patrick.net

Kevin,

I'm in a similar situation, and am going through the same emotional roller coaster that you most likely are. I can't speak to Seattle, but just yesterday I saw an article on cnn projecting that prices in most areas have further to fall.

http://money.cnn.com/2009/10/20/real_estate/home_price_forecast/index.htm?postversion=2009102011

Kevin, I moved recently and my wife also wanted to buy. Putting your foot down and saying no to buying will suck and cause some fights but watching your 100k of equity vanish over the next couple years will be worse. Also why are you living in a small 3br? There should be some nice houses to rent for 2000-2500? And you can ask the landlord for a 2-3 year option in the lease so you don't have to move after 12 months. Stocks rise with inflation too and you can buy them on margin if you really need to be leveraged like you would be with a home loan.

Personally I would not let the 20% down to be a road block. It does not make sense for a lot of people to put 20% when they can get just as good as a rate putting down 5 or 10% down. I personally think it makes more sense to put down the least you can that will let you get the best interest rate. The only advantage of putting down 20% is to avoid PMI. Although PMI appears to be a complete waste of money. Using up your savings is a big risk even if you have a 401k because of all of the penalties associated with doing a 401k withdraw. Also having extra money in savings is a must when you buy a home incase you discover things need to be fixed or changed after you have moved in.

Very similar situation here but in the Bay Area. And completely agree that the uncertainty is the absolute worst part of it. One day it seems like prices still have a ways to fall; the next day I see a 1000 sq ft house selling for $700k. With the government getting involved so much but with some of their plans not working or just delaying things, it's impossible to accurately predict where things are going. The main thing is that we want to make sure we don't get in over our heads and become another foreclosure statistic if something happens. What if there is another downturn and more jobs are lost including yours? That's the big one that really makes us slow down. It doesn't matter what else is going on if something like that happens. If we find the right thing we'll buy, but if not a rental house is a viable option.

I'm in the same situation, and I have no info other than to offer this old graph:

http://www.housingbubblebust.com/OFHEO/Major/NorthWest.html

But really I don't see any option other than the obvious one you gave: wait or just spend more $ than you think you ought to. The things to consider: are you really loosing anything by renting, particularly when you factor the costs of owning and the potential for the market to fall further, considering the description of owning as "renting money" as opposed to renting as "renting property". How bad would it be to eat you ego and just wait a little longer? Is your rental place that bad?

Keeping you retirement nest egg but loosing on the value of a home is pretty much a self defeating philosophy. It sounds like if you go in, because of the uncertainty you'd want to put as little of your own $ down, but of course then you're into the scenario of having to 'rent' a lot more money for a longer period.

A friend of mine who I've been having this same debate says:
That said, I think the time to buy a house is when:
a) you can afford one
b) you want one
Trying to game the system will only make you crazy.

To which I replied:
This guy Wanted to swim and Could:
http://www.youtube.com/watch?v=t62bHEEs4GA

Good luck, I hope you'll sort out your priorities but I think I'll wait a bit longer, probably at least to mid next year when it seem reasonable that more info should be apparent, though of course possibly not if the tax credits and corporate banking give-aways continue. Consider the possibility that the correction may take many more years...

You want a house - find one that fits your needs and that you feel comfortable with on price. Rent until you find the house you want. $600k for a house is a lot of money, so make sure that you find one you really like or you'll hate yourself for many, many years.

Rent a house (not an apartment). Stay in it for 10 years if you must. Buy when it's right. Sure, your family will have to move ONE more time... but you'll save tons more money which is better for your family in the long run.

There is no other smart choice.

I must be missing something here.

You mean for $2500-3000 per month you can't find a great place to rent where you want?

Go ahead and buy a place but it is very likely you will either lose money. Or if we have hyperinflation your house will still drop considerably in terms of gold and silver and oil and such.

I told my wife that "if she wants to buy now it means divorce". Plain and simple, the look on her face was priceless.
Told her that "I can get laid for $100 whenever I want, and if I work at it, for free, so that I was not going to spend $100K+ down and $3-4K a month"......."just to keep her nesting hormones happy" (my exact words), given the state of our economy and house prices (here in Canada we are at 7.3 times income and you guys were at 5.4 or something similar when your bubble burst, and ours has not burst yet). We are currently saving $2,700 a month as renters......and have been for years. Said if she wants to ruin herself financially she is perfectly entitled to do so on her own, and she can if she wants to, from a financial perspective, as she also has her own money, as do I. Been married since 2001, and I think we'll be married for the rest of our lives.

There is no reason to ruin oneself financially whatsoever just because your wife's brain isn't working properly. If buying a house is cheaper than getting a divorce, in your situation, you may have to reevaluate your scenario, but in my case it is not by a long shot.

Are you another one of these people that thinks it's beneath you to live in anything but the most exclusive neighborhood? I only ask this because I got 350++ homes returned for a search of 4 bedroom homes less than 500k... And that's Seattle proper!

While I know its tough to find a decent rental house at times here in my corner of Oregon (Salem/PDX area), I can't believe you can't find something suitable in Seatac area for under 3k. Try looking for a longer term lease as mentioned above. I'm seeing houses at 2k-3k+ sq ft here that haven't sold (in 1-2 years prolly) renting for 1600-2500/ month. I've considered moving up to Vancouver area to be closer to PDX and find a newer rental home.

Oh, and yes, we are looking up in the Seattle area for our possible vacation/retirement house on Vashon. What a cool place for kids to grow up
http://www.redfin.com/WA/Vashon/9810-SW-Bunker-Trl-98070/home/522074

Strange you seem to think anything worth your while up there is 600k+?

Can't you move part of your retirement fund over to a house without paying any penalties? I thought it was considered part of your retirement still as it was a long term investment?

If you are saving potentially 50K a year, you are living well below your means which means waiting for prices to drop is probably a good bet for you. If you were living at your means and unable to break away from that habit, then locking in a 30 yr mortgage and losing some equity over the next 5 years probably wouldn't be a bad situation to be in a person living at their means wouldn't likely save anything anyways and the sooner they started paying off the mortgage probably the better for them. Since you aren't in that situation, waiting seems to be a much better option. Waiting 2 years and putting down 200K on a 500K (assuming 100K drop) house seems like a bargain for you. Putting down 200K on a 650K house (assuming a 50K increase) still seems like a bargain for you.

elliemae says

You want a house - find one that fits your needs and that you feel comfortable with on price. Rent until you find the house you want. $600k for a house is a lot of money, so make sure that you find one you really like or you’ll hate yourself for many, many years.

I agree 100%.

As for the Canadian reference to housing, the markets are completely different.

Including mortgages aren't tax deductible, thus interest rates are far lower. The lower rates hold housing prices up.
Banks won't lend with 0% down, and aren't able to make crazy mortgages like were allowed down here.

The whole system is setup to be far more restrictive in it's lending practices. Thus the market has done relatively well in this global crisis. Housing prices might be inflated, but the market isn't under any stress to unload homes. Here the combination of resetting mortgages, a huge market down turn, and huge number of poorly made unsecured loans caused a massive flood of homes to enter the market and homes that needed to be sold (eg foreclosures), and for many, they wanted to lock in their gains. All put pressure on the housing market to push it down. In Canada those same conditions don't exist.

Homes might be unaffordable, but there isn't a reason for them to crash either.

pkennedy........

Totally untrue.......no offence........bare with me......

Mortgage interest can be made deductible thru a simple tax strategy you employ with the help of an accountant.

Our central banks rate is 0.25%..........yours is also 0.25%..........the mortgage rates are also very close in that regard. Virtually all of our mortgages are what you call "Option Arms".......in that every 1-2-3-4-5 years you renew the outstanding balance at the prevailing rate in the marketplace. Much riskier than your 30 year fixed loan, which does not exist here. I wish they did. We also have variable rate mortgages, as well as the occasional lender who does 7 and 10 year fixed terms, but at much higher rates.

We had zero down, no doc, mortgages for years, and you still can get them unfortunately.......they are now called "Cash Back" mortgages. All of the US subprime practices existed here, and to many extents, they still do, but with officially sanctioned, government backing lending, thru CMHC (our version of the FHA). The government has told CMHC to approve everything, so if you have their fees, and a pulse, the bank gives you the mortgage, CMHC insures it (well, actually the taxpayer is on the hook by virtue of CMHC being a government corp) and then securitizes it and "poof" the bank is off the hook.......heard that before ? Big question is though, who is buying all of these mortgage securitizations ? Kinda hard to find that out as their website is deliberately very ambigous........we think it is the government quietly doing it with printed money........heard that before ? In 2007 their securitization market cap was $350 BILLION......the government just raised it to $600 BILLION last week.......so the government has juiced our housing market by $250 BILLION, which is basically a hidden bank bailout at my expense.

Currently the overwhelmingly vast majority of new mortgage originations are for 35 year amortizations, with 5 year interest terms and 5% down, at record low rates with house prices that are at historical bubble pricing, and CMHC insurance. The only people left buying are also the stupidist of all, the first time home buyer, encouraged by a deliberately targetted media and REIC marketing campaign.

Foreclosures are up by 400% here in Canada since 2007. Defaults are just starting......we are always 2-3 years behind the US. As for the market stress, well, last year we had 15,000 listings in my city, a 300% record, it is down to about 9,000 now, but rental listings have spiked from roughly 500 in 2007 to over 5,000 today, which is where all those houses for sale ended up, since they were, well, unsellable.

We're screwed worse than you guys are...........which is why I don't want to buy, when I can rent the exact same place for 1/3 the monthly cost and save the difference, plus I do not put a 6 figure deposit at certain risk of loss.

Call me a "Negative Nellie".......I don't care as my brain is still working and I will survive this one.

Kevin, you may consider several things:

1. If you have your retirement savings in 401K/403K you may be able to withdraw $10k penalty free when you buy a home. Same with your wife. So you get extra $20k. Also they will most likely expand that $8K tax credit (It's like narcotic dependency, after having it for several months you can't withdraw.) So here you get total $28k to spend on your house purchase.

2. Many 401k programs allow for borrowing against your savings. A typical is you may borrow up to 50% and no more than $50K with initiation fee of $100. Usually you must repay it in full if you change your job. The interest is added to your 401K account. So this way you may get up to additional $50K (twice so if your wife has one as well).

3. Judging by your estimate of $600K I suspect you guys are "top school district" addicts. Hard to tell how it is in Seattle, but in California good school districts make less and less sense. Middle schools are disaster even in the best school districts and elementary education also is often much better at home. Since you have small children, your wife may consider staying home with them and doing some "home-schooling". In many places there are excelent programs available for free. They mail you all necessary materials and actual lessons are available on line. Check K12.com for example. (AKA CAVA in California). They may be available for free in Seattle area. This way you may be able to buy for a $100K less.

I have a 3 bed 2 bath 1700 sq ft home in puyallup or a 3 bed 2 bath 1500 sq ft townhouse in Fife if you're willing to commute. 1200 rent indefinitely. The pierce county school system is decent. You rent there for 10 years and the money you'd save you could by a mcmansion in cash afterwards. Just saying, that's all.

Kevin,

It may sate your wife if you take some time at some point during your current lease to purchase some of the more select/pricier furnishings with which you'll want to outfit your future domicile. High quality furniture (shit you either don't ever have to replace, or shit that is worth repairing/reupholstering) can be expensive. Better to get it out of the way beforehand, as there are likely going to be various expenses both large and small associated with your first house -- and I'm not referring to closing costs and junk fees.

I understand why both you and your wife are stir crazy, and sick of the travails and vacillations of renting. You'd also be forgiven for thinking it's somewhat crazy to have 150K+ coming in, 100K in liquid assets, and yet still opting to compromise your comfort level, but I really think you're doing the savvy thing. One idea might be to diligently save for another 10 or 12 months, and then move to a nicer/larger rental. Promise your wife it will be your last move before you find a permanent residence, and start assembling some furnishings. It might help ease the strain if you are actively working on something related to your future place instead of just sitting on your hands.

Just a thought.

Kentam... trying checking DQnews.com each month for the latest... per latest results prices in NorthWest are dropping.

http://www.dqnews.com/Articles/2009/News/Seattle/RRKIWA091005.aspx

My family of four lives comfortably in 1,000 square foot 2/2...why? we suffered significantly during the 2001-02 tech bust, a few relatives got severely burned by the RE bust and now I have so many friends and relatives out of work from this recession I seem to have no problem being a lowly renter and watching this all from the sidelines. Heck, I don't even window shop (www.rmls.com) much anymore as I know prices are still out of whack with incomes and our high unemployment rate in Portland. We got a long way to fall here as we drank a lot of Alt-A kool-aid!

My list of unemployed friends and relatives (ages are approx):

45y.o. civil engineer in PDX
45y.o. home inspector, losing home to foreclosure in PDX
60y.o. uncle in Phoenix flipping houses and got could holding a big one
58y.o. uncle in Dallas, after 30+ years laid off from 84 Lumber, he and wife both unemployed for over 9 months
2 30ish teachers in PDX can barely find sub work
60y.o. uncle in Phoenix in telecommunications, unemployed 9+ months
2 new grad RN's leaving PDX to find work

This is why I have no problem waiting and saving.

No, not everyone is going to get burned but why not wait and improve your chances for success.

kentm says

The things to consider: are you really loosing anything by renting,

Absolutely:

1. Nice rentals are still pretty pricey (not that much cheaper than buying, to be honest), and cheap rentals are, well, cheap.
2. I want a place for my kids to grow up in. We've lived in 4 places in 4 years. That's not exactly good for their well-being.
3. It makes it much more difficult to plan out anything else in life.

For instance, I'd really like to pay off my car. We owe about $18k on it, and are paying around 8% interest. Paying it off would give us an extra $500 a month, but we'd also be taking a $18k hit on our down payment money and it would take three years to make up the difference.

We also want to start contributing to our children's college savings, but it's hard to budget for that when you're trying to save as much as possible towards the house.

Even simple things like buying a new TV or sofa are tough decisions. If we spend $1500 on that sectional are we going to be another month away from our objectives?

Lastly, there's a very good chance that I'm going to get hit with AMT next year, so the mortgage tax deduction does start to look very attractive.

StillLooking says

You mean for $2500-3000 per month you can’t find a great place to rent where you want?

Oh, I certainly can find a place for $3000, but that's about what it would cost to buy. If I'm going to waste $3000 a month that I'll never see again, I might as well buy a place and at least get the tax deduction.

Tude says

Are you another one of these people that thinks it’s beneath you to live in anything but the most exclusive neighborhood?

No -- but I need:

- 4 bedrooms (I have 3 kids, and there's a 6 year gap between the boys so sharing a room isn't practical)
- A decent sized yard (we have a fairly large dog, plus, well, the kids)
- A good school district
- A short commute
- A place that I would WANT to live in for 20+ years (and probably forever)

So, yeah, places like that are running from the upper $500k to lower $600k range, and those are for the ones that need considerable amounts of work.

pkennedy says

Can’t you move part of your retirement fund over to a house without paying any penalties?

Yes, and it's something that we're considering, but it's hard to justify doing that now with the market insanity firmly entrenched. If it comes down to no other choice, I'll probably tap the 401k, although at most that's only about $40k (the actual limit is $50k or half of your total, and I've only got about $80k in mine -- and yes, I'm maxing out my contributions and I have a 50% match). My wife doesn't work and has no 401k.

michaelsch says

Also they will most likely expand that $8K tax credit (It’s like narcotic dependency, after having it for several months you can’t withdraw.) So here you get total $28k to spend on your house purchase.

Unfortunately I'm already over $200k this year because of some good luck with my company stock plan, so it's unlikely that I'll qualify for the tax credit. If they keep the limit at $170k I might be under next year.

michaelsch says

Judging by your estimate of $600K I suspect you guys are “top school district” addicts. Hard to tell how it is in Seattle, but in California good school districts make less and less sense.

No way. The top school districts here start in the $800k range for what we're looking for. Seattle area schools are infinitely better than bay area schools though, so we're not terribly concerned. In CA my biggest concern was ensuring that my kids weren't exposed to gangs and drugs, I took that the education was crap as a given.

Austinhousingbubble says

High quality furniture (shit you either don’t ever have to replace, or shit that is worth repairing/reupholstering) can be expensive.

You must not have young children! :) I'm not touching anything resembling "high quality" furniture until my youngest is old enough to understand that crayons are for paper.

My wife doesn't really care about that stuff though. We like "high quality" (as in "good value") in everything that we buy, and we avoid the wal-marts and ikeas of the world on pricipal, but we're mostly thrift-store / craiglist buyers, not luxury goods consumers.

What my wife wants is "roots", not status. We both grew up in lower-class families and didn't really have a place to call home, and we want better for our children. Neighborhoods where families with kids that ours can play with, where the police aren't coming by every night on domestic violence cases, and where the parents actually care who their children play with are what I care about.

My wife doesn’t really care about that stuff though. We like “high quality” (as in “good value”) in everything that we buy, and we avoid the wal-marts and ikeas of the world on pricipal, but we’re mostly thrift-store / craiglist buyers, not luxury goods consumers.

I agree -- plush for the sake of plush is not my thing -- but the way to go is high quality, meaning stuff made to high standards that will hold up and continue to look good as it ages and even retain some value. I buy old stuff and restore it most of the time. Never mind status, I like the idea of buying the good article once, rather than replacing it a bunch of times throughout the years with equally sub par stuff. Kinda dovetails with the idea of living in one house forever.

Granted, kids and Crayons puts the lid on the whole thing.

I still see 2000 square feet houses that haven’t been updated in 30+ years listing for over $600k.

While those prices still strike me as outrageous, it is tempting. By my reckoning I could get something along those lines for under $3000 a month, sitting comfortably at about 25% of my gross monthly earnings even if the stock market tanks again and my bonus sucks next year.

By my basic rule of annual rent / interest rate = fair house price, ($3000 * 12) / 0.06 = $600K. So I'd say you're a borderline case and it's not completely obvious what to do. Personally, I think house prices will keep falling, and joblessness will increase some more, but I could be wrong. Maybe the critical factor should be how secure you feel about your job.

the difference between owning and renting at $3k/month each is that while renting the owner is taking the full risk of further declines.

I think of my downpayment right now this way: How much am I willing to "spend" on a house right now. How much money am I willing to lose, for that particular house? You've been saving all that money up for a reason. To "buy" a house. The cash you put in upfront is how much you pay, the rest is just renting the money.

Now, I wouldn't say this if the numbers you posted weren't so close to rental parity. Or if your job sounded shaky.

Given today's crazy-low interest rate environment, money is cheap, I recommend looking at what you could reasonably buy if you only had 5% to put down, and then deciding whether to contribute more DP to lower your monthly costs. Going all the way to your last dime is just as stressful if not more than waiting it out 6 more months.

Keep an eagle eye out this winter for something that's priced right or that you can get a deal on, that's the perfect place for you, or that you can turn into the perfect place for you.

You've saved all that money, you've earned the right to spend it on roots if you choose to.

The cool thing about home ownership is that you can paint over the crayon marks. A cooler thing is the door that you mark the kid's height on - the one that you paint once (when you move in) and becomes part of your family lore.

I moved ten times before I graduated high school - roots are good (that's why I bought, and that's why I stayed even tho I could've scored $200k if I'd sold in 2006). I say, if you find the place you like, go for it. But take your time and make sure it's the place you want to be. Alot of people bought homes and can't sell without taking a loss or short-sale; hopefully you'll never be in that position.

10caipirinhas: I will up your tax account with my father: retired Canadian tax prosecutor.

I've discussed this with him and the "strategies" that were used to create tax deductible loans on homes. His reply, as is the same with almost all my Canadian tax questions are what are the intentions? The intention is to purchase a house and deduct the loan. The accounts came up with games that appeared to circumvent this, and essentially they're just waiting to be caught for tax fraud. I remember reading a bit before about some reforms, I'm not sure if they are in place. But as of the last time I saw, it came down to fraud. Most of the tax advice given out essentially comes down to "It worked for all these people! It must be true" which is Michael Moore logic. What it really means is that they haven't been caught as of yet. Don't forget, Canadian taxes are due for life. If you declare bankruptcy everything but the taxes goes away, if you go into hiding for 30 years and they find you, they're still able to collect. Be very careful.

My brother locked in a loan for about 4.x% for 30 years about 2 years ago? while loans here where in the 6% range. From the family and friends who obtained loans, they've been a few % points lower than what was available here. A few % points adds up to a huge amount of extra lending ability.

Most of the Canadian loans are a lot more restrictive still than what was done down here. What you consider risky, was fairly conservative.

Regarding a previous post by elliemae -

We almost always customize our rental - Millionaire Mommy Next Door does this too.

Here's a link. Scroll down to the middle of the article where she posts pics of her home with custom painting:

http://millionairemommynextdoor.com/2009/07/realtors-might-not-have-your-best-interests-at-heart

Painting is no big deal. When we move out we simply repaint walls to their original color. Usually, the LL has extra paint out in the garage.

As far as marking kids' height on a wall, we simply have chosen to make memories using other things such as keeping records of their schoolwork showing their evolving handwriting, etc. Their height can always be recorded on something portable such as on an 8-ft metal Stanley retractable tape measure.

~Misstrial

Misstrial says

Regarding a previous post by elliemae -
We almost always customize our rental - Millionaire Mommy Next Door does this too.

Many rentals won't allow for this. It depends upon where you live. I have a bunch of animals, which makes it harder to find a rental. However, renting works for alot of people.

I live in an area that's wayyyyy different than Calif. My house payment is $800 per month for a 3/2 1700sq ft on an acre. Buying my home was a good choice for me (so far), but it's not for everyone.

Kevin,

It sounds like you're in a spot like I'm in. Your income, ability to save and repayment times could be higher than the average. Low interest rates don't really favor you. Of course you've got children and there is a certain point in time where it isn't worth just "waiting' any longer. At some point it is worth spending and living the way you want to vs saving at an astronomical rate.

Having the full 20-25% down payment and not paying the penalties is probably worth it for you. You can obviously live below your means, which means re-paying a 401K plan won't be difficult. Repaying a car shouldn't be that hard either, and saving for the kids college shouldn't be that difficult either.

The other alternative is to get a shorter term loan, with a lower interest rate that may reset and pay down the house quicker. That way when the mortgage does reset, hopefully you'll have made a decent sized dent in that mortgage. At least the lower interest rates would be able to help you in this case. For those neigh sayers, this is different from lowering your mortgage payment so you can afford a house. The key here is to pay the same amount of mortgage payments as the higher priced loan would require, and reduce the principal as quickly as possible as opposed to gambling and "hoping" that in the future the house goes up for a quick sale. Rates would have to go up quite substantially for him to fall into a position where he couldn't service his debt when it was refinanced.

Why have you moved 4 times in such a short period? Was it to better position yourself for work? Better rent? Job changes? And the big question: Are these reasons likely to exist after you make a 20 yr commitment???

10caipirinhas says

I told my wife that “if she wants to buy now it means divorce”. Plain and simple, the look on her face was priceless.

Told her that “I can get laid for $100 whenever I want, and if I work at it, for free, so that I was not going to spend $100K+ down and $3-4K a month”…….”just to keep her nesting hormones happy” (my exact words), given the state of our economy and house prices (here in Canada we are at 7.3 times income and you guys were at 5.4 or something similar when your bubble burst, and ours has not burst yet). We are currently saving $2,700 a month as renters……and have been for years. Said if she wants to ruin herself financially she is perfectly entitled to do so on her own, and she can if she wants to, from a financial perspective, as she also has her own money, as do I. Been married since 2001, and I think we’ll be married for the rest of our lives.
There is no reason to ruin oneself financially whatsoever just because your wife’s brain isn’t working properly. If buying a house is cheaper than getting a divorce, in your situation, you may have to reevaluate your scenario, but in my case it is not by a long shot.

You must be a real hit with the ladies... lol... If I told my wife those things I probably would have to pay for sex.

Kevin says

Yes, and it’s something that we’re considering, but it’s hard to justify doing that now with the market insanity firmly entrenched. If it comes down to no other choice, I’ll probably tap the 401k, although at most that’s only about $40k (the actual limit is $50k or half of your total, and I’ve only got about $80k in mine — and yes, I’m maxing out my contributions and I have a 50% match). My wife doesn’t work and has no 401k.
Unfortunately I’m already over $200k this year because of some good luck with my company stock plan, so it’s unlikely that I’ll qualify for the tax credit. If they keep the limit at $170k I might be under next year.

In this case I would say: wait till you have at least $110k in your 401k. This would allow you using extra $60k for down payment, closing etc. But make sure you take a loan from your 401k, try to not withdraw from it. If your job is secure you can repay $50k loan quite easily in 2 years. If it's not - no reason to buy.

Tude,
Have you been up here to physically look at properties? The real estate world via "internets" is a place of dreams with very little reality attached, at least in my experience. Maybe like Cali FOR nia. I've looked around quite a bit there too.
Seattle area listings are usually never as they seem. I'm on my 3rd year looking for a decent place at a value based price without that "fatal flaw". Yes, I'll admit I'm picky. I'm not into old meth labs, houses in slide zones, mold infested fixers, properties right next to gas stations or neighbors who have a bad case of OCD. If it's a decent house in decent condition for a decent price its gone in days, even in this so called slow market. If you want it you'd better run to look at anything you think you'll like and looks legit in terms of marketing.
If that property on Vashon you refer to in your post is really as it appears on Redfin you better bust a move 'cause it will likely be STI very soon.
Vashon properties, especially waterfront tend to be very expensive. 425k doesn't add up. I guess it's remotely possible prices are correcting very steeply over there.
My wild guess is that's one of those Vashon places that doesn't have vehicle access to the house. The Redfin listing states 'no parking' if you look closely. Yes, you might have to walk all your stuff back and forth down a pedestrian trail or boardwalk. Charming, I'm sure. Great for a weekend/summer place, but otherwise in November when its cold and pouring down rain even as a retiree you'll be enjoying yourself slogging along that walk with your armload of soggy groceries luxuriating in those 'panoramic Sound views'....
Maybe California really IS THAT BAD but for someone who has lived in the Puget Sound area since the mid 90's, it just seems foolish to participate in this ongoing mania. The housing hasn't changed but for the worse and the heady delusional days when that common refrain "I'm going to be a multi-millionaire' HAS. You could even buy an "affordable" house during THOSE times. You at least had the option of buying something out of the city and commute in for your work. Has anyone noticed the prices lately of those places out in the backwaters that used to just generate Seattlelites' snickers and sneers?
I'm beginning to come to the conclusion that the west coast property market is permanently hosed.
And that makes me very sad.

Well at least in California, the estimate is to double the population by 2020 or something insane (I believe that was a quote about 5 years old?).

Those back water places might be unrealistically expensive now, but if your options in a few years are to commute 1 hour or 4 hours into work, those back water places might start to look pretty good. The sheer number of people moving into California should help revive the market, even if it requires 10 years, it won't be permanent.

pkennedy:
Some of those backwaters I referred to sometimes ARE the 4 hour commutes today especially if you are on the "wrong" side of the water. If the price of gasoline ever goes beyond what it was in the summer of '08 it will make even less sense.
Will you be able to afford not only the time but the fuel for such a horrendous commute? I doubt it will look much better as a deal than today, maybe worse....
To clarify, Vashon Island is not IMO a backwater, it's a nice place within a short ferry ride to downtown Seattle.

The statement that California is going to double in population by 2020 seems like an argument related to the old "buy now or be priced out forever" . Anyway, I thought California was losing population not working on doubling it. In this economy? Guess that's good for all those in the Golden State. IMO at some point more is not better it just causes scarcity and crowding. We have that here already. I guess it can get much worse.
If all the Californians do decide to move to Washington State to find "cheap" housing, I guess they'll get it. Seems at least a good number have the perception that housing should cost more than most working people could ever hope to be able to pay! Then there is that pesky problem called local markets that kicks in based on those local job wages. Once you move here and find a job here its all relative anyway.
But like I said before, I'm afeared the whole west coast property market is hosed for some of us.

lyoungblood says

10caipirinhas says

I told my wife that “if she wants to buy now it means divorce”. Plain and simple, the look on her face was priceless.
Told her that “I can get laid for $100 whenever I want, and if I work at it, for free, so that I was not going to spend $100K+ down and $3-4K a month”…….”just to keep her nesting hormones happy” (my exact words), given the state of our economy and house prices (here in Canada we are at 7.3 times income and you guys were at 5.4 or something similar when your bubble burst, and ours has not burst yet). We are currently saving $2,700 a month as renters……and have been for years. Said if she wants to ruin herself financially she is perfectly entitled to do so on her own, and she can if she wants to, from a financial perspective, as she also has her own money, as do I. Been married since 2001, and I think we’ll be married for the rest of our lives.

There is no reason to ruin oneself financially whatsoever just because your wife’s brain isn’t working properly. If buying a house is cheaper than getting a divorce, in your situation, you may have to reevaluate your scenario, but in my case it is not by a long shot.

You must be a real hit with the ladies… lol… If I told my wife those things I probably would have to pay for sex.

You probably already do in any number of ways. We all "pay" for sex in various ways, not just cash. Of course, these days some believe and seek to leglislate "budgets"/money control as emotional abuse in relationships. One of the biggest reasons for divorce... financial issues. Who do you think would/will take the heat after the ARM reset of the couple in the "Suzanne researched this" century21 ad? I doubt it will be suzanne or the wife.

Maybe that one place on Vashon on the water has "fatal flaws" but there are several properties on Vashon on acreage for less than 500k I have been watching for a while that don't seem to be selling
http://www.redfin.com/WA/Vashon/11330-SW-220th-St-98070/home/520827
is right next to the equestrian park, and has been on the market for a year.
How about this? An acre, has parking, near the water, a little more but trouble selling?
http://www.redfin.com/WA/Vashon/8950-SW-146th-Pl-98070/home/522094
Personally, with your $$ and income I would be looking at the upper end of you budget but making lowball offers until one sticks.
What zipcode are you looking in anyway?

pkennedy says

Why have you moved 4 times in such a short period? Was it to better position yourself for work? Better rent? Job changes? And the big question: Are these reasons likely to exist after you make a 20 yr commitment???

AZ -> CA for work, moved twice in CA because we had two kids in 2 years, and moved to WA about a month ago to escape the insanity of the bay area.

michaelsch says

In this case I would say: wait till you have at least $110k in your 401k.

That would require another 18 months (unless the market does really well), which would be pretty painful (Maximum contribution = $16.5k + 8k for the match). I could do something crazy to pad the beginning of the 2011 calendar year early, but that's still going to take at least 12-13 months.

AltonS says

You probably already do in any number of ways. We all “pay” for sex in various ways, not just cash. Of course, these days some believe and seek to leglislate “budgets”/money control as emotional abuse in relationships. One of the biggest reasons for divorce… financial issues. Who do you think would/will take the heat after the ARM reset of the couple in the “Suzanne researched this” century21 ad? I doubt it will be suzanne or the wife.

Some of you people have very bizarre relationships with your spouses. That's not healthy.

Vashon is nice, but it's also an hour+ commute from my office (in Southern Kirkland), and I like getting home before my kids go to bed.

Still saw well over 100 homes in the Kirkland area that are 4+ bedrooms for less than 500k. All look like really nice homes too. I can only conclude that you are another person complaining that they cannot find a home in a specific 5 block area for what they want to pay, therefore it's impossible to find a home in their special area.

I hear it about the "Bay Area" too. Nothing less than 800k people say, then you find out they too good to live anywhere but Piedmont... Whatever.

Kevin says

For instance, I’d really like to pay off my car. We owe about $18k on it, and are paying around 8% interest. Paying it off would give us an extra $500 a month, but we’d also be taking a $18k hit on our down payment money and it would take three years to make up the difference.

I'm sure you realize that "option" will cost over $2,300 in non-deductable interest. If you are pretty sure you will not buy for at least a year, you are paying $2,300 to have an extra $12,000 in down payment money.