Open House Picks: Apartments

New York City is expensive. A million barely gets you in the door. You want cheap, there's a whole country out there. You want New York City? Be prepared to pay up.

Wait around for the bubble to burst, as you put it, and you will not see prices come down to whatever fantasy level you are waiting for.

Posted by: Anonymous at September 23, 2006 11:31 AM

Having lived in NYC in the late '80s, early 90s, I saw the bubble burst first hand and had friends who took significant losses on their apartments. While the price may not decrease 50% or more, it's clear a market correction is going to come eventually as it always does. And I say this as someone whose property is worth nearly 3 x what it was purchased for less than 5 years ago. I don't expect it to continue to be worth as much as it is right now.

Posted by: Anonymous at September 23, 2006 11:39 AM

Obviously true, my properties are worth over 3MM each. But my point is that a 50% drop is still over $1MM so whatever the previous poster is wishing for is unlikely.

Posted by: Anonymous at September 23, 2006 12:19 PM

Not so fast anon 12:19pm. I'm a property owner, and I think it's not unlikely that some properties somewhere in NYC will drop more than 50%. Where and what exactly, who knows?

Posted by: Anonymous at September 23, 2006 12:23 PM

I agree, this IS the low. Plus any drop more than 25% in a well established neighborhood like Park Slope would be more than just a bubble bursting, it would be a major recession and why would anyone wish for that? Secondly, there ARE a couple Park Slope co-ops listed right now that reflect a 10-20% drop in price from what they could have commanded in early 2006. Brownstoner didn't list them here, but they're out there. Anyone who is convinced prices will drop lower than $500K on a well-located co-op, will simply be paying rent for yet another year or two then paying even more to buy after that. At a higher mortgage rate, to boot. Because if the prices really did have to drop more than 25% in order to sell, most owners of properties in prime Park Slope will just hang onto them and wait to sell when the market picks back up. There'll be very low inventory to choose from.

Posted by: Anonymous at September 23, 2006 2:07 PM

To Anonymous 11:39 who lived in the City in the late 1980s and 1990s and saw the bubble burst first hand, let's look at what's different.

Then: stock market crashed in 1987, down 25% in 2 days. Now: stable to low growth market.

Then: nyc unemployment went rate from 5% to 10% in 5 years (87 to 92). Now: unemployment rate = 5% down from 8%+ 5 years ago.

Then: 1-year treasury rates at 8%-9%. Now: 5%.

Then: 3,000+ murders annually with crime driven by the crack epidemic. Now: 500+ murders annually.

Then: Gulf War. Now: Gulf War.

Oh well, not everything is better.

I moved to Brooklyn in 1983 and the period from then until the early 90s was not comparable to today. It is so much bettter now and that has shown up in real estate prices. Clearly the market is softer (and saner now), but there is no comparision to the late 80s early 90s when real estate did tank. The fundamentals now are still too good.

Posted by: Anonymous at September 23, 2006 3:12 PM

Anon 12:39 here - I think that some of those positive fundamentals have been driven by the booming property market. As prices soften and homeowners are unable to tap their homes for credit, the economy will slow down, unemployment will go up, and the housing market will soften/fall/crash yet again.

Posted by: Anonymous at September 23, 2006 4:09 PM

Anon 11:39 here - perhaps you are right, Anon 3:12, but it amazes me how many people assume property values will always go up. I remember looking at a studio in Brooklyn Heights for something like $90,000 in the late '80s, which was too expensive for me to buy. A few years later, you could buy a 1 bedroom for $65,000. I would bet we are not yet at a low, but hopefully, due to the reasons you mention, the fall won't be too hard. But the huge increase in prices in just a few years in some neighborhoods just isn't the norm.

Posted by: Anonymous at September 23, 2006 6:17 PM

3:12 poster here again.

Do not agree that the housing boom in NYC drove the local positive fundamentals. First, NYC is an anomaly. It is a renters city (something like 75%). For better or worse, participation in wealth created by increasing real estate values has been narrow. Second, while the housing boom did drive residential construction, NYC has commercial construction to pick up the slack now that residential real estate is soft. This is different than many parts of the country. NYC is going to see a large amount of commerical construction activity since commercial space is scarce right now. I know this for a fact since my business leases space and our lease is expiring. Our rent is tripling from when we signed the lease 10 years ago. If unemployment stays solid, so will housing.

All that said, poster at 4:09 is right. The huge price increases over the past few years isn't the norm. When I do my own financial planning, I guestimate annual house apprecitation for my house at 1%-3% over the next 10 years. At that appreciation rate, house values go up by 10%-35% with the increase in value not subject to capital gains. During that 10 year time you get the benefit of mortgage interest tax deductibility + a reasonable stable monthly housing payment (unlike rents which will climb faster than 1%-3% per year). Lastly, as an owner you control the property you live in, not some landlord. Still seems like owning is better than renting.

Posted by: Anonymous at September 23, 2006 7:54 PM

Those who are saying prices won't be rising as fast, that's certainly true. But just because rising prices have slowed (to return to normal) doesn't mean it's a "crash". I think those here who are trying to point that out to renters who are hoping to buy - it's not to be nasty, it's to be helpful. Because it could be a good idea to go ahead and buy now or within the next several months while sales have slowed and sellers are unsure of what's next. You could pick up a good deal if you find a very motivated seller who needs to sell before the end of 2006.

Posted by: Anonymous at September 24, 2006 3:15 PM

Now is a great time to buy. Interest rates are still at a very low point because people think the fed might lower rates further. But once they start tightening, and rates rise again, it'll be a tough time to sell and to buy. That's okay if you don't believe me. Just wait, I think a lot of us on here remember the many, many years when mortgage rates were in the double digits. I bought in the early '90's in Park Slope and things just sat and sat on the market for years because nobody could afford to sell for less than what they paid for a place and nobody could afford to buy until the rates went down. Also parts of Park Slope were truly scary after dark then, as they were in much of NYC. Now it really is safer, much more commercial activity in many parts of Bklyn where there was nothing to speak of after dusk. And many communities worked hard to get their local schools to improve. And so now people are paying more to live in these areas as a result.

Posted by: Anonymous at September 24, 2006 9:27 PM

um...interest rates weren't in double digits in the early 90's. i bought in park slope in 93 and our interest rate was 7 percent. Not that bad. Interest rates now are still historically low, despite the uptick...

Posted by: Anonymous at September 25, 2006 7:39 AM

Uh, the Co-ops are not projects. I live in the South Campus and can tell you they are not projects!

Posted by: Anonymous at September 27, 2006 9:21 PM