My experience buying at the Meritage

So why did I buy at the Meritage?

For the past two years I’d been passively watching the Seattle real estate market but I’d been a big believer in the imminent bursting of the Seattle real estate bubble so I didn’t pay too much attention. Interest rates were going up, incomes at the local tech companies have been flat, zoning changes have resulted in more supply, rental prices are low, foreclosures are raising… However, while sales have slowed, the market is still hot, properties have continued to appreciate, the local tech companies have continued to expand, some believe prices will go even higher, interest rates are likely plateauing,…

I definitely should have bought two years ago (a friend bought a 2 bed/2 bath two years ago and cashed out recently for $100,000 profit). But better late than never, right? (I swear I never said that when buying Pets.com stock at it’s peak!).

And so I started to watch more closely. Ideally I wanted a 700 sq ft condo on Capitol Hill for around $200,000 that was in need of updating. I watched for a few months and found that very few of these came on the market. At the same time the Meritage went from being an empty lot to a construction site. It then wasn’t long before a sign went up and I had a number to call for more information.

That’s when I started talking to Javila the onsite agent. I first inquired about buying a ‘shell’ (empty unit with no walls, no finishes, etc.) but I found out that buying shells is very uncommon in Seattle and the developer wasn’t willing to entertain the option. Then with the first day of sales looming and no $200,000 ghetto 700 square foot condos on the market I decided to borrow the earnest money (5%) from friends (they’re very risk averse and so I offered them a few points above what they were getting in their savings accounts) in order to purchase a unit at the Meritage as a hedge against finding what I was really looking for. I figured that given how people involved in the Braeburn pre-sale made out I wouldn’t have a hard time flipping the unit, if necessary, when it came time to close.

At the time I was looking at the Meritage as a hedge there wasn’t much else on the market on Capitol Hill so while the Meritage really lacked what I wanted in architecture and interior design it had a great location. What’s great about the location? Firstly, it’s equi-distant from Broadway and the Pike-Pine corridor, the two happening parts of the Hill. Secondly, it’s two blocks from the 545 bus stop which is the second last stop for the 545 before it heads to Microsoft. Thirdly, it’s just blocks from the I-5 freeway making it easy to get to Microsoft via either the 90 or 520 bridges.

What don’t I like about the architecture and interiors? Where do I start? :) The fundamental issue is that I’m a concrete+glass+steel+LEED kind of guy while Meritage is all homey feeling and not LEED. …I need a place that not just I can call home but where my Tizio lamp and DWR furniture fit in too. I want a space I can literally throw a bucket of blue paint at the wall and call done. Not somewhere where I’m concerned about whether the beige carpet matches a traditionalist couch. But more specifically, it bugs me that the bathroom floors aren’t tiled, no stone or tile counters for the bathroom, they used juilette balconies instead of putting on real balconies (and they totally could of added balconies between the 736 sq ft one bedroom units facing west), no ability to custom the interiors beyond picking one of three color schemes and a few upgrades, wood construction, no common area amenities, etc.

So without really thinking I’d move in I retained the help of a real estate agent (primarily because, in general, I worry the on-site agent is more worried about the developer then they’d be worried about me) and on the opening day of sales I picked a unit (#504), talked to the onsite lender to ensure I’d qualify for the price (he put my income into his calculator multiple it by some number and said yes), signed the paperwork and put 5% down (regular old cheque cashed a week or so later).

Funny enough, that weekend I then went through the sales offices for all the other developments on the market at the time (Mosler, Trio, The Parc, Olive 8, Cosmo, Canal,…) and was only really impressed by Mosler (though I couldn’t afford Olive 8/Cosmo and they were mostly sold out). But I wasn’t too thrilled about the Mosler location (I like Belltown, but don’t think it’d be a good place to live).

Some folks have inquired about what I did for financing… Meritage has a preferred lender, Wells Fargo, who is offering buyers the ability to lock in financing at today’s rates with one rate adjustment before close. I realize rates have gone up since I closed, but I have yet to make a decision on financing. This is for two reasons, both only half thought through. Firstly, I might not move in, and if I do, it won’t be for long. Secondly, while rates might uptick .25% at the next fed meeting in June, mortage rates by next Febuary are likely to go down. While I could get some guarantee by locking in today, I’d rather have banks and brokers competing for my business at the market rates when I’m ready to move in. Thirdly, I haven’t decided how much I’m putting down (this is really dependent on whether I decide to sell my house in Canada or not). (Having taken a few courses in economics is probably more a liability than an asset in playing the interest rate game (but hey, it’s only money and I bought a bit less than I could afford)).

So where am I at today with the Meritage being my hedge against not finding a cheap place to renovate? I’m not as aggressively looking for that cheap place like I was initially. Now, my plan is to buy pre-sale at Veer or Rollin or Brix and live in the Meritage for a year until whatever I buy is built.

Am I still worried about a bubble? Not in the downtown core condo market. Demand is strong, supply is constrained. There’s still a good couple years of growth available.