy on Bainbridge Island (ouch - spendy), but ended up 5 miles further out, in Poulsbo. We bought a 2400sf, 4 bdrm + den home on an 8000sf lot for $350K. Today, just two years later, it's assessed at $470K. Pictures (on a badly dated website) are here.

I can work at home much of the time, so it's a pretty comfortable location for me. My husband must commute daily, and it takes him 1.5 hrs to get to work - car, walk on ferry, then bus to office. He's pretty wiped out by the end of the week, but when I suggest looking for something closer, he insists he prefers being in Poulsbo.

The boys really like the schools here, which are smaller with small class sizes, ranked well, quiet and diverse. They've made friends and found activities they enjoy and are happy here.

For us it's the best of both worlds (except the horrendous commute for Bryan) - we have the peace, quiet and cost of living of a fairly small town, and we can earn an income and go play in the city.

And... for what it's worth, on the job subject... while I'm trying very, very hard to be grateful for my job and the income & benefits it provides, I very much wish I had the freedom and flexibility to be involved in a more entrepreneurial and creative profession right now. But hubby has zero tolerance for risk and a high need for security, so 8-5 (or 6 or 7) is where I am for now.

Maybe we can do an exchange. ;)

Best wishes with your house hunt!

Jeri

HOLY said...

Jeri: wow -

Your house is much like the one we sold last summer, except a larger square footage on the upper two (we had an undeveloped walkout basement as well).

I wish we could find something like that, especially on an 8,000 sq ft lot. But it would mean a major commute.

Mind you you can make the most of the ferry commute with reading, laptop, snooze, etc., although I'm not sure if you end up catching Bainbridge or Bremerton - (I've been to Poulsbo, I should know the answer to that but don't :) because I've heard they're ditching the Bremerton ferry.

I dunno. I just know we're in re-evaluation mode. Kids love it here but at what price, love?

Jorge said...

I can sympathize with your predicament. The university where I am has been forced to go into the real estate market and buy/subsidize homes for faculty being recruited from other parts of the country, as the sticker shock is so huge that most willimmediately turn down the job on the economics alone. If those who have the ability to pay our ridiculous prices are hesitant to plunk down cash when a burst bubble and subsequent transfewr can wipe out a lifetime of savings. As you're already doing your due-diligence, good luck!
J.

Natalie said...

I love the Queen Anne area. Old homes with beautiful views. Expensive.
The prices there are akin to prices in Santa Fe here. And guess what? There are tons of Californians in Santa Fe. Coincidence? I think not.
Outfreakin'rageous.
And I thought 175k was expensive but then the last house I bought (in Tucson) I paid 92k for... and just sold it for 156k.
Outfreakin'rageous.
See? Yet another reason to move to NM. Did you know that Microsoft was founded (originally) in Albuquerque? Me either.
Intel is here. pfffttt... They might as well be Sprint at this point.
However, the housing prices are quite inexpensive compared to the west coast.
Lawdy but that pricey!

VENTL8R said...

Nah, come to Omaha!! We bought our 4BD 3BA 2000+ sq. ft. house for $160K.

BTW - thanks for the lovin' at the end of your post!

Becca said...

Hey my husband works for Intel and we can't afford to live here where the majority of Intel is currently based, it isn't just because the company is located somewhere that prices are high. We are renting. And it is costing us $1k a month in rent. At this rate we are going to have to take in a boarder..can you imagine? Come on 2010 when my husband can walk away...it is no cheaper here in Hillsboro..trust me, sucks all the way around!

The Beast Mom said...

sigh. it's all true. it's outta' control. you don't lie when you mention the possiblity of selling your soul just to buy a modest home around here. it's really making me rethink all the priorities in life.

-bm

Tanya said...

I completely feel for you Holy! I wish you all the luck in the world.

I am so sick of house-hunting, luckily though, we can now afford almost everything in our new little neck of the woods. But that also means that we can be picky as hell - either way it sucks!!

Our realtor out there was great and he knows your area. He helped us find our home AND we also went with him when we put our house up for sale. If you want his name and number I would be more than happy to send it to you. Let me know.

HOLY said...

Jorge: I'd love to live in your neck of the woods but I wouldn't even consider it in this lifetime - I think you have to be grandfathered into some regions of this great country - I know that's the case here - many locals have assumed housing from their parents, hence, they can afford to live here.

Nat: Queen Anne is great - sure wish I could have had a young and single stint here in Seattle - it would have been great to have a stylin' little apt. right downtown. I hear ya on the buy/sell thing - we bought for 210 in Calgary in one of the craziest market yrs ever 6 yrs ago, but then sold last yr for more than twice that so we were lucky. But that won't even come close to being a decent down payment on a house here. Pouty sigh....

Ventl8r: Oh ma..omaha...it shoudl be omahaha cuz you get the last laugh. Yeah, that's more like the price I'm cool with paying. Do you think a moving company would move the mtns and ocean along with the rest of our crap if we moved there and take away the tornados? :)

Becca: I know, yikes, you're in the same boat with high prices. All those dang Californians moving to lovely Oregon (nudge nudge wink wink, Nat and Jorge) - I've even suggested to hubby that we move to McMinnville, OR - in search of more attractive house pricing. Big sigh - life choices - why do they have to be so darn tough?

BM: That's right - you blogged about this very plight last week - I'm going to link your post in this blog, actually, because you speak for the masses on this issue, as do your faithful followers....I know you guys just pulled up some career roots so to speak, but I think you may have some good options to go even more rural, if you chose to. Does that appeal to you or not?

Tanya: you guys are sitting so dang pretty now - best of all worlds - close to family, great quality of life (you guys make the top five places to live in the US for cost-of-living, etc. - I think you guys made a terrific move at a great time in your life. And think of what your Monroe house money will buy you now!

I'm not sure on the realtor - I want to find one that is uber plugged into to our community - ie. lives here and knows the residents -because things come on the market but are sold before being listed because of word of mouth.

mannyed said...

Sigh. Just insert Long Island, New York into your post because the pricing is practically the same. The prices of homes in New York, namely, Long Island are out of control. Me, a first time home buyer, can't even look at the "starter homes" in this area. We are considering packing up and moving to Dallas where beautiful new constructions are priced at about what Kristi paid for her house.

Lynn said...

I have started househunting this weekend. Now I'm discouraged, afraid and a little depressed, Holy. You'd think a downsized price in homes would be the rigeur in lil ol' Kentucky, but no. Apparently we Southerners are uppity and think we should have outrageous pricetags on cozy, charming, ancestral homes...yeah, small, strange and old too. It's going to be a long, fun process. And Mike sends the brain damaged, impatient person out to man this hunt!
And as far as your job...WRITE A BOOK (since you're not really doing anything right now anyway ;) heheheh)! You know you got it in you!

Jorge said...

Just stopped by to se how things were going in your neck of the woods. I have to work this weekend, which is too bad, as it's a gorgeous day outside. Good luck with the house hunt.
J.

KC said...

LOL... I'm not even going to complain about the prices in my neighbourhoood (which you saw... however, THAT house... had wayyyyy too many repairs needed and the owner won't budge in price - it simply won't see in the condition that its in)

What about going back to BC? Is it too far to travel for work? That way - you could also work... no immigration/visa issues... maybe? Who knows?

Its insane in the West Coast - I found even Vancouver to be disgusting in cost... and all I keep asking myself is WHY?????

Good luck hon! I'm in the same but different boat... and a lot more choices in my price range. I'd be in the poor house for sure living in Seattle.... or Vancouver.