Q: I’ve never owned a home. Should I buy now?

March 19, 2009 Published in the April 2009 issue of Seattle Met

True Story
Find a house first, and then set a date for the wedding. That was the game plan one young and engaged Capitol Hill couple agreed upon last fall when they started mapping out their future. Better to find a house now when prices were more affordable, their theory went, and keep saving for the ceremony. But with a combined yearly income of less than $150,000 and just a little more than $10,000 in the bank, putting 20 percent down on even a modestly priced house was going to be next to impossible for them in the near term. Then they learned that, based on their high credit score (approaching 800) and low debt-to-income ratio, they qualified for a Federal Housing Administration–backed loan, which would only require them to put down 3.5 percent. With $300,000 starter homes back in their sights, they started looking again.

Realty Check
First-time buyers in Seattle are enjoying a lot of the same benefits that move-up buyers have been treated to: lower prices and interest rates, along with increased leverage for negotiating with sellers who are motivated to sell. And part of that has to do with inventory. Months of supply, which real estate number crunchers crunch by dividing the total number of homes for sale by the number of pending sales at any given time, should be near six months in a stable market. But for large parts of King County, inventory was anywhere from 10 months in Enumclaw to two and a half years in Bellevue, east of I-405, as of last December. “Right now, inventory is far too high,” says Matthew Gardner, a Seattle-based land-use economist with Gardner-Johnson. “But I suggest that possibly in the middle part of the year, we should start seeing some stabilization as a function of the reduction of inventory levels.”

After months of searching, the Capitol Hill couple found a 1,350-square-foot, two-bedroom Lovell-style house north of Ballard, for $319,000. The owners had dropped the price by $30,000, and they agreed to pay $9,000 toward the buyers’ closing costs, which brought it closer to their $300,000 target. They closed in the middle of January, content with the investment, but got another surprise discount a month later when they found out about the $8,000 first-time homebuyer tax credit that made its way into February’s economic stimulus bill. (It was retroactive to any purchase made after the first of the year.)

Last Word
Wilson Realty Exchange agent Vicki Seelig met the young couple when she was teaching a first-time homebuyer education class sponsored by the Washington State Housing Finance Commission. “Homes in the first-time homebuyer price range are always going to be in high demand,” Seelig says. “But two years ago, if you found something for $250,000, you were competing for it with 80 other people. Now, there’s just more properties to choose from out there.”

TIP First-time buyer or not, if you’re buying a house now, you need to decide whether you’ve got the stomach to watch your new investment lose some value in the short term. The question you have to ask yourself, says Glenn Crellin, the director of the Washington Center for Real Estate Research, is “will you be willing to ride the market down a little bit, if the values decline, and then ride it back up?”

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