Better to Rent Than Buy in Brooklyn Now?
The rent vs. buy equation has changed again in places like Brooklyn, where home prices are now so high it might make more sense to rent, according to a story in The New York Times. In fact, the market turnaround may show we’re in a bubble that is going to crash soon, the story said:…
The rent vs. buy equation has changed again in places like Brooklyn, where home prices are now so high it might make more sense to rent, according to a story in The New York Times. In fact, the market turnaround may show we’re in a bubble that is going to crash soon, the story said:
An analysis by The New York Times finds that in the country’s most expensive places, including New York, the San Francisco Bay Area and Los Angeles, buying a home again looks like a perilous investment, based on the relationship between their prices and rents or incomes. And in a longer list of areas, including Boston, Miami and Washington, prices have risen enough that buying is no longer the bargain it looked to be a few years ago.
…But across much of California and the Northeast, prices are now high enough that the costs of owning a home – property taxes, repairs, fees to real-estate agents and mortgage interest – may outweigh the financial benefits, including the tax break.
It is the latest change in a yo-yo pattern over the past decade. From 2004 to 2006, the math overwhelmingly favored renting rather than buying across most of the country, even as many Americans mistakenly decided that home prices could never fall. From 2009 to 2011, buying was an extraordinary deal in most of the country. Even the markets that have experienced huge price increases are far from the clear-cut bubble conditions of the mid-2000s, but they’re inching closer with every bidding war.
This viewpoint comes as a surprise to us: Even as housing prices in Brooklyn have risen steeply in the last six months or so, so have rents — or so it seems to us.
But an analyst at Moody’s sees it differently: “A lot of these coastal markets look overvalued compared to rents. In these markets, it seems generally more attractive to rent than to buy, even as the national market is broadly well balanced.”
If you are considering a house that costs $500,000, it might make more sense to rent if a similar place is available for $1,956 a month or less, said the Times. Do you agree?
Rent or Buy? The Math Is Changing in the Northeast and Coastal California [NY Times]
I know it’s just a financial exercise and debate, but to me the big reason for buying were the intangibles. The pride and freedom of ownership. No landlord over you. Making rennovations as you wish in order to make it YOUR home, knowing its adding to the value. Feeling more ‘settled’ and stable. And on and on.
I stopped reading after it said the analysis was done based on data from Zillow. The zillow rental price on my place is 25% of the true market rental rate, whereas the purchase estimate is only slightly undervalued. Perhaps it’s more accurate elsewhere in the country, but the data is close to worthless n Brooklyn.
Rent & high income taxes while investing the down payment and closing cost cash + paying rent and brokers fees and moving costs every couple of years, because in New York, unless you have a rent stabilized apartment….you will be moving every couple of years! Versus…Buying? Long term low interest rates, housing cost increases are under your control, owners get income tax deductions ( the only tax deductions for normal working people) and if you do choose ( I stress you choose) to move every couple of years, any profit you make on your home is TAX FREE. ( up to $250,000 as a single $500,000 as a couple)
A House in Fort Greene 25 years ago ( 4 sty 2 fam Carlton between Lafayette & Greene $300,000 today $3,000,000) with many tax deductions & rent increases from your tenant along the way.
The New York market cannot be compared to the National Market. There is always a back up rental market (in New York) for when the Banks go out of the mortgage market and you cannot sell for a couple of years! ie: 2009-2012 and it always comes back stronger each time.
This is not a bubble, the Banks are only just getting back in the mortgage market….as they loosen the reigns the New York market still has a way to go…before the Feds put the breaks on again…and then you rent for awhile and rents go even higher. The cycle just keeps going and going….play the game right and you make a fortune…. don’t buy and be whiner….. listen to all the people whining now….”I could have bought this five years ago for 750…now its 2.5 mill!!”
Buying in New York will always trump renting a home.
Seems like it was talking most about houses. I re-ran the numbers for the co-op I just bought this year, and I’m still coming out ahead. Rents in Clinton Hill are still higher than purchase prices. However, I can believe that a $500,000 home in the suburbs, with requisite NJ or Nassau property taxes, might end up looking like a bad deal if there’s a price correction.
Um, the same poster who said house prices would tank in late 2010. That bet worked out really well.
🙁
This comment resonates with me in the broad sense. But my unique situation, where I own an apt but will soon need to upsize, is a little different, in that unless things change, it seems to make most sense to hold onto what I own, rent it out, and rent a larger place for my family.
Agreed. I think its almost like calculating taxes, it’s not a one-size fits all type of analysis. A lot of non-quantifiable aspects go into purchasing versus renting.
This invest versus buy a home analysis also does not take into account risk tolerance and what you would ACTUALLY do if you had 500k in cash – would you really invest all of your 500k in the S&P 500? If that’s not your actual next available/realistic alternative or opportunity cost, the analysis doesn’t matter.