Here at Cobb & Associates, part of our job is to keep up-to-date with the various markets in which we operate. This is why we spend time perusing market data on places such as Everett, Mukilteo, and so forth. We need to look at market data so we can have a sense of what’s happening and the most likely trajectory for these different areas. This allows us to offer good counsel to clients and also improves our ability to negotiate prices. Remember, when it comes to real estate, much of the value of a given property isn’t intrinsic, but is determined based on what others are willing to pay. And what others are willing to pay changes over time, and in some cases can even change very rapidly.
Other markets, like memorabilia, operate in a similar way. Famously, Muhammed Ali’s boxing trunks from the so-called “Fight of the Century” against Joe Frazier sold for $150,000 at auction. Does this mean that those trunks were “worth” $150,000 based on the materials or function? Of course not. They were worth $150,000 because someone was willing to pay $150,000 for them, and this willingness was largely a result of what others were willing to pay. When you put a house on the market, what you are really doing is putting it up for auction, in a sense, and its value is based on how desirable it is in the eyes of prospective buyers.
Today, we’re going to look at the decision to buy vs. rent in the great city of Edmonds, our hometown. This decision has to be informed by what’s happening in the Edmonds market. We will look at median home values and also average rents. The decision to buy vs. rent will be based on a whole range of things, but two things which have to figure in the discussion are median values and average rents. Let’s look at these numbers.
Buying in Edmonds
As of August 31, 2019, the median home value in the city of Edmonds is about $603,300, according to Zillow. The market is listed as “neutral,” and so it can’t really be classified as being a market favoring either buyers or sellers at the moment. Given the neutral state of the market, the decision to buy vs. rent has to hinge on the median home value to a degree. $603,000 is lower than the median for the city of Seattle, but it is certainly not a low figure in an absolute sense. By comparison to the national median, $603,300 is quite high. If you’re looking to put down 20% on an Edmonds home, and 20% is customary, then you’ll be putting down a sum of $120,660. That is not a small amount of money. And, if you put down $120,660 on a median value property in Edmonds, you’ll be financing $482,640. If you obtain a 30 year fixed-rate mortgage, you’ll be looking at a monthly payment of about $2,304, assuming an interest rate of 4%.
How do these numbers compare to average rents in Edmonds? Let’s take a look.
Renting in Edmonds
According to Rent Jungle, as of April, 2019, the average rent for a 1 bedroom apartment in the city of Edmonds, WA, was $1,292. The average rent for a 2 bedroom apartment in Edmonds was $1,551. Again, as with median home values, both of these figures are considerably lower than the corresponding figures for average rents in the city of Seattle. Right away, we can see that both of these figures are quite a bit lower than the monthly payment on a median value home after putting down 20% in Edmonds. Despite this higher payment, if were making an argument in favor of buying, we would emphasize the fact that buyers build equity in their homes. But, a counter argument to that argument would be that the money saved from paying lower rents could be used to grow the renter’s wealth in a way which outpaces the wealth grown by building equity. With sufficient expertise, for instance, the renter could take the additional money saved from renting and invest in the stock market, bond market, gold, or other investment vehicle.
Financially, it’s possible to make a case for both buying and renting. Ultimately, the decision will depend not just on the financial data and market projections but also on a given person’s long-term goals. Renting is good for someone who needs to be able to pack up and move on a dime; this might be a good option for a young professional who is likely to transfer or change jobs between cities, for instance. Buying is a good option for those looking to plant firm roots in a certain area. This makes buying a good option for those looking to start a family, for instance. In the end, financial data should inform your decision, but other factors need to be considered too.