Rent or buy? What to know if you're moving to Seattle

Homeownership is considered the most direct path to building personal wealth and a significant part of the American dream. Along with this wealth comes the pride of ownership. Ownership gains you a piece of the neighborhood and a more permanent part of the collective environment.

With these piece-of-mind benefits, does it make financial sense to buy, or are you better off continuing to rent?

Sadly, there is no simple answer. Every situation is individual, requiring a balancing of all of the financial implications. Even with a complete economic evaluation, how do you value the peace of mind that your home is yours?

As mentioned, one of the most significant advantages of homeownership is that it can amount to one’s first and most considerable contribution to personal wealth.

In 2020, the median home price in the U.S. rose to $320,000. Compare this to a median home price in 2000 of only $119,600. Narrowing the region to the immediate Seattle area, the median home price in 2020 was nearly $800,000. Looking even closer at the city of Seattle, the average listing price of a single-family home was over $1M at the close of 2020. With less than a month’s inventory, the Seattle market is vibrant and does not appear to be slowing anytime soon. Indeed, the trend seems to be in place for another record year in 2021.

While all this looks incredibly good for someone who wants to acquire wealth, homeownership in Seattle does not come without some high costs.

At the top of the list of expenses are property taxes. While not nearly as high as in some states within the United States, they are still significant. If you own a home in Seattle valued at $750,000, you can expect to pay about $7,000 annually.

The next consideration is that of maintenance. Depending on the area where you purchase your home, you could be investing in a lifelong project. As cute as a mid-1920s home in Greenlake or on Queen Anne’s north side are, these can be expensive to maintain.

As with all investments, the actual realization of profit comes after the sale. Frequently, whatever increased value you enjoy becomes a significant part of your next, more expensive home. That is unless you’re moving to the sun and cashing in as part of a retirement plan.

Not yet mentioned are the associated costs of selling your home. If you are selling the same $750,000 home, the selling costs will typically exceed $40,000. Homeownership can be expensive.

At this point, with all the associated costs and the high price of entry, perhaps homeownership does not make sense. In some cases, this is true. For example, maybe your employment is based on a one or two-year contract. The combination of selling costs and potential maintenance may not pencil out.

Renting, with its fixed costs, has some advantage, not the least of which is when something breaks. Let’s say it's a holiday and the furnace breaks. All you have to do is call the owner or the property manager. The service technician comes out, and you are warm again without any unplanned expenses. These savings could be enough to help purchase a permanent home either here or in another desired area you plan on planting roots. Renting does have some advantages.

If only the decision to purchase a home or rent were straight forward. While in the short-term it appears as though renting is the way to go, over the long term buying has some significant advantages.

Not mentioned is the increases in equity over time compounded by the increases in property values. Let’s say you bought a home in 2000 for the national median and had been paying your 30-year mortgage uninterrupted since then. You would have quite a nest egg saved up. With today’s amazingly low-interest rates, you could pull money out to purchase a rental property or even use this to help subsidize university costs for your firstborn.

Generally, homeownership is a long-term investment that offers excellent stability.