I think it’s time to either move to New York or get ready for the collapse of the Seattle real estate market. Check out this article in the New York Times, Young Buyers, Prepared and Fearless. First a look at how young buyers approach the transaction:
Brokers say that younger buyers, especially those under 30, often approach their first home with cold calculation and an appetite for risk more often associated with real estate moguls.
While this approach to buying may be typical of Wall Street analysts and bankers who are used to approaching deals with extensive research, younger buyers with jobs far from financial fields — wedding photographers and advertising executives, for example — are not relying only on the advice of their brokers. In addition, they are coolly investigating the backgrounds of their developers and their buildings’ histories. They treat these purchases first as portfolio diversifiers and only second as homes. With that in mind, they are keeping their money in the bank and borrowing as much as possible.
I hope in the near future to build up Urbnlivn a bit more. Currently you can see which developers have done which projects but it would be great to add some commenting and rating features so we can build up profiles on developers, marketers, interior designers and architects. For instance, I’m really worried about Trace’s interiors given what I’ve seen the same interior designer put together for Trio.
Now the quote that really caught my attention was this one:
They put down a deposit for a 1,000-square-foot one-bedroom loft selling for about $500,000.
Does anyone find it odd that I’m looking at a 800 square-foot studio loft selling for about $500,000 in SEATTLE? Maybe I should move to New York where the lofts are cheaper!?
After the couple spent $35,000 on a number of changes, including expanding the closet in the master bedroom and installing new floors, Mr. Hyman predicted that they could easily rent the place out and cover the mortgage.
Unless you’re putting 20%+ down there is no way you could rent out a Seattle condo and have the rent cover mortgage + HOA + tax.
And they end the article with a quote we are all thinking when we close our next deal:
“I really think that real estate will not go down,” she said. “At the very least, it will stay the same. In the meantime, I need a place to live. So the worst-case scenario still isn’t that bad.”
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14 responses so far ↓
1 kh // Feb 5, 2007 at 1:55 pm
very interesting! i’m guessing the “1,000-square-foot one-bedroom loft selling for about $500,000″ won’t be in an extremely desirable area of NYC that you’d want to be living or have a view! you’d have to give up your wish list to get anything in that range.
but the fact you can’t rent condos in seattle for comparable prices as the rental market definitely says something!
2 jo // Feb 5, 2007 at 2:33 pm
“But Mr. Hyman, a 27-year-old trader at Credit Suisse First Boston, and Mrs. Hyman, a 24-year-old elementary science teacher at the Grace Church School”
Dang…what are they paying teachers out there if the two of them, as young as they are, can afford a 875k place.
3 brain // Feb 5, 2007 at 2:34 pm
NYC and SF don’t compare favorably to Seattle for a lot of reasons. They’re not even comps really, for reasons beyond $ - including business, lifestyle, culture, politics, development restrictions, construction quality.
4 Andy // Feb 5, 2007 at 5:16 pm
I am a mid-twenties financial analyst buying a first property, so this was a fun read. I’d suggest that people in their twenties at CSFB, Goldman, and Morgan Stanley aren’t very representative of the 20-something set as a whole.
At Trace, the exposed structural elements will make it hard to hide speaker wire, and I heard about some interesting potential A/V upgrades — wireless Bose speakers. I actually started to rationalize them by picturing the option costs (speakers, laundry appliances, etc.) up in the LTV, deductible with the rest of the I/O. Flash forward to housewarming: “The Clash kill on these speakers. And he got them for a steal on an after-tax basis.”
The word is out on the fat spread between the net monthly after-tax cost of an 80/17 I/O ARM + fixed second lien and the payment for a traditional principle-paying 80/- 30 year fixed. It does a lot of work in reserve. With HSBC Direct offering 6.00% APY on liquid cash you build up an equity base pretty quickly–compounding money that’s accessible if you lose your job and isn’t locked up like home equity. Takes some discipline, but with automatic savings plans it seems easy enough.
As for research, I visited the mayor’s Design & Planning office at 700 Fifth (floor 20) to learn more about Trace. They have a stack of microfilm architectural plans, to scale, under the address 1412 12th Avenue. Free to peruse and $1 per sheet for a hard copy. It was good to see the floor plans in context and they had some elevations and structural details that ate up a good hour of browsing. The ventilation system for the parking structure was a bore, but seeing the relationship between Trace and the (immediately) adjacent Trace North redirected my interest from 306/206 to the 12th Avenue side. Looking at plans for an hour may have saved me a few years of looking at weird naked neighbors. Trace has updated their website to be more clear on this.
Other resources from the city include an historical record of permits and complaints (http://web1.seattle.gov/DPD/permitstatus/Address.aspx?addr=1412,,12TH,AVE,) (note the scary earthquake reference at the bottom), and a meaty “Analysis and Decision of the Director of the Department of Planning and Development.” (PDF: http://www.ci.seattle.wa.us/dpd/notices/decisions/2408094.pdf) It’s full of words like chamfered and fenestration.
I think the key subtext of the NYT story is the breadth of publicly available information about finance, property, its history, and valuation.
5 EconE // Feb 5, 2007 at 6:11 pm
I’d love to see articles in a decade or so that “revisit” the lives of all the 20-something couples that are sinking big $$$ into real estate now.
It could be interesting
6 jpsfranks // Feb 5, 2007 at 8:18 pm
I don’t think the substantial gap between rent and PITI is unique to Seattle. I have a very hard time believing that these NYC couples could “easily” rent out their places and break even either.
7 Matthew // Feb 5, 2007 at 8:30 pm
Even the most pro RE people I have talked to over the last couple of months agree that the single bedroom condo market is Seattle is overinflated. Sinking 500,000 in an IO loan like some of these people in the article… well… good luck…
8 Cameron // Feb 6, 2007 at 10:13 am
IO loans were all the rage during the Bay Area heady years of 2000-2005 where appreciation was 20% a year. But now the IO portions of the loans are coming due and foreclosures and short-sales are WAY up. Unless you seriously want to bet that the market in Seattle is NOT being overbuilt for the short-term I’d think long and hard before going the IO route.
9 Cosmo Seattle // Feb 7, 2007 at 12:47 pm
Andy- thanks for the cool tip about the mayor’s Design & Planning office. I take it from your comment (and that the architectural plans were on microfilm) that you were looking at the original turn of the century plans. Did you also have access to the renovation plans?
I have been following development in the Denny Triangle and recently attended a design review for a condo building at 1823 Terry Ave. They had some fancy pictures but not much in the way of architectural drawings.
10 Andy // Feb 8, 2007 at 9:01 am
The microfilm plans for Trace were recent, stamped by Johnson Architecture & Planning in 2005/2006. None of the microfilm plans dated to the original construction.
The renovation plans for Trace are detailed–with specific views of the demolition, salvage, residential and commercial floor plans, soundproofing, waterproofing, structural, and landscaping design for the project (commercial floor plans for the street and mezzanine levels are in PDF format here: http://www.12thandmadison.com/trace_building.htm) There were interior and exterior elevations and unit plans down to the cable and power hookups, etc. There were plans for both the Trace Lofts proper and Trace North.
I like the proportion of original building elements that will be preserved in the lofts. I think this authenticity will become rare as fewer suitable factories and warehouses are left for renovation downtown.
11 Matt // Feb 8, 2007 at 9:35 am
Thanks for the tip Andy. I’d love to find out more about Trace North and of course EK is not talking.
12 urbnlivn - A Seattle condo new construction real estate blog » Frustrated with the lack of info? // Feb 8, 2007 at 9:45 am
[…] I don’t know about you but I’m often very frustrated with the lack of information about a project; I want to know all the details about sound proofing, cable drops, plumbing, etc. Or I’m frustrated that no information is available until days before the pre-sale/reservation process begins. Fortunately one our readers, Andy, has a great tip, visit the Department of Planning and Development: As for research, I visited the mayor’s Design & Planning office at 700 Fifth (floor 20) to learn more about Trace. They have a stack of microfilm architectural plans, to scale, under the address 1412 12th Avenue. Free to peruse and $1 per sheet for a hard copy. It was good to see the floor plans in context and they had some elevations and structural details that ate up a good hour of browsing. The ventilation system for the parking structure was a bore, but seeing the relationship between Trace and the (immediately) adjacent Trace North redirected my interest from 306/206 to the 12th Avenue side. Looking at plans for an hour may have saved me a few years of looking at weird naked neighbors. Trace has updated their website to be more clear on this. […]
13 Bob // Feb 12, 2007 at 5:12 pm
An $875k apartment shouldn’t be much of a burden for that 27 year old trader. He probably makes $400k a year including bonus. Why do you think a girl who looks like that would be with him? LOL.
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