Can the Seattle Market keep going up!?

Question

Hello,

I've spent a lot of time trying to get educated on real estate investing over the last year. It seems almost all investor advice focuses on cash flow. I get that, but I also recognize I've made a killing in appreciation from owning a SFH in Kirkland, WA. We just put our home on the market and my plan is to take the equity and convert it to a market with much better cash flow. However, the initial response (number and size of offers are very high) is making me 2nd guess my strategy. What if Seattle is the next San Francisco? How likely is real estate here to keep climbing at crazy appreciation rates? My ROI models hinge on appreciation here so that's a pretty big variable that's hard to predict! Any opinions or advice would be appreciated!

Thanks!

Sam Van Horebeek · Answer

This is less important than understanding local demand but for what it is worth, Seattle has been a favorite from what we can see here in China.  We continue to see inquiries from from both investors and families here in Asia.  Obviously, there are some challenges now with Foreign Exchange controls but the intent to buy condos and houses in that market is strong so more to come for Seattle.

Rudy Manna · Answer

I live in Seattle area, and from what I see, I am also strongly bullish in the Seattle market. Per anecdotes I keep hearing, there are still 15 offers per houses for  every somewhat good house. typical 4 bed/3bath new constructions in areas like Bothell and Shoreline are going for ~$1M. Condos in South Lake union are just shy of a million. I dont think this is a bubble. Seattle is  becoming the hub of so many areas of Technology - Machine Learning, Cloud Computing, Drones to name a few. On top of that, with water and mountain on two sides, there are so much land to build.

On another note, a chunk of bigger pocket investors tend to believe the you should invest for cashflow, not appreciation. That is, frankly foolish. You can always predict long term appreciation. A vibrant city like Seattle, Boulder, or even NY will always beat out a dying mid west city in terms of long term appreciation, liquidity in case you need to sell, and rent increase. A good investment is always a balance between appreciation and cash flow.

Remus Phillips · Answer

I'm more of an appreciation guy myself, @Denny Hancock.  I actually am looking in the Seattle/Olympia area.  I really think the prices of houses in that area is going to boom in the next 5-7 years.

Denny Hancock · Answer

Thanks Rudy & Christian. In general, i'm bullish on the Seattle market as well for the same reasons you mentioned. That's why i'm happily paying my mortgage... for now. :)

Christian Wathne · Answer

I recently moved to the SF bay area from Bellevue/Seattle for work reasons, but am continuing to invest in the seattle real estate market. I'm incredibly bullish on seattle prices.

In addition to the Chinese, so many SF bay area workers (who make a lot of money) see seattle as having a much better quality of life per dollar compared to the bay area where modest 3br/2ba single family homes start around a million dollars. Amazon and alot of other tech is bringing very high paid workers from all over the world to seattle in huge numbers. People moving from the bay area see 700-900k homes as a steal of a deal in Seattle.

Last summer when I listed my recently renovated Bellevue 4br/2ba sfh for rent at what I thought was an above market price I was flooded with inquiries and showings from people from new york / australia / the uk / sf bay area, who were recruited by amazon / microsoft / other smaller tech companies.

The above explains the demand side. On the supply side, look at single family home build starts; there's hardly anything being built within 45minutes of seattle/bellevue.

Until inventory or new construction picks up dramatically I'll stay bullish.

Denny Hancock · Answer

Thanks Amy! I'm feeling the same way.

Amy Greger · Answer

We listed a First Hill condo for 330K last month.  Had 15 offers, and based on the names, at least 6 were Chinese mostly cash offers. Sold for 370K cash with 35K Ernest money.  Great seller's market, but I'm not putting the proceeds back in Seattle.  Can't afford anything decent.  I am cashing out and buying in NW Indiana for cash flow.

Like @Lane Kawaoka said, can't eat appreciation. :)

Denny Hancock · Answer

Thanks a lot Troy, Sam, & Lane. I appreciate your insights! Sam, I just hosted a few open houses and I can say that China was well represented... but so was every other country I've heard of and more! Seattle is getting so diverse! Lane, you got me thinking about selling in the first place. ;) Still feeling confident (enough) about the decision to sell and reinvest in a better cash flow market. I wish I had enough money to do both. :)

Troy MacDonald · Answer

Hi Denny,

I'll give you my opinion as I am in a similar boat (SFR in Bothell). I think relying on appreciation is sketchy. It is possible to speculate that the Seattle area will continue up due to the in flux of high paying tech jobs, low inventory, and foreign investors that see Seattle as a cheaper alternative to other high flying markets. Personally, I think these trends will continue for a little bit, but without a stable portfolio to fall back on, I won't be relying on appreciation in the near future. My choice would be to go after cash flow and limit my downside risk, but this is coming from an expectant father so maybe I am playing it too safe! Interested in other thoughts!

Cheers

Can the Seattle Market keep going up!?

Most Popular Reply