Seattle Real Estate: A Hot Market or a "Terrible Idea"?

Zillow recently created a "10 Best Places to Invest" list--with an emphasis on "invest," not "live"--but Business Insider chose to play up the thirteen worst real estate investment areas: Spokane is eighth-worst, Seattle fifth-worst, and Portland fourth. Key factors were price-to-income ratio, home value declines, and the percentage of foreclosure sales.

In Seattle's case, the price-to-income ratio is 117 percent above the norm, home values are down 11.6 percent year-over-year, and foreclosures are 17 percent of all resales. (Seattle Bubble has foreclosure shopping tips for you.) Not grim enough? Trulia just announced "Seattle is second worst city to buy versus rent," reports Seattlepi.com: "Specifically, the median cost to buy a two-bedroom apartment, condominium or townhouse in Seattle is 24 times the median annual rental cost for a similar home."

But people are buying, sometimes in large quantities. Take a look at Estately's "10 Most Expensive Homes Sold in King County" last year. #1 is a Hunts Point behemoth, with 8,300 square feet, that sold for almost $11.3 million. Redin has its previous sale price, in 2001, as $5.75 million, so as an investment, that didn't seem to pan out too badly. (#2 sold for $9.1 million, after previously fetching $15 million in 2006, so caveat millionaire.)

Meanwhile, December 2010 showed a surprising surge in King County closed sales. How much of a surge, and what drove it, is up for debate, but one thing is clear--more closed sales than expected isn't bad news. Yet Seattle was more or less unaffected by the bump. Redfin shows Seattle sales at plus--or-minus two percent from November (depending on month-to-month or weekday-to-weekday comparison). And, year over year, Seattle sales were down 14.5 percent. 

"Good Inventory is Hard to Find," notes Redfin in their monthly roundup. Between sales and homes taken off the market, inventory in Seattle condos and houses dropped 17 and 18 percent, respectively, month-to-month. Even through mid-January, inventory remained stagnant. Go north (Seattle), young housebuyer, advises Seattle Bubble. And watch out for that volatility.