I often tell the story, when I’m meeting with first time homebuyers who are a bit discouraged with today’s home prices, about my first home. We were renting a nice apartment in Kent when a builder had left a flyer on our car promoting that if we could afford $X in rent, then we could afford $X of a brand new house! WOW! I couldn’t believe it…but my wheels were turning.
I began picking up the Homes & Land magazines and before you know it, we had landed with a real estate agent and were looking at homes…with that bright and shiny brand new home in our minds. In reality, we qualified for a 900 square foot older rambler with 3 bedrooms and 1 bathroom…and we pounced on it for about $65,000. In 1989, our interest rate was in the 11% range. My commute out of NE Tacoma to downtown Seattle was horrendous! Even back then.
We lived there about one year and we were experiencing a market similiar to what we have lately in our area. I began to panick that we would be "trapped" in that house forever. Although I was grateful to own a home, it was not where I wanted to raise our future family. My (then) husband and I discussed matters and agreed to wait 5 years to move. The next day, when he was at work, I bought a house…subject to his approval, of course! He wasn’t very happy when I called him at work to tell him what I had done. He forgave me when he learned that our house we had purchased a year ago was worth $90,000!
We bought our second home. This one was new construction in southwest Federal Way. The plat was marketed as "The Affordable Street of Dreams". This photo is not of our second home, but is in the neighborhood (Madrona Meadows…there were no Madrona trees in the plat…btw) and is similiar in size and age.
I thought I would provide you with the sales history on our former home in Madrona Meadows (these figures are not for the home in the photo):
- We purchased July 1990 for $124,495
- We sold in April 1993 for $134,900 (approx. 7.5% appreciation over 3 years)
- Sold again in July 2003 for $215,000 (approx. 9% appreciation in 10 years)
- Last sold in March 2006 for $303,000 (approx 14% appreciation in 3 years)
Owning a home can be the best savings plan a person can have. In 16 years, the property more than doubled in value (241%), provided income tax benefits, not to mention shelter! Back in 1990 when we purchased in Madrona Meadows, there was "bubble talk" as well and in our area, we have yet to see real estate take a nose dive. It may simmer or slow down a bit, I certainly would not recommend that potential buyers sit on sidelines waiting for that event. Our local economy is too strong for that to happen anytime soon. In addition, "first time" homes are great purchases because there will always be a market for them.