Seattle is pricey

Seattle PI, Seattle too pricey for normal people.

It is, but there must be a lot of rich people because whenever I wonder about who can afford $500k condos I just go for a bike ride down Lake Washington Blvd or a boat road around Lake Washington or the Sound and there are multi-million dollar homes as far as the eye can see*.

*The homes would be multi-million dollars if they went on the market today. However it is likely many of them were purchased at a time when real estate was much more affordable.

Update: Seattlest has a few comments too, Relocated Boise Couple Can’t Hack It, Whines to P-I

About Matt

Matt , Urbnlivn's publisher, has a love for lofts, floating homes and mid-century moderns.

For years Matt resisted becoming a real estate agent preferring to be an executive in the startup world but he recently caved in the spring of 2014 and became an agent.

You can also find Matt on Twitter or skiing.

  • Dan Ji

    Not sure what happened up there, but most of the message got cut off:

    Matthew, I’m interested in hearing your views on why IO loans are so bad. I currently have a IO on a SLU condo, and a 30-year conventional (fixed) loan… looking at the amortization schedule of the principle paydown for that conventional, I’m actually not netting all that much every year.

    From what I gather, I’d see an acceleration of principle paydown towards the later part of my loan schedule – but if I don’t plan to live there for more than a 3-5 years, I’m not quite sure what the benefits are?

    Are you down on IO loans in general, or people who misuse them? Just trying to get a feel other views…

  • Matthew

    Dan Ji,

    I guess I am more biased against the people that misuse an IO loan to get into property that they otherwise couldn’t afford. An IO loan is a great tool when the market is undergoing tremendous growth like we have seen the last few years.

    If you intend to live in a place for a short time period, than it may not be a bad option. The risk however, is that if you bought at the peak of a speculative run up, what if you have to sell your condo at a loss? Maybe you will decide to stay in your residence another few years to ride out the market. Refinancing may not be as cheap as you think.

    Condo markets tend to be much more volatile than SFH. I’ve seen plenty of my co-workers in our San Diego office that thought “Hey I’ll just buy a condo with an IO loan to get into the market. Then I’ll make a bunch of cash and get into a house”. Guess what? Many of those people are now upside down in their loans, many of which are now refinancing at a huge penalty. But hey Seattle is different.

  • Matthew

    Dan Ji,

    I guess I am more biased against the people that misuse an IO loan to get into property that they otherwise couldn’t afford. An IO loan is a great tool when the market is undergoing tremendous growth like we have seen the last few years.

    If you intend to live in a place for a short time period, than it may not be a bad option. The risk however, is that if you bought at the peak of a speculative run up, what if you have to sell your condo at a loss? Maybe you will decide to stay in your residence another few years to ride out the market. Refinancing may not be as cheap as you think.

    Condo markets tend to be much more volatile than SFH. I’ve seen plenty of my co-workers in our San Diego office that thought “Hey I’ll just buy a condo with an IO loan to get into the market. Then I’ll make a bunch of cash and get into a house”. Guess what? Many of those people are now upside down in their loans, many of which are now refinancing at a huge penalty. But hey Seattle is different.

  • Matthew

    Dan Ji,

    I guess I am more biased against the people that misuse an IO loan to get into property that they otherwise couldn’t afford. An IO loan is a great tool when the market is undergoing tremendous growth like we have seen the last few years.

    If you intend to live in a place for a short time period, than it may not be a bad option. The risk however, is that if you bought at the peak of a speculative run up, what if you have to sell your condo at a loss? Maybe you will decide to stay in your residence another few years to ride out the market. Refinancing may not be as cheap as you think.

    Condo markets tend to be much more volatile than SFH. I’ve seen plenty of my co-workers in our San Diego office that thought “Hey I’ll just buy a condo with an IO loan to get into the market. Then I’ll make a bunch of cash and get into a house”. Guess what? Many of those people are now upside down in their loans, many of which are now refinancing at a huge penalty. But hey Seattle is different.

  • http://twitter.com/mattgoyer mattgoyer

    I too am puzzled by the anti-IO sentiments.

    I agree that neg am is bad and I’m definitely staying away from them but I don’t feel the same way about an IO which is what I’m doing for my mortgage at The Meritage. Personally, I’d much rather invest the difference between a non-IO payment and a IO payment in the market then in paying down my mortgage and building equity. I of course understand that many people are steered into neg-AM or IO products to buy more than I can afford but as a more sophisticated buyer I certainly appreciate that products like an IO product is available to me.

    As for going upside down, it can happen with a neg-AM, it can happen with an IO, it can even happen with 5% or 10% down if the market really reverses direction. No mortgage product is going to prevent you from losing your shirt if things go south.

  • http://twitter.com/mattgoyer mattgoyer

    I too am puzzled by the anti-IO sentiments.

    I agree that neg am is bad and I’m definitely staying away from them but I don’t feel the same way about an IO which is what I’m doing for my mortgage at The Meritage. Personally, I’d much rather invest the difference between a non-IO payment and a IO payment in the market then in paying down my mortgage and building equity. I of course understand that many people are steered into neg-AM or IO products to buy more than I can afford but as a more sophisticated buyer I certainly appreciate that products like an IO product is available to me.

    As for going upside down, it can happen with a neg-AM, it can happen with an IO, it can even happen with 5% or 10% down if the market really reverses direction. No mortgage product is going to prevent you from losing your shirt if things go south.

  • http://blog.mattgoyer.com Matt

    I too am puzzled by the anti-IO sentiments.

    I agree that neg am is bad and I’m definitely staying away from them but I don’t feel the same way about an IO which is what I’m doing for my mortgage at The Meritage. Personally, I’d much rather invest the difference between a non-IO payment and a IO payment in the market then in paying down my mortgage and building equity. I of course understand that many people are steered into neg-AM or IO products to buy more than I can afford but as a more sophisticated buyer I certainly appreciate that products like an IO product is available to me.

    As for going upside down, it can happen with a neg-AM, it can happen with an IO, it can even happen with 5% or 10% down if the market really reverses direction. No mortgage product is going to prevent you from losing your shirt if things go south.

  • Cameron

    I tend to believe that if apartment living suits your personal financial requirements and living desires then great! Why argue as there are good reasons for both owning and renting? Many of these rest on personal, unmeasurable, feelings towards financial risk and the responsibilities and costs of home owning.

    IO loans have been huge in the Bay Area for years and while Downtown might be correct that it is very difficult to go ‘technically’ upside down on on IO, that is not the real issue. IO loans are often used to get into the housing market. But, take the situation where the market stagnates or even worse…YOUR part of the market stagnates and rates go up. It is possible that an IO loan cannot be refinanced when it comes due at rates the owner can afford. If the value of the property did not go up very much the owner might not be any further along in their dream of home ownership (or becoming a real estate mogul) than when the purchased 3, 5, or 10 years prior. Several articles have been in the Bay Area press recently detailing owners that bought in 2000 and 2001 that now find themselves in this position.

    But obviously these loans do work for many. As in anything to do with real estate, research and listen to your gut. If it doesn’t ‘feel’ right for you then it probably isn’t.

  • Cameron

    I tend to believe that if apartment living suits your personal financial requirements and living desires then great! Why argue as there are good reasons for both owning and renting? Many of these rest on personal, unmeasurable, feelings towards financial risk and the responsibilities and costs of home owning.

    IO loans have been huge in the Bay Area for years and while Downtown might be correct that it is very difficult to go ‘technically’ upside down on on IO, that is not the real issue. IO loans are often used to get into the housing market. But, take the situation where the market stagnates or even worse…YOUR part of the market stagnates and rates go up. It is possible that an IO loan cannot be refinanced when it comes due at rates the owner can afford. If the value of the property did not go up very much the owner might not be any further along in their dream of home ownership (or becoming a real estate mogul) than when the purchased 3, 5, or 10 years prior. Several articles have been in the Bay Area press recently detailing owners that bought in 2000 and 2001 that now find themselves in this position.

    But obviously these loans do work for many. As in anything to do with real estate, research and listen to your gut. If it doesn’t ‘feel’ right for you then it probably isn’t.

  • Cameron

    I tend to believe that if apartment living suits your personal financial requirements and living desires then great! Why argue as there are good reasons for both owning and renting? Many of these rest on personal, unmeasurable, feelings towards financial risk and the responsibilities and costs of home owning.

    IO loans have been huge in the Bay Area for years and while Downtown might be correct that it is very difficult to go ‘technically’ upside down on on IO, that is not the real issue. IO loans are often used to get into the housing market. But, take the situation where the market stagnates or even worse…YOUR part of the market stagnates and rates go up. It is possible that an IO loan cannot be refinanced when it comes due at rates the owner can afford. If the value of the property did not go up very much the owner might not be any further along in their dream of home ownership (or becoming a real estate mogul) than when the purchased 3, 5, or 10 years prior. Several articles have been in the Bay Area press recently detailing owners that bought in 2000 and 2001 that now find themselves in this position.

    But obviously these loans do work for many. As in anything to do with real estate, research and listen to your gut. If it doesn’t ‘feel’ right for you then it probably isn’t.

  • Ben

    It’s all relative. I’m from Honolulu…Seattle’s housing is cheap.

  • Ben

    It’s all relative. I’m from Honolulu…Seattle’s housing is cheap.

  • Ben

    It’s all relative. I’m from Honolulu…Seattle’s housing is very affordable compared to other places.

  • Ben

    It’s all relative. I’m from Honolulu…Seattle’s housing is very affordable compared to other places.

  • Ben

    It’s all relative. I’m from Honolulu…Seattle’s housing is cheap.

  • Ben

    It’s all relative. I’m from Honolulu…Seattle’s housing is very affordable compared to other places.

  • matthew

    If you are going to own a property for 1-5 years, an IO loan is could be the loan for you. Any longer than that, and chances are you are going to wish you had opted for something fixed. With interest rates still at historic lows, I would opt for the peace of mind knowing I am locked into a low rate.

  • matthew

    If you are going to own a property for 1-5 years, an IO loan is could be the loan for you. Any longer than that, and chances are you are going to wish you had opted for something fixed. With interest rates still at historic lows, I would opt for the peace of mind knowing I am locked into a low rate.

  • matthew

    If you are going to own a property for 1-5 years, an IO loan is could be the loan for you. Any longer than that, and chances are you are going to wish you had opted for something fixed. With interest rates still at historic lows, I would opt for the peace of mind knowing I am locked into a low rate.

  • Dan Ji

    downtown-

    not sure if you meant that I don’t seem to understand IO loans… but maybe I wasn’t clear. I tend to agree with your view on IO loans. (Oh, and I’ve had experience with neg amortization loans in the past, including those “option arm” products… and now stay far far away).

    So, to clarify… in looking at the amortization schedule of the P&I loan on my SFH, it doesn’t seem like the benefits are very great OVER an IO loan – granted, one that I stay in for 2-5 years. And that’s partly why I chose an IO for my condo.

  • Dan Ji

    downtown-

    not sure if you meant that I don’t seem to understand IO loans… but maybe I wasn’t clear. I tend to agree with your view on IO loans. (Oh, and I’ve had experience with neg amortization loans in the past, including those “option arm” products… and now stay far far away).

    So, to clarify… in looking at the amortization schedule of the P&I loan on my SFH, it doesn’t seem like the benefits are very great OVER an IO loan – granted, one that I stay in for 2-5 years. And that’s partly why I chose an IO for my condo.

  • Bob

    Don’t discount the fact that many rich folks will help their children buy their first homes. Handing the kids $30k, $50k is not a big deal to these families. Those kids probably aren’t slaving away at a $15/hr job in the first place. Lumping every buyer of $500k condo with those who use IO loans is silly.

  • Bob

    Don’t discount the fact that many rich folks will help their children buy their first homes. Handing the kids $30k, $50k is not a big deal to these families. Those kids probably aren’t slaving away at a $15/hr job in the first place. Lumping every buyer of $500k condo with those who use IO loans is silly.

  • Bob

    Don’t discount the fact that many rich folks will help their children buy their first homes. Handing the kids $30k, $50k is not a big deal to these families. Those kids probably aren’t slaving away at a $15/hr job in the first place. Lumping every buyer of $500k condo with those who use IO loans is silly.

  • Matthew

    Ben,

    You are right. Seattle is cheap compared to about 5 other cities. Honolulu, NYC, DC, and Cali, other than that, this place is not really that great of a bargain.

    Bob,

    Who is lumping every 500K condo owner as someone who is financing with an IO loan? I live in a condo building, I see plenty of people with all different sorts of backgrounds and jobs. I am merely saying that if you are using an IO loan to afford more house than you would normally be able to purchase using conventional methods, you are going to be in for a rude awakening. Downtown and Matt do not seem to me, to be the common IO loan user. An IO loan is a sophisticated loan, and in the wrong hands, can have terrible consequences. Up until recently, the IO loan was only used by a select buyer and was not widespread.

    Again, being aware of what type of loan you are using is the key. It is amazing the amount of people that have had their loan reset and are clueless as to why they are suddenly paying so much extra every month.

  • Matthew

    Ben,

    You are right. Seattle is cheap compared to about 5 other cities. Honolulu, NYC, DC, and Cali, other than that, this place is not really that great of a bargain.

    Bob,

    Who is lumping every 500K condo owner as someone who is financing with an IO loan? I live in a condo building, I see plenty of people with all different sorts of backgrounds and jobs. I am merely saying that if you are using an IO loan to afford more house than you would normally be able to purchase using conventional methods, you are going to be in for a rude awakening. Downtown and Matt do not seem to me, to be the common IO loan user. An IO loan is a sophisticated loan, and in the wrong hands, can have terrible consequences. Up until recently, the IO loan was only used by a select buyer and was not widespread.

    Again, being aware of what type of loan you are using is the key. It is amazing the amount of people that have had their loan reset and are clueless as to why they are suddenly paying so much extra every month.

  • Matthew

    Ben,

    You are right. Seattle is cheap compared to about 5 other cities. Honolulu, NYC, DC, and Cali, other than that, this place is not really that great of a bargain.

    Bob,

    Who is lumping every 500K condo owner as someone who is financing with an IO loan? I live in a condo building, I see plenty of people with all different sorts of backgrounds and jobs. I am merely saying that if you are using an IO loan to afford more house than you would normally be able to purchase using conventional methods, you are going to be in for a rude awakening. Downtown and Matt do not seem to me, to be the common IO loan user. An IO loan is a sophisticated loan, and in the wrong hands, can have terrible consequences. Up until recently, the IO loan was only used by a select buyer and was not widespread.

    Again, being aware of what type of loan you are using is the key. It is amazing the amount of people that have had their loan reset and are clueless as to why they are suddenly paying so much extra every month.

  • EconE

    Pac 10?

    Sorry Business…an fact…I wouldn’t have wasted my time if I knew that you were also Financeguru.

    But sorry…puffery over a school because of it’s SPORTS doesn’t cut it.

    Now…you want to tell me what your degree was in…sounds to me that you were a BUSINESS major that took the required econ courses and risk management was part of your degree.

    But…then…when you state a “Degree” in RE…that is what really made me laugh.

    Had you said RE LAW then you might have a leg to stand on…however…it looks like you couldn’t hack it with a Business Degree and had to go into RE and now you are the bitter one.

    I’m done with you because frankly…you are not very educated and I wish you luck with all of your endeavors.

    Oh…yeah…and you’re RIGHT…global economics has NOTHING to do with our housing market…sheesh.

  • EconE

    Pac 10?

    Sorry Business…an fact…I wouldn’t have wasted my time if I knew that you were also Financeguru.

    But sorry…puffery over a school because of it’s SPORTS doesn’t cut it.

    Now…you want to tell me what your degree was in…sounds to me that you were a BUSINESS major that took the required econ courses and risk management was part of your degree.

    But…then…when you state a “Degree” in RE…that is what really made me laugh.

    Had you said RE LAW then you might have a leg to stand on…however…it looks like you couldn’t hack it with a Business Degree and had to go into RE and now you are the bitter one.

    I’m done with you because frankly…you are not very educated and I wish you luck with all of your endeavors.

    Oh…yeah…and you’re RIGHT…global economics has NOTHING to do with our housing market…sheesh.

  • EconE

    Pac 10?

    Sorry Business…an fact…I wouldn’t have wasted my time if I knew that you were also Financeguru.

    But sorry…puffery over a school because of it’s SPORTS doesn’t cut it.

    Now…you want to tell me what your degree was in…sounds to me that you were a BUSINESS major that took the required econ courses and risk management was part of your degree.

    But…then…when you state a “Degree” in RE…that is what really made me laugh.

    Had you said RE LAW then you might have a leg to stand on…however…it looks like you couldn’t hack it with a Business Degree and had to go into RE and now you are the bitter one.

    I’m done with you because frankly…you are not very educated and I wish you luck with all of your endeavors.

    Oh…yeah…and you’re RIGHT…global economics has NOTHING to do with our housing market…sheesh.

  • http://mikeplummer.com Mike

    I know MSFT doesn’t pay college grads enough to purchase houses. Besides, college grads would rather rent in Belltown then rent a house in Redmond. My 2 first-year Microsofty friends both own condos in Lower Queen Anne, quite easily by all appearances.

    I’m well aware that condo inventory turnover is slowing. I’m also not sure that it’s time yet to run around in circles with my hands in the air screaming, “the sky is falling!”.

    However, I am concerned enough that I’m considering cashing out of my short-term conversion condo investment (up 20% in 13 months) and into a new construction unit that I’m willing to stick with and live in for the long-term. In other words, I am worried about the next couple years, but not enough to deter me from plopping 5% down to reserve a place I see myself living happily in for the next 5-10 years.

  • http://mikeplummer.com Mike

    I know MSFT doesn’t pay college grads enough to purchase houses. Besides, college grads would rather rent in Belltown then rent a house in Redmond. My 2 first-year Microsofty friends both own condos in Lower Queen Anne, quite easily by all appearances.

    I’m well aware that condo inventory turnover is slowing. I’m also not sure that it’s time yet to run around in circles with my hands in the air screaming, “the sky is falling!”.

    However, I am concerned enough that I’m considering cashing out of my short-term conversion condo investment (up 20% in 13 months) and into a new construction unit that I’m willing to stick with and live in for the long-term. In other words, I am worried about the next couple years, but not enough to deter me from plopping 5% down to reserve a place I see myself living happily in for the next 5-10 years.

  • http://mikeplummer.com Mike

    I know MSFT doesn’t pay college grads enough to purchase houses. Besides, college grads would rather rent in Belltown then rent a house in Redmond. My 2 first-year Microsofty friends both own condos in Lower Queen Anne, quite easily by all appearances.

    I’m well aware that condo inventory turnover is slowing. I’m also not sure that it’s time yet to run around in circles with my hands in the air screaming, “the sky is falling!”.

    However, I am concerned enough that I’m considering cashing out of my short-term conversion condo investment (up 20% in 13 months) and into a new construction unit that I’m willing to stick with and live in for the long-term. In other words, I am worried about the next couple years, but not enough to deter me from plopping 5% down to reserve a place I see myself living happily in for the next 5-10 years.

  • http://twitter.com/mattgoyer mattgoyer

    A new grad at Microsoft/Amazon makes ~$60-80k/year in base compensation.

  • http://twitter.com/mattgoyer mattgoyer

    A new grad at Microsoft/Amazon makes ~$60-80k/year in base compensation.

  • http://blog.mattgoyer.com Matt

    A new grad at Microsoft/Amazon makes ~$60-80k/year in base compensation.

  • Kate

    Move to Portland then drive to Seattle visit :) !

  • Kate

    Move to Portland then drive to Seattle visit :) !