I am going to go out on a limb here, but I have my doubts about the resale value of townhomes. Many are built on busy streats in "up and coming" neighborhoods. I just dont know if they will appreciate as well as a nice condo or certainly a single family home.
Here is my advice. Buyers in the future are going to have the same thougts as you. So what kind of home appeals to you. Don't buy what you think will resell better in a few years. Buy what you love. Others will love it just as much as you do now, especially if you maintian it and make simple improvements.
I would stick to a good condo in a great complex or a nice single family home that has upside potential. Then upgrade it as you can and watch the appreciation grow.
Just my thoughts.
If appreciation is most important, buying in a less expensive area in the path of growth is your smartest move. Meet with a real estate consultant for a Buyer Consulting Interview, a person who can ask you the right questions, to help you gain clarity on your goals and problems you want to solve. The Seattle area is definietly going to appreciate and now that prices are down 4% from one year ago, now there are some great opportuinities.
Timing is everything and if interest rates go up 1%, what you can afford decreases significantly. By the way, "no debt", doesn't give you the best credit scores, which is very important to lenders.
Let me know if you have any other questions. Maybe I raised a few in your mind.
If you work in the City of Seattle and live in the city, you might check with Homestreet Bank on special financing programs for City Dwellers-City Workers. They used to have some great programs, even better ones if you work FOR the City. Best of Luck!
Unless you have a huge six-figure down payment that's going to be a hefty monthly bill. And with condos, you've got to take into account homeowners dues too which can be pretty pricey, depending on the amenities.
Most mortgage calculators suggest taking out loans no greater than 3 x your annual income, which is why most single first-time home buyers in Seattle end up buying condos in Lynnwood instead of Green Lake. :P
Of course, if you've got that giant down payment, then feel free to ignore my nay saying. ;)
This wonderful buyers market is not going to be around forever, so I would take the time now to buy if you can.
Why would you want to live in a neighborhood you're not fond of? I would question that...or at least really consider it. This is where you'll be coming home to every day after work. I would assume you'd want to like or enjoy where you live. Are there other areas along the Light Rail that you would appreciate more like Columbia City? (I'm not familiar with the Othello Station or Rainier Valley).
I think that if you are going to hold onto a condo or townhouse as a rental then you are making the right choice to buy. Condos and townhouses are usually the last to appreciate and the first to depreciate.
Inventory is high and interest rates are low, so if there ever was a time to buy, now is the time. If you are looking to sell in a couple of years you should stretch yourself a little bit and get into a house. Rent a room out to a friend to supplement your mortgage. The best situation would be when you want to buy again rent your current home and upgrade. Best of luck.
Windermere RE Lake Tapps Inc.
I would be happy to take a few minutes and talk to you over the phone or in person and show you the statistics in the area for condo's vs single family homes. The area near the light rail is up and coming. It is hard to predict what future appreciation values would be. Resale on townhomes can be good. Single family tends to be better. It all depends on supply and demand. Please send me your contact info and we can discuss things in detail.
In my opionion Light Rail will not have a big impact on prices in 2 years.
As I look into my crystal ball (actually it's a Seattle snow globe) all I see is a big blank. It seems your question is dependent on things that no one can predict. You're wise to be concerned about resale whether it's a condo, townhouse or even single-family home. And it's equally smart to consider current market conditions and the prices that prevail in certain neighborhoods. Somehow I don't think it's ever wise to ignore your feelings in lieu of a smart buy. It's been my experience that buyers who love their home are more accepting of any short-comings that become apparent over time. When you buy a place that makes sense but doesn't speak to your heart then you'll be less forgiving when problems or issues arise. Those neighborhoods that speak to you have high per sq feet pricing because they offer attractive lifestyles. I would suggest sticking to your neighborhoods of choice but consider expanding your housing options. Older vintage condos should offer more affordable prices per sq ft. I'd also suggest that there's a lot of inventory of new construction that might offer some serious price discounts or buyer incentives. You might also look a little outside your choice areas. For example, instead of Green Lake think Maple Leaf or Roosevelt. The north slope of Queen Anne is a great alternative to the hill top enclave as well as Fremont and Ballard. A creative agent can probably help you find just the right place without too much sacrifice. And now is the time to make your move while rates remain reasonable.
As far as investment time, to avoid capital gain tax on the profit of selling your condo, you need to live in that residence for 2 out of the past 5 years, so I agree with Ken Jacobs that planning on holding the investment for at least 5 years is a good idea. Plus, you'll get appreciation and get to customize the place to your liking! However, remember neutral elements are good for resale :)
As far as location, that is something that you need to investigate on your own. I cannot steer you in any one neighborhood. Go visit the neighborhoods that you like and if you're comfortable, you should consider it. The current issue of Seattle Magazine (on stands now) talks about up-and-coming neighborhoods and gives a lot of great information.
Note that in DT Seattle many of the planned new construction condos was put on hold, so the demand will be higher than supply in the next few years. It is more expensive to live in the city than have a commute, so the price/SF will definately be higher, but it's a different lifestyle!
Enjoy your house hunting. Real estate is always a good investment for the long-term. The tax deductions are sweet, you get a place to call your own, and you put your money toward something, where rent doesn't.
You have acquisition cost and then selling costs. Then you need to compare the cost of paying a mortgage vs rent ...you can get really complicated cause paying a mortgage will have some tax benefits, etc...but here's the bottom line. Property values are unlikely to climb much if any this year. We're all crossing our fingers the market returns to a bit of normalcy in 2009, but there is simply too much inventory out there that it's unlikely we'll have an appreciating market in 2009 ...maybe we'll start to see something in 2010 ...So if you buy, ... you could be looking at the next 2 years of negligible appreciation...maybe even slight depreciation. Then if when you sell and pay all your selling costs...you could be in the red for buying. If you plan on holding for many years 5+ ... you're pad your risk in the investment....every year you hold it longer, the better your chances are in the investment. Real estate has historically always appreciated given enough time. (like the stock market).
So...I don't think it's a good idea to buy anything if you only plan on being in it and selling it in 2 or 3 years.
I'm on the fence whether it's good to buy near the light rail. If it becomes a widely used mode of transportation, then it would be great. If it fails to live up to its hype, ...it may become a nuisance. If the cities don't take care of the areas around rail stations, ...I wonder if it'll become an area of more crime. All speculation at this point. If the light rail generates a lot of noise ...it may not be a good thing to be really close to the rail line.
Bottom line, ...really think about how long you're going to be in the place. If it's not very long, ... it's not a good time to buy. If you buy it with the plans to rent it out when you're done, ...then by all means..it's a good time to buy. ...But if you're just gonna sell it ... run your numbers carefully.
Personally, I also want to be near the light rail stations and have access to downtown and the airport quickly and easily (like in most other large cities in the world! Hooray for Seattle finally getting light rail!). I believe that living near the light rail will increase property values. I actually have a copy of a study done nationwide that shows how property values increase the closer you are to these light rail stations. Get a hold of me and I can send you a copy of it. That's why I live and invest near the light rail station on Beacon Hill, and why I suggest the same for my friends, family, and clients as well. If you haven't checked out Beacon Hill yet, you should. You're so close to downtown, yet you feel at home in a nice quiet neighborhood. There are a lot of cool older homes here, as well as newer townhomes, and some pretty nice condos as well. Plus, Beacon Hill has a lot of great spots with views of downtown, Elliott Bay, and the mountains to the west, as well as Lake Washington and the Cascades to the east. Its a hidden gem that I think will really become a lot more popular in the very near future. Ok, I'm off my Beacon Hill soapbox now.
As for townhomes, there have been a lot of them built over the last few years all around Seattle, and in some areas they have over saturated the market. Again, North Beacon Hill was kinda late in the game in getting townhomes. They are just now starting to sprout up. Since they are just now coming onto the market, I really think that you can get a good deal on one. A lot of builders are pricing their townhomes just to break even now, and some of them are still having a hard time selling. That means that some of these builders will be taking a loss - Bad for them, but great for you!
Let me know if you'd like to learn any more about my hood, North Beacon Hill, or have any other questions I can help you out with.
Let me start by saying that in my opinion, the townhomes that have been built as of late around Seattle will not have a great resale value down the road in that most of them are not aesthetically pleasing and there are too many of them. Hopefully with the downturn in the market, builders will be forced to build a more interesting and creative product.
The dollar per sq ft is high in the areas that you mentioned and (in my humble opinion) always will be.
Greenlake, Ballard, Queen Anne and Belltown will always be desirable and good investments.
My advice is don't buy in an area if you are not fond of it. If it feels wrong, it probably is.
That being said, an up and coming neighborhood like Upper Ranier Valley has plenty of upside because of its proximity to downtown.
Let me know if I can help further
Mark J Tillett