Bainbridge Island

[tsgrayson]

I am in the military moving up to the Kitsap area. Are there good home values on Bainbridge or are they still inflated somewhat?

[perfectfire]

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You can make up the money by saving money.

[TJ_98370]

tsgrayson -
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Median sales prices are down 12% from last year in Kitsap County with nothing indicating a trend reversal in the near future. Being in the military, there is a good chance that you would be transferred within the next few years, right? Why take the unnecessary risk of taking a possible depreciation hit. I would recommend that you rent for awhile and check out the situation for yourself.
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[tsgrayson]

True but we want to keep this home and rent it out so we can come back when I get out.

[rose-colored-coolaid]

[TJ_98370]

tsgrayson -

It's difficult to advise someone on this issue. There are many considerations. It sounds like you have family and, despite rose-colored-coolaid's suggestion, it is is understood that military housing can sometimes be less than ideal and may not be an option for you.
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From a purely financial perspective, unless you are prepared to take a loss for the short term, I would not recommend buying any real estate in the Seattle area right now, unless you find something for 15% to 20% below neighborhood comps. If you do buy on Bainbridge and later transfer, do not expect to generate positive cash flow by renting your home out.
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The above is just my personal opinion. I also am in the local market, but because I truly expect to see some major depreciation, I do not expect to buy until sometime after the end of the decade. Housing depreciation is "sticky" and takes awhile to find equlibrium.
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There are other informed "regulars" and "lurkers" who visit this blog who should weigh in.......
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[tsgrayson]

Thanks for all the input so far.

[ira s]

tsgrayson,
In some parts of the USA you can buy a house and rent it out and have the rents cover the mortgage payments and even leave some extra, but in the Seattle area that's mostly not true, so if you bought a home on Bainbridge and rented it out the likelihood is that you'd be subsidizing it by several hundred dollars per month. It's also very unlikely that Bainbridge home prices will increase in the next year.
But yes,Bainbridge is a nice place with a great school district, and over the log haul it probably makes sense to own a home there. But is there any urgency to do it now?

[tsgrayson]

The reason for the rush is that I have to move soon.

[Hyperbola]

No offense, but you're repeating a lot of common real estate fallacies here.

I don't want to pay someone else's mortgage: Nobody likes doing that, but that's not what's happening here. If you rent from landlord X for $2000 a month, and X has to pay $3000 a month after tax benefits, insurance, maintenance, etc., to cover the cost of carrying the house, then even though you may feel like you're paying X's mortgage, in reality X is actually paying YOU a subsidy to pay his mortgage. So you are getting the house cheaper than it would have cost you to own it. If you save the difference, then financially speaking, your buying power will increase over time, just like an owner's would, and now you are NOT carrying the depreciation risk... X is.

At least we would be paying down the principle [sic]: Paying principal != building equity. If the value of the house falls faster than your principal is being paid down, you are still losing equity. Also, you need to factor in the equity you are throwing away by paying a higher carrying cost than a comparable rental.

I need to make up my losses: Meaningless. What equity you gained or lost in the past has no bearing on the best financial decision going forward. The money you lost is gone forever. It's not going to magically reappear especially for you over someone else in the same situation.

This does not mean that you shouldn't buy - there are lots of other factors. I am just pointing out some poor reasoning. My advice is to think about the following: What are your family's needs? What are your priorities? What actual value do you personally receive by owning your home instead of renting it? What do you plan to do if your new house also loses value and you are forced to move again? What rentals could you live in comparable to the houses you are looking to buy? What rentals could you live in up to the carrying cost of the houses you are looking to buy?

The bottom line is you need to convert all of these disorganized, emotional thoughts into something financially concrete. The better you can quantify all of these things, the more the decision becomes as simple as balancing a checkbook.

[perfectfire]

[ira s]

I'm not going to tell you not to buy a home on Bainbridge Island, but if you do, do whatever you can to make sure that the home you buy sells for considerably less than comparable properties, and just because a real estate agent tells you something is a good deal doesn't make it so.

[tsgrayson]

I am refering to the 50K loss as simply my illustration of the downturn in the market. I lost roughly 12% on my house. My logic is simply that the market is going down, and I might be able to come in at a lower price and attempt to make up the money I lost on the backend when the market eventually starts to turn around. We love the area and would really like to come back. If I just say forget it...I might be missing a chance to get a good deal when prices are lowering and when I hopefully come back to the area in 4 or so years...prices could be back up out of my price range.

[jon]

Wherever you move to you should rent for a few months at least before you buy. That way you have a much better idea of how to evaluate the prices you see. A price that looks good on a website may not be so good when you learn more about the areas. You will also be in a position to have the most important asset in a buyer's market: the ability to walk away. Even if you have to buy out the rest of a one year lease, that it is small compared to taking your time in getting a better deal.

Sellers know they are looking at a 1 year wait before they can sell their house. Use that to your advantage.

[TJ_98370]

tsgrayson –
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Housing depreciation has just started in the Seattle area. The recent national housing price run-up is unprecedented. No one knows how long the "correction" will last. If you buy now, you may be underwater for a long, long time.
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I assume you have been reading the blog postings by Tim on this website. You may also want to visit Eleua's blog . He is a bona-fide resident of Bainbridge and is more real estate "aware" than most IMO.
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You may want to check this out-
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Also Google "Japanese Real estate Bubble". You will find amongst the results:
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Something to think about, yes?
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