Home Buying in Redmond>Question Details

M, Home Buyer in Kirkland, WA

Rent for 6-11 months or buy now?

Asked by M, Kirkland, WA Wed Jul 23, 2008

We have it in mind to buy before a year is up to use some hiring relocation benefits my husband received. We are wondering what is projected for the market over the next year--is it worth our while to ride it out and rent, or jump right in and buy? Additionally, we are looking at the $300,000 range (Unfortunately we took a loss on our house to come here. ;) It'll be worth it in the long run!) and would be buying in either Redmond, Kirkland, Bellevue, or Seattle just on the other side of I-90.

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Welcome to the B.E.S.T. (Bellevue/Everett/Seattle/Tacoma) Region!
You're right about your sacrifice being worth it. I relocated here from Boston in 1996 and there's been no looking back. Scenic beauty, vibrant communities, and yes, a strong economy make the Puget Sound area the envy of the nation. Was I subtle enough?

Anyway for those very same reasons I would say act while interest rates are low and tax deductions are wasting away. Those are valuable benefits you definitely don't want to leave on the table. Now I'm not going to kid you, $300,000 is a tough number in any of those communities you listed. But there are many neighborhoods in the space between those cities that likely offer good solutions and convenient commutes.

If you wait and interest rates rise, you'll be eating up your purcahse power. As a matter of discussion, a half percent rise in interest rates will offset a 10% decline in housing prices. Most projections for our local real estate market do not predict such a large decline. Meanwhile you sit in the renter's circle without the homeowner benefits of tax deductions and net worth.

Personally, I would not advise a lease with option to buy, especially if you feel the market may come down. Locking in a future price (generally above current valuations) might mean the house won't appraise when it's time to get a loan. Depending on the terms of your contract you could find yourself paying a premium rent now for a home you can't finance at the end of the contract's term. Minimally you may want to negotiate a price that is tied to an index for home prices in the area. That way your price will at least follow the trends. And let's face it, lenders are growing increasingly strict making it that much difficult when it comes to future pricing. If you feel the market is moving downward and it is to your advantage to ride it out, just rent and wait. Why lock yourself in with current choices when a downturn will produce a whole new batch of options.

Also give strong consideration to your relocation benefits and when they expire. Oftern times there's a 2 year limit or less. Since you probably get your closing costs reimbursed, any concessions (and they are being made as we speak) can come in price adjustment rather than closing cost credits.

Finally, real estate investing is truly a long-term investment. You should be considering a 5 year of more horizon when it comes to money in/money out. If you think your time in the Emerald City area is more brief then it might be best to hold off a while. (Those words will ring more true once you've spent a winter here!) It seems clear that the US housing market and economy is in a bit of turmoil. The fast approaching presidential elections will also have a key role in just what way our future prospects head. Generally housing will weather the storm over time but if you or your husband's next step up is another relocation, it may be best to hold off.

Good luck with your decision,
Steve
4 votes Thank Flag Link Thu Jul 24, 2008
M, My personal opinion is that renting is a great option right now for you. Of course, I know nothing about the area you are moving into, but there is a general oversupply of Real Estate in every market right now. There is a 11+ month inventory of unsold homes in the US at June selling rates. Just wait until this Fall, like Keith mentioned. With slower turnaround, this number is only going to increase. My best guess is that we could see a 16-18 month supply of homes. There is a large amount of space in the market, and financing has gotten much more expensive, making assets worth less.

My advice is to look at Capitalization rates. When they are high, you should buy, and when they are low, sell .... that is what smart REIT's do. I believe that if you can find the right rental, you probably will be in better shape and be able to watch Real Estate come back to reality.

Good Luck!
2 votes Thank Flag Link Thu Jul 24, 2008
Hi M,

In late summer and fall there is usually an inventory build up of homes which puts a bit of downward pressure on home prices since there are less homebuyers for the available homes. Since we are already in a buyer's market, you may get more for your money this fall if you get into a short term rental now.

Also, if you rent for 3 months or so, you will have the advantage , as Keith commented, of checking out areas and neighborhoods to have a better idea of the best location for you. Unfortunately, you would have to move twice to do this. Of course if you know you are doing this when packing up, you can pack for short-term needs and store the rest so you have to pack and unpack so much.

If you are not moving to the area until late Aug or Sept, then that is when inventory begins to build up more so if you don't want to move twice in a short period, then buying at that time could get you more for you money.

By spring there will be more buyers looking to buy and it's possible that interest rates would be higher, as Bryan and Mary commented, so the conditions may not be as favorable to you. On the other, home prices could go lower, and even if interest rates go higher, it could even it out...or not. None of us can really know what our market and mortgage conditions will be like.

Whenever you do decide to buy, be sure that it's a location that you will enjoy for 3 to 5 years , more likely 5.

Best wishes on your re-location to the Seattle area! Welcome to the Pacific Northwest!

~Deborah
2 votes Thank Flag Link Thu Jul 24, 2008
Good advice from the first 3 responders.

To summarize, if you are sure where you want to live and are staying here for AT LEAST 3 years, then buy now. If you don't know the area very well, then get an agent to help familiarize you with neighborhoods that would work for you - and show you some homes in those areas.

Whatever you do, make the decision based on your personal financial and employment situation. Do not try to cull predictions about the market from experts because nobody knows what is going to happen. This new territory for even the expert economists.

I think Ben (the home buyer in New York) is mistaken about why Keith got the thumbs down. Usually the agents that post here get a thumbs down when they are asking for business or asking the questioner to contact them (I've been guilty too), not for giving prudent or contradictory advice.

Best of luck M
Web Reference: http://www.homehounds.com
2 votes Thank Flag Link Thu Jul 24, 2008
If you are just moving to seattle. I always tell people that it is best to rent so that you can get a lay of the land. The thing you dont want to do is move here and rush into buying a home and then being mad because you are in an area that you may not of wanted to be in. It is best to be in a home for more then two years in this market. Good luck on your home search and if you would like to have help with finding a rental please let us know.
Web Reference: http://www.tk2homes.com
2 votes Thank Flag Link Thu Jul 24, 2008
Great Advise on Trulia! You have relocation benefits, and may want to take advantage of those benefits now, and spare yourself the time and expense of another move. In my opinion, the market shifted quickly here in the Pacific Northwest from a sellers market over to a buyers market when it did actually happen. It probably wont shift back anytime soon (as trends from a buyers market back to a sellers market go) and it won't happen quickly -- so you could wait, but as long as your financing is in place and you can find a home in a neighborhood of choice, it is a great time for you to buy.

There is a challenge to find a home in the areas you named, but you may just be able to find a suitable REO -- and if your financing is solid, a savvy agent will help you navigate that purchase. Also, some outlying communitues would have the home inventory you are looking for at the $300 K price point . My advice is to look and see if there are any communities that have homes in your price range, and take the time to research and find out about them and see if they would be suitable. If so, you may be in a home by years end -- with no more additional moves. Best wishes!
1 vote Thank Flag Link Thu Jul 24, 2008
Keith is right. Sure, you can roll the dice and buy now but it might be better for you to rent for a short time and look for a great deal while you scope out the area.
1 vote Thank Flag Link Thu Jul 24, 2008
M -

Alot of good advice on here. A couple things to really take into consideration...don't lose your relocation benefits! Yes...it will likely continue to be a great time to buy for several months though with interest rates possibly continuing to go up this could be the best time to buy. It is impossible to predict when is the "best" time to buy...but I can say that right now is a good time to buy.

The other factor is how familiar you are with this area. If you know the area already then it may be OK to buy right now...however, with Real Estate being a long term investment...you want to make sure that when you do buy it is where you want. As some people suggested, maybe a short term rental is smart while you get to know the area. Then you can purchase before your relocation benefits run out. With your budget you can find some nice townhomes and homes in the area if you are willing to spend some time looking.

Just don't make any quick decisions...take your time in the purchase process. Even if you are going to rent for a while contact a Realtor and lender today so that you can begin your home search and be ready to purchase when the timing is finally right.

Good luck on the relocation!
Web Reference: http://www.agentsamuel.com
1 vote Thank Flag Link Thu Jul 24, 2008
You took a loss on your house moving. Have you not learned the risks involved with real estate?
Its funny how Keith got a thumbs-down for giving prudent advice.
You will lose nothing renting for a year.
1 vote Thank Flag Link Thu Jul 24, 2008
M
There are some great answers here for you. I live in Kirkland and although it is still a buyer's market things are improving. Interest rates just dropped again and there is still lots of inventory available to choose from. If you are sure of where you want to be then I would buy now. It is always possible that things will get better in a year but also that they may be worse. I would be happy to e-mail you a couple of articles on the economy and housing market currently.
Mary
1 vote Thank Flag Link Thu Jul 24, 2008
By your description of benefits I anticipate you are referring to a benefits package that Microsoft has to offer to those they hired from out of area. I may be wrong on that but if that really is the case then I would highly recommend you buy sooner than later. Our market is a buyer’s market. There are great deals to be had, especially with the summer half way over. I am curious though, why are you considering renting first? Are there financial reasons?

The other thing to consider is the interest rate. There is no one out there that has a crystal ball but the anticipation is they are only going to go up over the unforeseen future. Getting a rate around 6.5% may end up being 7.0% or even 7.5% in 6 months to a year. If that is the case then your monthly expense for a 300000.00 home could be another 100 dollars or more a month.

Unless you have other personal reasons for needing to rent first, I would highly recommend you consider buying sooner than later.

I hope this information has helped.
Web Reference: http://www.homelantern.com
1 vote Thank Flag Link Thu Jul 24, 2008
All depends on how long you will be hanging on to the house. If you intend to sell in less than 2 years...
don't bother buying. It's highly unlikely you will break even in the short term. If you plan on staying in it for the longer haul ...then you can find some exceptional buys in this market.
1 vote Thank Flag Link Thu Jul 24, 2008
Why not consider a lease option? With a term that allows you to get in prior to the benefits expiring. The benefit to you is to allow you to find a place to live, ensure you like the area, secure a price on a home for purchase while it is still a buyer's market (I am optimistic that there will be a subtle up-turn in the market in the next year). And although you say only $300,000 there are some homes out there if you have a good agent to do the searching for you. You may also be able to take advantage when it comes time to finalize the loan to consider an FHA - K program which would allow you up to $35K to put improvements into a home that may not be just the way you want it.

In my opinion, for your situation this is a great option -- the best of both worlds. I agree with all of my fellow professionals opinions below...but I am guessing you will simply fall in love with the NW and not want to leave so most likely it will be a long-term purchase ;-)

And one final note, to keep you under that $300K price point with more options available, you might consider looking into Woodinville, Duvall, or Bothell - all still providing a realistic commute to Redmond.

Have a great day!
Web Reference: http://www.key2yourhome.net
0 votes Thank Flag Link Thu Jul 24, 2008
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