Not only did median home prices in King County fall from $435,000 in December 2007 to $375,000 in February, it’s possible to snag interest rates in the neighborhood of 4.5 percent and easier to find sellers willing to pay for inspection items—even in multiple-offer situations. An owner in West Seattle put one former rental property on the market for $359,000 early this year; 16 months earlier, comparable homes in the area were going for $379,000. A buyer offered $350,000, and the seller countered at $355,000, but the deal wasn’t done until he agreed to pay for a new $4,000 furnace.
“It’s a bitter pill to swallow for the sellers,” says the listing agent, Bill Reid, of John L. Scott Westwood. “But two years ago it was a bitter pill to swallow for the buyers who would see a house that they liked for $500,000 and offer $530,000 and waive everything and still not get it because they were competing with seven other people.”Realty Check
Now that’s all fine and good for buyers, but before you get the itch to dive into a deal just because it looks too good to pass up on paper, take a look at your own financial situation. “Someone who wants to buy because the interest rates and prices have dropped, they need to think of other reasons,” says Jillayne Schlicke, of the National Association of Mortgage Fiduciaries. In this economic climate, she warns, you need to be prepared for any financial eventuality. “Do you have cash reserves available to make those mortgage payments if something were to happen to you?” Or what if you lost your job, or worse, couldn’t work at all?
Matt Jensen, an agent with the Cascade Team, helped one family close on a $725,000 short sale in February but then watched another deal fall through later the same week. The would-be buyers, a growing family that needed more space than their four-bedroom Ballard home could provide, were set to close on a $545,000 property in Issaquah Highlands—until the husband got some bad news at work. His job was safe for the time being, but talk of salary cuts had started to swirl, so the family made the conservative play and walked away from the purchase.
What it comes down to, says Tim Ellis, editor of the real estate blog SeattleBubble.com, is making a responsible decision. “The advice that I would give at any time in the market is, if you can find a house that you can afford—and by ‘afford,’ I mean with a sane, safe mortgage—and that you’d be happy living in long term and that wouldn’t cause you extreme financial or emotional distress if the value of that house dropped considerably, then go for it.”