REPORT SAYS SEATTLE AREA RESIDENTS ARE SPENDING MORE ON RENT THAN MORTGAGES; KIRO NEWS TAPS REALOGICS SOTHEBY’S INTERNATIONAL REALTY ON TRENDS
On August 18th KIRO TV News reported that it may be less expensive to own than rent and interviewed Dean Jones, CEO as well as broker Cassie Daughtrey of RSIR. Reporter Natasha Chen cited analysis by Zillow, which suggests renters are typically spending nearly 10-percent more of their monthly income on rent than they are mortgages. This revelation and other myths and facts about homeownership will be highlighted during a series of events hosted by RSIR and Caliber Home Loans on August 26th and 27th in downtown Seattle and Kirkland, respectively. The firms have aligned to help prospective homebuyers understand their opportunity.
From the KIRO TV website:
By Natasha Chen
Renters in King, Snohomish and Pierce counties are spending 31.6 percent of monthly gross income on rent, which is the highest it’s ever been, according to Zillow.com estimates.
At the same time, homeowners in the area are paying only 22.7 percent of monthly gross income on mortgage.
The numbers indicate it may be cheaper to own than to rent, if one can purchase a home in the competitive housing market.
The CEO of Realogics Sothebys International, Dean Jones, said many renters have no idea that they’re prime candidates for home ownership. Jones said the cost of renting is not just the money being turned in to a landlord every month, but the lost opportunity to buy a home before prices potentially soar higher.
In a market where demand far outpaces supply, Jones said it will take several years for there to be more units built or put on the market. Until then, prices will keep climbing.
The news crew explored not one but four of Cassie Daughtrey’s recent sales in the last month and all were purchased by renters that elected to buy. One home that went pending in Seattle’s Maple Leaf neighborhood near Greenlake. With a $525,000 purchase price and 3.5% down ($18,375 can be gifted by family members) the $506,625 base loan amount @ 3.99% requires just $3,245/month including (PITI and MI) to own.
Daughtrey said there are many renters in the area that are paying $4,000 or even more than $5,000 for a house and she wonders why.
“If you’re going to remain in one location for more than two or three years, it pays to own,” adds Daughtrey. “My sellers are harvesting equity they’ve built up over the years and many times they are even adding value through thoughtful renovations, which can dramatically improve the market value. Besides there are meaningful tax advantages and while it takes some effort, it’s smart to build your own portfolio instead of your landlords.”
Jones outlined his views about the in-city housing market suggesting that demand will outstrip the supply because it takes so long to develop larger buildings and developers have preferred to build apartments.
“The reality is many apartment buildings are now worth as much as they are as condominiums,” said Jones. “While that’s all well and good for developers it leaves consumers with a lack of inventory to choose from. There are only about 60 resale condos for sale in downtown Seattle right now and about half of the new condominiums being built are presold. If just 5-percent of the new residents that moved into a new apartment building in the last few years decided to buy, we’d absorb all of the available inventory for sale and prices would escalate even further. I think that time is coming.”
Part of the reason consumers are renting is convenience, mobility and lack of information about the market. Nancy Glover, a Mortgage Banker with Caliber Home Loans lists a few common misconceptions potential home buyers have about buying in today’s market:
Fiction: You need at least 20% down to purchase a home!
Fact: There are loan programs available with as little as 3%, 5% and 10% down.
Fiction: I need to save up all of my own money!
Fact: You can use gift funds or a loan from your own retirement account for the down payment.
Fiction: I won’t be able to qualify for a loan due to difficult lending requirements!
Fact: Lenders are now offering more lending options than before to help you get a loan, it’s easier than you think!
Keith Lashley is another Mortgage Banker with Caliber Home Loans and agrees there are many great loan programs, tax credit programs and options for a first time home buyers. He offers some advice for prospective buyers that are trying to save up for a larger down payment.
“Mortgages are intended to be a leverage tool allowing a borrower to secure a preferred home at a preferred price today vs. waiting to buy in a year or two,” said Lashley. “I respect the intent to have less debt and pay down a mortgage as quickly as you can but the reality is most can’t save as fast as the market is appreciating. So by waiting to buy, it’s actually resulting in less purchasing power and it would seem less selection to choose from. It’s ironic but you may actually be able to save more money as a homeowner and pay down the mortgage quicker because you enjoy income tax credits.”
Consumers interested in learning more about the state of the housing market and mortgage industry are encouraged to attend a private event on either August 26th or August 27th. To sign up, click here.