Property Q&A in 98034>Question Details

Home011, Home Buyer in 98034

I am buying a house in WA-98034 and I plan on selling it in 3 years? will the market go up in 3 yrs? Will get I be able to get back my invested money?

Asked by Home011, 98034 Tue Feb 2, 2010

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Dear Home011,

One thought to start with is that you are buying when prices are down, and when they appear to be near the bottom. What we know is that it has taken us three years to get to this greatly affordable level and it will take a few years to go back up to 2005 prices, which was our peak. The short answer is that prices may go up enough in three years for you to recoup all your sellling and buying costs and they may not.

In the meantime you get your tax interest deductions for home ownership.

You can see the up and down trends visually, at my website, http://karenmcknight.com / click on Market Statistics. The most important indicator of whether prices will go up (or down) is the absorption rate, which is the ratio of sold to listed properties. In other words, it is the ratio of demand to supply. On most of the Eastside, which includes 98034, we are still at around 17% absorption rate. We tend to see price increases when we have been at 28% absorption for three months or more. You will see the ratio percentage on the graph I am referring to at the market Statistics link, which is "500 - 600" - the NWMLS code for the Eastside. go to page 2, which shows the rate of Absorption.

To specifically tell you the absorption rate for the area and price range in which you are purchasing, your agent can run an Area Market Survey and divide the number of properties selling per month by the total number of listings in that area and price range.

If you are not able to get that answer, I am happy to calculate it for you. It is simply the best way to get an early prdiction of the pricing trends.

Warm Regards,
Karen
0 votes Thank Flag Link Sat Feb 6, 2010
Everyone here has made very valid comments, and generally we do not recommend trying to time any market, housing or otherwise. Real Estate is a buy and hold investment. That being said, and assuming you are purchasing the home as your primary residence, there are several other elements to be considered before you decide to buy now and sell in three years.
• The rent vs. buy scenario,
If you pay $2000 in rent for 3 years, you will have spent $72,000 paying someone else’s mortgage
• The tax benefits of the interest deduction
You will most likely reduce your tax burden with the opportunity to deduct the interest on your mortgage
• The tax credit “free money”
If this is a first time home purchase or a move up home, and if you qualify, you will have the added advantage of a reduced tax bill (or a refund) if you purchase before April 30 2010.

Please talk with your tax accountant, then contact your agent and run the numbers. Make your decision on facts rather than trying to time the market.
Web Reference: http://www.annizilz.com
0 votes Thank Flag Link Tue Feb 2, 2010
I do not think I would bother if you know that you have to sell it in 3 years. That is just not long enough to take the risk. On the other hand, if you could turn it into a rental, that might not be such a bad idea.
0 votes Thank Flag Link Tue Feb 2, 2010
That is the million dollar question isn't it? I wish I had a crystal ball...

The short answer is that likely, probably, yes, this economy will rebound and the market will come back. Can anyone tell anyone what will happen in 3 years? Absolutely not. However, we are in an economic slump and the housing market has suffered. Right now, we are seeing historic lows with home prices and interest rates. That is why tons of home buyers like yourself are jumping in now- to take advantage of super affordable homes - bacause it's more affordable than it's ever been and values will likely at least remain stable.

The answer to your question not only applies to the market but the home itself. If it's an affordable home that has been nicely kept with an appealing floorplan and no major disrepair, there is more of a market and a larger buying pool for that then, say, a $3M mansion on the water. So it depends on the saleability of the home.

I will say this: Kirkland is a great area to live in. Nice schools, lake, clean, pretty safe, and a reasonable demand to live here. Quality of life is good in this area and it's centrally located to major hubs. Another good sign is that in this zip code, prices have remained more stable than even other parts of Kirkland and continue to remain that way.


The best you can do to curb things in your favor is to try to put as much downpayment as you can, keep the home in updated and repaired condition, and take your agents advice. Also realize that you will have costs when you sell equal to about 9-10% of your sales price. Plan to have to pay those.


Good luck!
Jennifer
0 votes Thank Flag Link Tue Feb 2, 2010
Good rule of thumb for a short term hold: Buy the ugliest interior with the best bones...and make it a whole lot prettier before you sell it :) The house I mentioned was great...but filthy. Buy the smelly dirty house with new windows and a new roof. Just cleaning it up and painting it gives an immediate boost.

When people buy something that is "perfect"...it has nowhere to go but down.
0 votes Thank Flag Link Tue Feb 2, 2010
Thank you so much for all your remarks.
0 votes Thank Flag Link Tue Feb 2, 2010
That's a great and VALAD question after the last couple of turbulent years we've had. Having lived and sold homes in the Juanita/Totem Lake/Kingsgate area for almost a decade I can tell you that it's a pretty safe place to buy if you're looking to retain your value. The location is close to the freeways, water and (of course) one of the most desirable cities in the state-- Kirkland. Because of these factors we have what in all likelihood will be an "area of geographic economic resurgence." Meaning it will bounce back a LOT faster than the outlying areas (think Duvall, Mill Creek etc...)

Historically, we've never had a slump longer than 2 years since world war II... So if we look back as an example of what lay ahead our outlook seems positive as well. There's a GREAT site for reference (back up to 10 years) on the market movements on http://www.alanpope.com. He's an appraiser based in Redmond that's been tracking our market for years. (click on “market overview” then the “eastside” to find localized charts) When you get there you’ll be able to see the seasonality of our area—more houses for sale during certain times of year- that directly impacts home prices. But with our financial world up in the air like it is we can only hope they only make it easier for people to buy, not more difficult.

Because of this as well as three years a relatively short time to own a home no one can really tell you if you’re going to MAKE money. Also, take into consideration that the cost of selling a home is about 8% with all the fees and taxes. So if you project homes going up by only 3% per year (which isn’t guaranteed but meets the national average in typical markets) you could make 1% if it’s in the same condition as you purchased it in… if you’re handy or work on remodeling then it’s time to sit down together and look at the cost vs. value reports for home owners to project what you may get out of it and how that will affect the sales.

I honestly think that you should make sure that this home is one you’ll enjoy living in so you’ll get both potential investment and satisfaction of ownership for the three years you're there.

Wishing you all the luck!

Lise

Lise McCleerey

Realtor

http://www.Eastsidelise.com
425-405-LISE (5473)
Web Reference: http://www.eastsidelise.com
0 votes Thank Flag Link Tue Feb 2, 2010
I agree with the previous two answers. Real estate should be viewed as a long term investment of at least 5 years to break even, taking into account buying and selling costs. While we think we are seeing a bottom to the local market, that doesn't mean it will immediately start appreciating in value. A return to "normal" may take quite awhile yet.

However, that doesn't mean you shouldn't buy a home. In making that decision, there are many other factors to consider, including your own personal situation.

Bev
0 votes Thank Flag Link Tue Feb 2, 2010
Home011,
The sad thing is we are all asking the same question. Anyone who gives you a diffinitive answer is guessing. Unfortunately in 2007 few were asking the question, because the recent history was all going up. We've had a couple of rough years with values declining 20%-30% in the northwest. Builders have adjusted to the new reality and are adding supply much slower now than before. Our economy is fairly diverse and I hear rumblings of positive growth. Microsoft just had a great year and may start to hire again.
3 years is a bit of a gamble, but longer would be safer. Because of the popularity of Kirkland, I think you are considering a good area. A lot depends on the individual property you select and how well you fare in negotiations. My recent experience is that prices seem to be firmer than a few months back, which is actually a positive sign for buyers looking for resale.
All this said, there are a lot of wildcards no one can account for. If you do decide to buy, do it sooner rather than later, rates are currently below 5% in many cases and a change here will dramatically affect affordability.
Best of luck with your purchase.
0 votes Thank Flag Link Tue Feb 2, 2010
98034 got an unprecedented "boost" at the tail end of the housing bubble. It depends where and what in 98034, as that covers a lot of territory. One of my clients bought a house in March or April that I could sell right now for more than they paid, so it really is a house to house issue. That house was three days from Trustee Sale when we made the offer.

It's a lot easier to sell that house that they paid $300,000 for at $350,000, than it is to sell a $650,000 house for $700,000. A lot has to do with the financing max amounts. So yes, it's possible if you buy the right house at the right price now. But generally speaking, the market is not going to appreciate enough in 3 years time to cover all of the costs of buying and selling. You have to be getting a pretty big discount from current market value now via short sale, bank-owned or otherwise seller in financial distress situation.
0 votes Thank Flag Link Tue Feb 2, 2010
I highly doubt you'll make your investment back in 3 years. Are you counting acquisition costs (outside of purchase price) AND selling costs? I agree with Sandy that real estate investing is always a better long term thing than a short term thing. I disagree that we've returned to anything ...even the average appreciation. There's still a ton of inventory and short sales, and bank owned properties are going to be keeping the average prices down for a while. There are some signs of recovery, but hardly enough in my opinion to think we're back to normal again. Even if we were back to normal..3 years is still short.
0 votes Thank Flag Link Tue Feb 2, 2010
Dear Home011

Traditionally real estate has always been a long term purchase and it is my opinion that we have returned to that type of market. If there is an increase in market value it will be modest, and anyone purchasing a home today should plan to stay in that home for 5-7 years. Depending on how much money you put down and the total of your payments, it's tough to say if you will make back what you've invested in three years. You may need to wait a bit longer.

If I can assist you with anything else, don't hesitate to call.

~Sandy
0 votes Thank Flag Link Tue Feb 2, 2010
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