Last Week's Biggest Sales

Prospect Heights Rocks!
I love all of you nay-sayers who constantly say that nothing in Prospect Heights is worth or sells for more than $1M. Next time a Prospect Heights house is listed at $1.8M maybe you will believe in the value………

Posted by: guest at June 25, 2008 10:39 AM

what a good deal for the Boreum Hill house!

Posted by: guest at June 25, 2008 10:42 AM

lookie here over asking for PH. Now that's what im talking about!

Posted by: guest at June 25, 2008 10:51 AM

1.8 for a 3 story. Was it extra wide or something?

Posted by: guest at June 25, 2008 10:56 AM

all I care about is studios falling back down into the 200k range and 1beds in the 300k range.

one can only dream

Posted by: guest at June 25, 2008 11:01 AM

PH house was 1) a one-family and 2) in move-in condition and 3) with a sweet garden. Those things are a rarity (trust me, I've been looking), and absolutely command premium $psf. Add to that the house is super cute, and on a nice block in an area that is getting nicer every day...I'm not surprised it went for what it did. (Though I wish it hadn't, cuz now the comps are that much higher and I can't afford it!)

Posted by: guest at June 25, 2008 11:04 AM

So 3 bedrooms in Park Slope go for 1.4 million and up now??

Posted by: guest at June 25, 2008 11:14 AM

11:01, 1 bedrooms don't cost in the 300's in most cities in the US (Chicago, Seattle, Baltimore, DC, San Diego, San Francisco, Portland, Boston, St. Louis, Kansas City, Miami). You think they should cost that much in one of the best cities in the world?? Is there no premium for NYC being one of the capitals of the planet?

Posted by: guest at June 25, 2008 11:15 AM

"PH house was 1) a one-family and 2) in move-in condition and 3) with a sweet garden."

Prospect Heights house has kitchens on the garden and parlor floors so it may be a legal 1 family, but was used as a 2. That means it is NOT move in ready for a 1 family.

It looks from the floor plan that it's not just a 3 story, but also narrow.

I like PH, but given it's not a full sized house I'd say someone overpaid.

Posted by: guest at June 25, 2008 11:15 AM

"1.8 for a 3 story. Was it extra wide or something?"

And it's close to Washington (not quite certified gentrified). Hat off to the sellers. Good luck new owners.

Posted by: guest at June 25, 2008 11:15 AM

Boerum Hill house is mad sweet. What a great neighborhood. I'm surprised they didn't get well over 2mm for that house. I'm in process of buying a 2br in Boerum Hill. I close next week. It's on Atlantic. Can't wait. Love the area

Posted by: guest at June 25, 2008 11:18 AM

No, the typical 3br in PS does NOT go for 1.4 million and up. There are certainly small 3BR's which command far less. Size matters so consider price per square foot, along with things like outdoor space, level of renovation, monthly charges etc. If anything, these numbers show me that brokers/sellers have been overreaching with their prices since both 3BRs went for significantly less than originally asked for.

The Boerum Hill house is very big, so that price does not seem very high. As for PH, well, this hit Open House picks just before Bear Sterns imploded - market has definitely gotten gloomier/more cautious since. Brownstoner keep featuring this, it is interesting to track the steady erosion of prices. Now over as is definitely a rare exception, not the rule (a big shift from years past), and closing prices are often well under 10% below initial ask, and growing.

Posted by: guest at June 25, 2008 11:19 AM

Yet another PH home that has sold, in this case for well above the asking price and approaching the 2M figure.

Where are all of the DDDB people who love to crow about the Atlantic Yards effect?

Posted by: guest at June 25, 2008 11:20 AM

Two 3 bedrooms selling for 1.4 million shows you what?

It shows me that the market is a lot healthier here than most people on this blog claim it is.

You do realize that it doesn't matter if the brokers/sellers asked 4 million for those apartments, but that 1.4 million for a 3 bedroom is still a VERY healthy price for a place in Park Slope. I'm shocked at those prices, when that's about double what I paid for my entire North Slope brownstone about 12 years ago.

Posted by: guest at June 25, 2008 11:23 AM

http://www.nytimes.com/2008/06/25/business/25exurbs.html?hp

GREAT article.

Posted by: guest at June 25, 2008 11:23 AM

$1.4m is roughly equivalent to $8000 monthly rent. Why does this make sense?

Posted by: guest at June 25, 2008 11:31 AM

The number of people who can afford 1.4 million is about 5 times the number who can afford 2 million. How likely is it that these buyers will be able to sell for a profit?

Posted by: guest at June 25, 2008 11:32 AM

11:23 -- how much gas do you need to burn to cover the cost difference between Park Slope and West Orange?

Posted by: guest at June 25, 2008 11:34 AM

This is the Atlantic Yards effect. This is what happens when everyone finds out AY won't happen the way it was initially planned to. Now all the houses in PH are worth more than they were in the fall while everywhere else they're worth less.

Posted by: guest at June 25, 2008 11:34 AM

"$1.4m is roughly equivalent to $8000 monthly rent. Why does this make sense?"

Because you don't have to pay that rent forever. Once the mortgage is gone you'll be living rent free so to speak.

Posted by: guest at June 25, 2008 11:36 AM

11:23 - that article has been posted about 3 times. These 3 Bedrooms are very large, almost as big as some of the smaller houses in the area (i.e. the 16 x 40 variety). So I don't think these are in any way typical of 3 BRs - they are more like house alternatives. Also, one had parking! For every healthy sale that Brownstoner posts, there are plenty of others going way under ask, or lingering. Brownstoner depends on realtors to advertise and fuel his site, so there is a built in bias towards the perspective the realtors may like. Not to say the market is tanking or that there aren't occasionally higher prices paid, but the direction of the overall market right now is down. That said, the market got SOOOO high in the last few years that yes, prices are still plenty high so owners should not fear selling. It's just that one cannot necessarily expect automatically get double the price one paid a few years ago, which is what a lot of brokers/sellers are aiming for. Price appreciation has basically stopped, and if anything, is ticking downwards for the next year or so, gas crisis or no...

Posted by: guest at June 25, 2008 11:36 AM

"11:23 -- how much gas do you need to burn to cover the cost difference between Park Slope and West Orange? "

About 1000 gallons per year.

And your soul.

Posted by: guest at June 25, 2008 11:38 AM

Brownstoner - why you don't feature 3BR's that are more typical, in the 1100-1200 sf range? These are both 1800 sf +. The smaller ones have much lower prices than these, believe me, and much more typical of PS. These 3BR's are an anomaly, and went for well below initial ask anyway. So yes, market is still healthy in that sellers are still making out just fine, but they have to see the new reality which is that they can't ask for the sky and get it. Prices are calming down.

Posted by: guest at June 25, 2008 11:40 AM

11:36 - but 1.4 million doesn't make sense if you can wait a year and get the same place for 1.3. This is what is happening to a lot of apts - check Streeteasy. These listings are a case in point.

Posted by: guest at June 25, 2008 11:41 AM

11.36 - No you won't mate. You'll be paying property taxes and property insurance.

Posted by: guest at June 25, 2008 11:42 AM

Nice little dance, 11:34. In the past, you all used the arena as the main argument that PH would become a hellhole of parking lots, traffic, rising asthma rates, garbage, chain stores, and loud, puking sports fans. Last time I checked, the arena remained the center of AY, yet property values in PH continue to hold steady or rise.

Posted by: guest at June 25, 2008 11:45 AM

Well considering I rent with my family one of the 3 bedrooms at 70 8th Avenue and we pay $6400 a month, I'm really not so sure it's better to rent than to buy. Even now. We only rented because we moved from out of state and weren't sure we would love it, but it turns out that we are absolutely IN LOVE with Park Slope so we've started to look around a little bit. We are finding prices to be firmly holding steady, if not increasing slightly in the areas of Park Slope where we are looking (North, nothing south of 3rd Street and mainly between 6th Ave and Prospect Park).

Posted by: guest at June 25, 2008 11:46 AM

1.4 mil with 295 maint which includes parking.

about a million dollars outside of anything I will ever be able to afford but seems pretty awesome.

Posted by: guest at June 25, 2008 11:47 AM

The reality is, more and more potential buyers are seeing this as a moment when renting makes more sense than buying, since they are waiting out the market. Not only is renting cheaper right now, but the risk in losing equity if you overpay is a growing concern when market signs point to better deals in the next year or so. We are in this camp. We sold a few months ago, just before the real estate news got decidedly gloomier. Sale motivated by school, as well as timing - we always knew we'd sell eventually and trade up, and time seemed right. Almost every single broker I've spoken to concurs and admits that coop/condo market is starting to suffer. Now, we see listing after listing lowering its price, or lingering on the market. Not that there aren't the occasional bidding wars for well-priced properties but it's getting rarer and rarer. I think we're in a moment of stalemate between buyers and sellers, but some sellers will not be able to wait it out - divorce, death, relocation continue and people need to sell. We on the other hand, have a lovely, economical rental in prime Bklyn where we can happily wait it out while we wait for the right place at the right price -- and we are seeing more of these starting to come on the market, and seeing more sellers forced to be flexible. And they should complain - prices are still SO much higher than what anyone paid 5-6 years ago, and I doubt will tank to those levels.

Posted by: guest at June 25, 2008 11:49 AM

No, but prices could tank to 2005 levels - I think sellers are wise to sell while the getting's good.

Posted by: guest at June 25, 2008 11:54 AM

Saw on the news last night that prices are down more than 8% in the NY metropolitan area.

Posted by: guest at June 25, 2008 11:54 AM

Brownstoner,

What happened to the morning after posting discussing Sunday's open houses? That feature should happen every monday.

Posted by: guest at June 25, 2008 11:57 AM

I think that most of you who claim to be waiting for "bottom" will miss it and before you blink the market will have recuperated, you won't know what hit you and you'll be renting till you're on your deathbed. These things have a way of sneaking up on you, and there is no possible way to know that if a year from now prices will be down another 8% (although I don't think that number is accurate in Manhattan or Bstone Brooklyn) prices could be flat, or they could be up 4%. You don't know. Since everyone I talk to who lives outside a city right now is thinking seriously about moving closer to one with the heating and gas bills, I would not be suprised if NYC continues to fare well in all of this. People are terrified of having to spend the rest of their lives with 5$ and up gas.

Posted by: guest at June 25, 2008 12:02 PM

Actually, I know plenty of people who are still moving OUT Of the city since prices are so much more attractive there, and there are plenty of great commuter public transportation options in NYC metropolitan area.

Re: market being "bad" - the problem is, sellers/brokers are still pricing things as if the market is a continuation of the last 5 years - so in other words, asking prices are not coming down much - it's **closing prices** that are finally yielding to reality. We are not the dreaded "bitter renters" since we owned until a few months ago, and we are actively looking right now, but my point is that we are not going to buy something overpriced when we see many price cuts. If a seller is flexible/negotiable with the still-unrealistic asking prices, we will buy. Until then, we will keep renting. So we're not "waiting" for market to "bottom out" but there is a reality that prices are often unrealistic these days, and we have no problem waiting for a more realistic price since we see more properties taking a long time to sell and or finally selling at a much lower price than ask.

Posted by: guest at June 25, 2008 12:08 PM

I'm amazed how these thread always turn into a complete denial that prices can possibly go down. People, 15-20 years ago, prices were extremely frothy and then **tanked**. Yes, variables are very different now, but markets are cyclical, and why is it impossible that prices may go go down a bit? They are historically much higher than ever by most measures - Case/Schiller, rent/own ratio, salary/housing costs, etc. Wall Street is suffering, the economy is weak, there's a lot of uncertainty, and buyers are increasingly skeptical.

Posted by: guest at June 25, 2008 12:11 PM

"asking prices are not coming down much - it's **closing prices** that are finally yielding to reality"

Um, did you see the #1 listing? That's $125k OVER asking and that's not the only bidding war being reported recently in PH.

Posted by: guest at June 25, 2008 12:15 PM

where in this thread is anyone completely denying that prices can possibly go down? no. some people are saying that they don't think prices will **tank** not that they don't think they may continue to "go down a bit." and others are saying that buyers looking to time the market may miss out. both fairly debatable points. what's your problem with that? you just hope everyone, especially sellers, give up and walk away?

Posted by: guest at June 25, 2008 12:20 PM

Bidding wars are exception not the rule. Not denying they cannot happen, but increasingly rare. Sellers don't have to give up and walk away just decide whether to accept a lower offer - we've had numerous brokers tell us to throw out offers that are below ask, and said sellers are getting increasingly flexible. Again, PH house went on market in early March - things have gotten more pessimistic since. We're not looking to time the market - we're very actively looking but what we see is more flexibility is becoming the rule, and people who need to sell fast have to be especially negotiable. They still will do just fine, given how high prices ran up in last 5 years. As long as they bought more than 3-4 years ago, chances are they'll make healthy profit. I challenge anyone to show that prices are continuing to go UP now overall - things are holding steady at best, softening is most likely, significant decreases possible.

Posted by: guest at June 25, 2008 12:26 PM

12:15 - Um, did you see listing #4, which closed almost 200K UNDER ask? This is becoming more common...

Posted by: guest at June 25, 2008 12:28 PM

11:40 -
I just sold my small 3 BR (1200 sq. ft) for just under 900K, FSBO. There are a few of these smaller 3 BR on the market in the 850-920K range (this is in Park Slope, around the name streets). I found that this market was strong for young families wanting to be in certain school zones and wanting 3 BR and some outdoor space, but not able to pay the super high prices or buy a brownstone. We had a bidding war and it went for over asking.

Posted by: guest at June 25, 2008 12:28 PM

To return to trend, which includes urbanization, prices should drop about 1/3.

To return to normal NY price:rent ratios, prices should drop about 1/2.

To return to trend price:income, prices maybe should go up, depending on whose income counts. If our market is tied to those below it, then median income:median price governs, and prices should drop by 1/2. If our market is tied to those above it (Manhattan), then prices may have room to rise a bit more.

To reach equilibrium, in which prices = construction costs, prices need to drop about 1/3.

Is that "tanking"?

Posted by: guest at June 25, 2008 12:30 PM

Yes, I agree that PS 3BRs in the 1200 range can go in the range of 900K, with outdoor space, possibly more. Depends on lots of factors. The 3BRs Brownstoner is listing are MUCH bigger than what is typical size, so they do not make sense as "comps" for all 3BRs. If you look at PSF, they come out in the mid $700's psf. That is not unhealthy, but it's not astronomical in the way that some properties are (i.e. trying to get 1000 psf).

Posted by: guest at June 25, 2008 12:32 PM

11:49am you are full of yourself and are a genius...OMG you sold at the top and are waiting for the bottom...You should be a trader at Goldman its amazing how simple selling at the top is and buying at the bottom is...LOL

Please do us all a favor and shut it...

You are fogetting one very impotant point genius: rates are not coming down anytime soon so when you get your Jumbo at 9.5% it will all equal out... Rates are still low so that means its a good time to buy and the fact that prices are so flexible and negotiable its an even better time...

So get out of the studio with your 3 kids in prime brooklyn or what is really BedStuy and beat it...

Posted by: guest at June 25, 2008 12:33 PM

To return to normal NY price:rent ratios, prices should drop about 1/2.

Please tell me how that is true, when people are saying they are renting 3 bedrooms for 6400 a month?

Did you see yesterday that Stuy Town 1 bedrooms START at 3K a month and 2 bedrooms for 4200 a month?

You all need to refamiliarize yourselves with these 2008 rents.

For 3K a month, I can buy a 500K 1 bedroom in a few nice areas of Brooklyn, so I fail to see how the rent ratios are that out of whack.

I think they are out of whack if you take into account your rent stabilized place you've been living in for 40 years, but that is not market rate.

Posted by: guest at June 25, 2008 12:35 PM

The problem with renting in Brooklyn is that many types of rentals just don't exist. If you look for rentals over $5000 in Park Slope you won't find much at all. People who want to spend $1.8M on a place are looking for 2000+ sq ft. There just aren't a lot of nice condition rentals of that size around.

Posted by: guest at June 25, 2008 12:35 PM

I just held an open house last week for my 1 bedroom in the North Slope. In the end, we received 3 offers within 24 hours, one of which was above ask, one was exactly ask, and another was a couple thousand less than as.

We sold for 13k above ask and over 100K more than we bought it for 2 years ago.

Can someone please tell me how this admitted anecdote represents a bottoming market in Park Slope?

Posted by: guest at June 25, 2008 12:39 PM

12:33 - typical vitriol from someone who can't stand the thought that market is shifting. First, we have plenty of cash so won't need a jumbo mortgage. Second, when rates do go up, which they inevitably will given inflationary pressure, housing market will suffer more and prices will be even more negotiable. Third, the next year or so may very well be a good time to buy - we are certainly aiming to buy, but it will depend on finding the right property at right price, and we are indeed seeing more flexibility, just have not found the place we love. But most asking prices are currently unrealistic, I guess because sellers/brokers are factoring in that buyers will bid significantly under ask...

Posted by: guest at June 25, 2008 12:42 PM

I walked up 7th Avenue last weekend and looked in all of the real estate windows. I was shocked at the prices. The absolute cheapest place was $2100 for a 1 bedrooms and I saw MANY listing around 2500-3000 for 1 bedrooms, a few 2 bedrooms for 3500-4000 and a handful of 5000 and 6000 rentals.

I was FLOORED!

Posted by: guest at June 25, 2008 12:42 PM

12:39 -
I am the other person who recently sold FSBO in Park Slope. We too got over ask, with 4 bids in a week, and almost 200K more than when we bought 2 yrs ago. I think some properties are still commanding high prices. But some properties are sitting. I think if it is a good apartment it still sells quickly and for decent money, but if there is anything about the layout or the location that people are hesitant about, it sits much longer than a couple years ago.

Posted by: guest at June 25, 2008 12:44 PM

12:39 - what was the price of your 1BR? And how many square feet? Did you do any improvements? Anecdotes can always provide exceptions to the rule, but are not typical. Also, a note of caution: it ain't over til it's over so I would not gloat til the contracts are signed and the closing behind you. That said, congratulations on a successful FSBO open house.

Posted by: guest at June 25, 2008 12:47 PM

12:39 - Good apartments in prime areas (like landmarked blocks of Cobb H, BH, CG, PS, etc) will continue to be fine in my opinion, and maybe that includes you. But, I think the days of apartments on the fringe of nice neighborhoods, where the apartment has no natural sunlight or is next to a needle-exchange program, or across from the PJs, and the apartment enters into a bidding war... those types of apartments will start selling for less or sit.

I also think as crime starts to tick upward as well, people will see apartments in nicer, safer landmarked neighborhoods continue to appreciate. Places in Park "Slide" (i.e., 4th Avenue), Bed Stuy, Clinton Hill, Bushwick, Flatbush, etc. will struggle, though.

Posted by: guest at June 25, 2008 12:49 PM

12:42 - we recently sold our 3BR apt and are renting while we actively look to buy a house. We found a number of nice 3BR in PS321 for less than $3500, with laundry and storage and some that were positively palatial for a bit more (around $4000). They are not impossible to find even if you have to look a bit harder. Also, realtors were sure to point out to me that landlords can be negotiable too - you can sometimes get the rent for less than asked. Bear in mind too that spring/early summer are the peak time for rentals so prices are higher and better deals can be had in the fall. Also, if you don't care about the school zone you can do even better. Our 3BR with 2BA and private W/D and outdoor space, which sold for close to 1 million, would have rented for only $3800 according to several realtors since it was outside 321.

Posted by: guest at June 25, 2008 12:52 PM

12:42 typifies the point I have been making. People are willing to wait for a place they really like and overbid if need be to get it. People are no longer willing to just buy whatever they can get because of pressure. Nice, quality places will continue to get good prices. Places with shoddy flip-style renovations in less-desirable neighborhoods or with too many detractions (on the BQE or Atlantic, no sunlight, short ceilings, etc.) will get few or no offers and will sit

Posted by: guest at June 25, 2008 12:54 PM

"About 1000 gallons per year."

Try 1000 gallons per month, not year. Most rents and mortgages for the same space people are used to who live out of urban areas rent or cost around 5K per MONTH in either rent or mortgage payment up here. I know of no-one who uses 1000 gallons of gas per month. People are not going to come running to those kinds of payments or rent amounts just because gas is high. Even at $10/gallon one would have to use 400-500 gallons per month. When I lived in the rural south I used maybe 150 gallons per month and drove 30 miles both ways to work and back every day. My complete mortgage, taxes, insurance, and bills on my 4450 sq ft. 7 bedroom house with a pool there is only 1450/mo. My rent here is $1850 for a 500 sq ft. studio/loft in Williamsburg. And as for the cost of heating, have you checked you Keyspan and Con-ed bills lately or the price of fuel oil? The price per therm of all of them is equal to (or in my case double that of my rural south home I still maintain). So people who believe that people are running up here to pay astronomical prices to live in the ghetto are either ignorant or insane. None of my friends or family from down there would ever consider having to share their house with 3 other families just to make their mortgage, nor shoving all 3-4 kids into one 10 x 10 bedroom in an apartment even if gas goes to $10/gal or more. Keep on dreaming. People live here because they want to live here, not because its cheap or even convenient.

Posted by: guest at June 25, 2008 12:57 PM

"12:39 - what was the price of your 1BR? And how many square feet? Did you do any improvements?"

549K and around 550 square feet. And besides painting and new electrical cover plates, I've done no work to the apartment. It is on a gorgeous tree-lined North Slope block though.

Posted by: guest at June 25, 2008 12:58 PM

park slope is proof that prices are coming down. sold for same price that it changed hands for a year ago, which is actually less than a year ago when you factor in inflation, interest and closing costs. not to mention that this deal happened before the market took an even worse dive. end of discussion. you broker shills are a joke.

Posted by: guest at June 25, 2008 1:15 PM

if you got 200k more than you bought for two years ago, you could have gotten 400k more for it last year. that and $2.11 will get you a starbucks grande drip.

Posted by: guest at June 25, 2008 1:22 PM

12:58 - just curious, what did you buy after selling? And if you did not buy something else, why are you selling?

Posted by: guest at June 25, 2008 1:24 PM

12:58 the person is selling becasue they cant afford it...lol

WHy sell in this market unless u have to...Or if u need to upgrade but sell and sit in cash and wait for the perfect buy is crazy...

Posted by: guest at June 25, 2008 1:28 PM

1:24, I found a REALLY good deal on a 1 bedroom plus den in the North Slope. It needs some cosmetic work (which I LOVE to do) but I found out about it because I live on the block and the owner sold it to me without even listing it. I'm super excited. It's about 200 square feet bigger than my place and will allow me to have a separate room for my home office and music studio. I bought it for a little less than I'm selling my place for, but my place is pristine and the new place will need some work...

Posted by: guest at June 25, 2008 1:31 PM

Oh and the maintenance on the new place is only 350 dollars a month! And they have a rather large reserve fund! So I'm pretty excited about it.

Posted by: guest at June 25, 2008 1:33 PM

I found an awesome place in Brooklyn with Eric Heras and Steve Gerber at Corcoran. By the way, my name is Eric Gerber and I work at Corcoran.

Posted by: guest at June 25, 2008 1:36 PM

1:15 = comment of the day

Posted by: guest at June 25, 2008 1:37 PM

3. PARK SLOPE $1,485,000
172 Sterling Place, Unit 7 GMAP
3-bed, 3-bath last sold for $1,485,000 almost exactly a year ago, according to Street Easy. Deed recorded 6/17.

I'm sorry...I don't see where it says that this place closed for 1.485 on 6/17.

It was for sale for 1,599,000. Where does it say when and how much it just sold for on Streeteasy?

Posted by: guest at June 25, 2008 1:38 PM

The 3BR on 8th Ave in PS is not a large apartment -- maybe 1400 sq ft -- and its finishings and fixtures were not top of the line (or even "upscale"). It is also not zoned for 321.

Its value was driven by (inflated by?): a) outdoor space, b)architecturally significant building, c) low maintenance. Still, I thought it would ultimately go for $1.1 or $1.2mm.

Bear in mind, $1.5mm was the latest asking price. The original ask for $1.9mm. And it lingered on the market for months.

In other words, this sale is not a sign of a "healthy" market, but a slightly more rational market.

Posted by: guest at June 25, 2008 1:55 PM

Anyone know if any of the tenants in the Dean Street house were stabilized or controlled. Curious to know if the closing price was impacted by anything like that.

Posted by: guest at June 25, 2008 2:03 PM

I don't know how one of the posts can come to the conclusion that equilibrium = constuction costs. Any developer who builds a house is going to need to buy land ($150-200 per buildable foot) incur soft and hard construction costs (say $350 psf combined) and will expect to make a profit (say 20%). On average, if developers don't expect profit, they won't build the house.

Posted by: guest at June 25, 2008 2:10 PM

"The original ask for $1.9mm."

Not true. Please show us.

Posted by: guest at June 25, 2008 2:19 PM

2:03 - nope. no rent control/stabilization.

Posted by: guest at June 25, 2008 2:20 PM

2:19

True.

I don't have the link, but there was a vanity site for the property by a broker from Heights Berkeley . Something like 708thave.com

When we went to see the apt, the ask was $1.695mm. The apt. was already on the market for several weeks and already reduced. The broker, a younger guy, was giving us his math for a $2mm valuation. He readily admitted that he didn't know how to value the unit and said to "make an offer".

Posted by: guest at June 25, 2008 2:30 PM

Re equilibrium = construction costs. Builder's normal profit should be included as a construction cost.

Land is harder: in a bubble, land values inflate, too (see Lloyd George). Mason Mint paid $500, if I remember correctly. As the bubble pops, land costs should drop to reflect their next most profitable use rather than speculation (parking lot? community garden? rent-controlled wreck?).

Still, 2:10's numbers, which are not far off, suggest about $600 / sft to build new housing. That suggests a drop of about 1/3 from current sales prices in the fancy neighborhoods. Otherwise, it'll continue to be profitable to build more.

Posted by: guest at June 25, 2008 2:43 PM

Re equilibrium = construction price.

Of course, equilibrium can easily be BELOW construction costs indefinitely (e.g., Grand Army Plaza, 1930-2006). But if prices are above construction costs, builders will build more until supply=demand=costs. That's just Econ 101.

Posted by: guest at June 25, 2008 2:46 PM

You are comparing new housing to 100 year old brownstones?

ooookkkkk

Posted by: guest at June 25, 2008 2:47 PM

I pay $3900 for a nice 3-bed on Berkeley between 6th and 7th. Rented in 2007. After-tax cost of a comparable apartment would be about $5000 if I were to buy (not even counting closing costs). So prices would have to come down about 20% for it to make sense for me to buy.

Another personal anecdote that may or may not reflect the broader market.

Posted by: guest at June 25, 2008 2:51 PM

I love the justifications for how 1.4 million (two of them) for 3 bedrooms apartments in Brooklyn is the sign of a tanking market.

These would have sold for 150K 15 years ago.

Brooklyn's doing ok...

Posted by: guest at June 25, 2008 2:52 PM

Speaking of Grand Army Plaza (apropos 2:46), does anyone have any idea how the Richard Meier units are selling?

Posted by: guest at June 25, 2008 2:53 PM

Re rents are in line with sale prices. An owner who can get $3000 / month for a one bedroom is better off selling at any price over $500,000 assuming he values his labor at zero. Less if he expects to be paid for his work.

Are there $3000 apts for sale for $500,000? I haven't found them. Even in places as wretched as Stuy Town, and what's the point of living in the city if you are going to live there?

Posted by: guest at June 25, 2008 2:53 PM

Most 100 year old brownstones will be mostly new construction by the time they are in a condition to warrant signing up for a million dollar mortgage.

Posted by: guest at June 25, 2008 2:56 PM

2:52 - not justification for tanking, but justification that prices are dropping in park slope. you shills haven't been even been willing admit that. now stare at cold hard facts, losers. take it in.
tanking will come in due time. anyone want to place bets for the next broker to lay off a slew of i-bankers. this is going to be like watching a train wreck.

Posted by: guest at June 25, 2008 2:58 PM

100 year old brownstones used to sell for a discount to comparable new construction (more work, cranky heating, silly layouts, no doorman, no a/c...). Fashions change and now they sell for a premium.

But in the end, neither the premium nor the discount can be very large, since too many people are willing to switch at the right price -- or to renovate to make the old look new or v.v.

Posted by: guest at June 25, 2008 3:02 PM

actually, 2:58...thinking about the foam come out of your mouth as you type because you are still renting and missed the largest run up in housing prices is more a train wreck, in my personal opinion.

the envy is PALPABLE.

Posted by: guest at June 25, 2008 3:02 PM

3:02 = biff = bitter loser

Posted by: guest at June 25, 2008 3:07 PM

the biggest run-up sets the stage for the biggest decline. the fear is PALPABLE.

btw, i have no envy. my landlord doesn't raise my rent ($2500 2br in prime north slope). i can afford to buy (now) but didn't earn/save that money by being stupid about it.

if you are an owner who is not underwater (bought before 2004), my comment wouldn't have irked you so much. so you are either a recent buyer or a desperate broker. so transparent.

Posted by: guest at June 25, 2008 3:12 PM

My rental needs 100k renovation to be comparable to ones I'm looking to buy -- but they cost double, after tax.

If only I were stabilized, I'd renovate the landlord's apt for it and we'd both be better off.

Posted by: guest at June 25, 2008 3:13 PM

3:12 = biff = so transparent

Posted by: guest at June 25, 2008 3:14 PM

So much for productive dialogue. Why don't you just insult each others' mothers, call each other fags and be done with it?

Posted by: guest at June 25, 2008 3:14 PM

3:14 = biff's taint

Posted by: guest at June 25, 2008 3:18 PM

the biggest run-up sets the stage for the biggest decline

Well I was fortunate to be a part of the run-up, but since I've seen 300% appreciation since I bought my place, I have a funny feeling that we're not going to see a 300% drop.

Posted by: guest at June 25, 2008 3:23 PM

not a 300% drop, mean reversion. study the difference between real dollars and nominal dollars. staying flat to slightly down for many years is still a big drop.
but good for you. i hope you're ok with saying the same thing 10 years from now, only 300% won't sound like a lot then.

Posted by: guest at June 25, 2008 3:27 PM

Guest 2:51.

You're paying $3,900 for your rental today. If your rent goes up 5% a year, you'll be paying $6,350 in 10 years. If your rent goes up 10% a year, you'll be paying $10,100 in ten years. If your landlord wants your apartment for his newphew, he tells you to move when your lease is up. In 10 years, the guy who owns will still be paying close to $5,000 and will have paid down a chunk of his mortgage.

Posted by: guest at June 25, 2008 3:27 PM

No, we won't see a 300% drop, but we may likely see 15-25%. I'm actively looking to trade up (sold already) but carefully so. Got lots of cash in the bank, but ain't gonna blow it on an overpriced mediocre property. Sellers meanshile can still make 250% profit if they are like you so go ahead and sell!

Also - both 3BRs on this list are listed on street easy as 1800 sf + so definitely do not reflect median prices for 3BRs.

Posted by: guest at June 25, 2008 3:31 PM

"i hope you're ok with saying the same thing 10 years from now"

I bought my house to live in for my lifetime. I have no desire to leave it. It is a wonderful sanctuary and place to raise my family.

Posted by: guest at June 25, 2008 3:33 PM

"But it is fun watching the guests fight with each other"

I wonder if it's as fun as us watching you argue with yourself.

Posted by: guest at June 25, 2008 3:35 PM

Douche Champion = thread officially dead.

Posted by: guest at June 25, 2008 3:36 PM

3:27 -- those are the classical arguments in favor of owning. In practice relatively few people last 10 years in a home. Many young buyers in New York done even last 5 years. At 5% appreciation, my rent will be $4978 in 5 years, still below the $5,000 after-tax cost of owning. I will have saved a bundle and will have even more money for down payment if I decide to buy at that point.

The classical rejoinder to that is that I will miss out on price appreciation. I might, and I'm happy to take that risk. I will be somewhat surprised if prices are at or above current levels in five years.

And the freedom of renting goes both ways. I can walk away from my apartment any time and the most I stand to lose is my security deposit. It is very liberating to know that I can downsize (or move) my life any time I want.

Posted by: guest at June 25, 2008 3:38 PM

Umm, a 300% drop means negative prices. Much of PS came close to zero for a while, but negative?

Posted by: guest at June 25, 2008 3:39 PM

I bet 5 bucks that biff can't keep his sorry bitter loser self out of this thread for more than 15 minutes.

Posted by: guest at June 25, 2008 3:42 PM

3:38 -- if the layoffs get bad and the rental markets start to decline, it might be worth your LL's while to sue you to enforce the lease. So you have more than the security deposit at risk.

But your basic point is right: you're still much more free than the mortgage slave. Moreover, in this market, if you invest your savings reasonably, more likely than not, renting will put you financially ahead of buying for many years. Mortgages may be stable, but taxes and maintenance are not, and losing your equity can be really painful.

Posted by: guest at June 25, 2008 3:46 PM

"Many young buyers in New York done even last 5 years."

I'd like to see your information to back this statement up, please.

Posted by: guest at June 25, 2008 3:46 PM

Where are all these renters in the government statistics that say that most Americans save NOTHING???!! Or negative, actually!?

Somehow we are blessed with thousands of them here in New York who rent but have HUGE, FAT BANK ACCOUNTS!!!??

I say bull shit. Most renters I know (even high salary renters) live paycheck to paycheck and have less than 5K in the bank and 25K in debt.

Posted by: guest at June 25, 2008 3:53 PM

3:46 - All I can offer you are personal anecdotes based on friends and family who have bought and sold in the city over the years.

3:38 - It's so easy to re-rent an apartment in the slope I don't think getting sued by LL is a realistic possibility. But sure, I guess it could happen. (not that I would put myself in that situation in any event - love my place, LLs are fine)

Posted by: guest at June 25, 2008 3:54 PM

No one goes through the trouble of buying in New York if they don't plan to stay. The comment that "young buyers don't last 5 years" is asinine. If they are young buyers, they just bought, so how would you know if they are staying or not.

Talk about a stupid comment.

Posted by: guest at June 25, 2008 3:54 PM

New Yorkers hold onto their bought property probably longer than any other city in the country, on the whole. Your friends and family are idiotic flippers, apparently.

Posted by: guest at June 25, 2008 3:56 PM

3:53pm great point...THe only people that have money in the bank are ones that sold places...THese people make NYC sound like the lifestyle is cheap and everyone is saving money for this big correction. LOSERS...

IF you are paying $3500/month in rent waiting to buy a place and hoping for a correction dont u realize that if you rent for the next 3 years is $126,000!!!!!!!!!!!!

ANd people are worried about negative equity when you could have bought a place say for $700k right now with low interest rates but instead kept waitng to buy for the next 3 years with rising interest rates...

GREAT JOB...

Posted by: guest at June 25, 2008 4:01 PM

Here are a couple of sources:

"The average first-time buyer only stays in their first home for four years." http://www.cityes.org/first-time-home-buyer.html

"the average homeowner moves every 5 to 7 years..." http://www.thinkglink.com/Mistakes_Homeowners_Make_When_Refinancing_Their_Home.htm

I would argue that New Yorkers move more frequently than Americans. More personal anecdotes - my New Yorker friends seem to be getting transferred to and from London, Hong Kong, etc. on a pretty regular basis.

Posted by: guest at June 25, 2008 4:02 PM

3:27 posting again.

Before I bought, I made the decision that the only way I could support buying was if I was going to stay in the house for 10 years. The closing costs + exit costs are just too high. In NYC, if you buy a house for $100, you need to sell for $110 to break even.

On the flip side, I've known a lot of people who rented so that they could "save a bundle" and use the money to for a downpayment. In my experience, the majority don't end up saving a bundle. They spend the money elsewhere.

At the end of the day, for me, the decison to buy or rent was not strictly a financial one. I'm raising a family and wanted to do it in a house. There were and still are very few townhouses available for long term rental. When my elderly parents come to visit, I like them to have a real guest room, not an air mattress. I guess that's a form of consumption, but to me it's the best money I'll ever spend.

I agree with your comment about the freedom of renting. On the other hand, if I ever want to downsize, I'm pretty sure I could rent my place out at a price that would at least cover the carrying costs. While owning gives me less freedom now, over time I think it will give me more freedom. As a paydown the mortgage over time I'll have an asset to sell or rent out for incomme in retirement.

Posted by: guest at June 25, 2008 4:03 PM

4:03 - Me again. All very fair points.

I seem to have inadvertently engaged some sort of angry person on the subject of how long first time buyers stay in their homes. Is this the Biff person that everyone always complains about?

Posted by: guest at June 25, 2008 4:05 PM

"67% of New Yorkers have less than $11,000 in savings"

Posted by: guest at June 25, 2008 4:07 PM

Does anyone how these people are financing these large purchase????

I just lost a mortgage at 5.85% for 528k for a two family house b/c it was in surrogate court and now it has been very hard to get an extension- first the interest rates are up to 6.25% (if I am lucky) and the amount of money that I have in the bank is not satisfying the lender (Wells Fargo). There are 3 people going on the mortgage with close to 300k income and over 20% DOWN - Am I not "bankable" enough???????????????

Posted by: guest at June 25, 2008 4:12 PM

nice work 3:42

Posted by: guest at June 25, 2008 4:18 PM

Not sure how someone in West Orange uses all that gas. West Orange has a very nice, walkable downtown, and fast, frequent trains into Manhattan. Of course you don't get to pay NYC income tax like you do in Brooklyn, but then you can't have everything.

Posted by: guest at June 25, 2008 4:26 PM

Nationally, one key reason that savings rates have gone so low is that homeowners assumed (wrongly) that their houses were doing the saving for them.

Another is that incomes haven't risen in the middle 50% for over a generation, but houses have gotten bigger and more expensive, so people are trying to spend more to support their houses with the same income.

My own experience is that it is way easier to save as a renter. When you own, anytime you accumulate some cash, the furnace dies or the kitchen begs for renovation. Now that I'm renting, the kitchen still begs to be renovated, but there's no way I'm paying for the renovation -- and then for a rent increase to reflect the improvements I made in the apartment...

Posted by: guest at June 25, 2008 4:32 PM

I am the West Orange person.

We drive all those miles because we have to go places on the weekends because it's so damn dull here...beach, NYC, dance lessons for this one across town, clarinet lessons for the other on the other side of town. It's a nightmare. We wish we lived in the city.

And our taxes are OUTRAGEOUS. I honestly would not recommend anyone to move to West Orange or to NJ for that matter. If you can afford to stay in the city, do it for as long as you can!

Posted by: guest at June 25, 2008 4:32 PM

Some people don't want to live their entire lives in a crappy kitchen, crappy bathroom and with a crappy landlord, 4:32.

More power to you for not caring what your home looks like or having any control over it.

Posted by: guest at June 25, 2008 4:34 PM

4:32 - Most of us on this board also wish we lived in the city. Since we can't afford it, we live in Brooklyn.

Posted by: guest at June 25, 2008 4:42 PM

You can't always get what you want, but you can try, and try...

Posted by: guest at June 25, 2008 4:48 PM

Last I checked, Brooklyn was a part of New York City.

The only people who call only Manhattan "the city" are Jersey trash and those from Staten Island.

Posted by: guest at June 25, 2008 4:49 PM

Totally disagree with you 4:42. I moved to Brooklyn 23 years ago after having lived in different parts of Manhattan (West Village, Hell's Kitchen + Upper West Side). At the time, Brooklyn had a really different feel than (calmer, stronger sense of neighborhood). The only thing I regret, is that Brooklyn has become so much more like Manhattan during the past 10 years.

Posted by: guest at June 25, 2008 4:57 PM

Really? Every Brooklynite I know talks about going into the City, and every native Manhattanite I know agrees. Even the blog is called "Brooklyn Heights America's First Suburb."

Posted by: guest at June 25, 2008 4:58 PM

I have lived in Manhattan most of my adult life and last year moved to Brooklyn. It was the best move I've ever made, and I've never been happier. If I won the mega ball lottery, I would not leave Park Slope.

Posted by: guest at June 25, 2008 4:59 PM

"Really? Every Brooklynite I know talks about going into the City"

Yup...all depends on context though. I'm a Brooklynite and while I might refer to "going into the city" I would say the EXACT same thing when I'm at the Jersey shore about heading home to Brooklyn....

Time to head back to the city.

What a silly thing to argue about.

Posted by: guest at June 25, 2008 5:01 PM

Not every Brooklynite talks about going into the City. Oldtimers often describe it as going to New York.

Posted by: guest at June 25, 2008 5:01 PM

I was in Connecticut last week and my friend said to me "Can we head into the city tonight" to refer to our going out in Williamsburg.

We never set foot in Manhattan. Does that mean Brooklyn is now "the city" and Manhattan is the suburbs since someone referred to it that way, 4:58?

Posted by: guest at June 25, 2008 5:06 PM

"The only people who call only Manhattan "the city" are Jersey trash and those from Staten Island."

Get new friends then.

Posted by: guest at June 25, 2008 5:16 PM

"The only people who call only Manhattan 'the city' are Jersey trash and those from Staten Island."

Wrong. My friends and I ALL referred to Manhattan as "the city" when we were growing up in Brooklyn in the 1970s.

Posted by: guest at June 25, 2008 5:16 PM

Where is Manhattan?

- Brooklyn resident

Posted by: guest at June 25, 2008 5:20 PM

Brooklyn Heights was called the suburb because at the time Brooklyn was a separate City

Posted by: guest at June 25, 2008 5:39 PM

With these prices, I'm glad I own:

Rents for Manhattan apartments remained generally flat in June compared to last year, according to a monthly survey by the brokerage Real Estate Group of New York.

Prices for one-bedrooms in non-doorman buildings dropped the most, by 4 percent to $2,859, while studios in non-doorman buildings rose by 2.1 percent to $2,190. Two-bedroom prices fell by 1.8 percent to $4,069.

In doorman buildings, studios showed a .2 percent drop to $2,642; one-bedroom increased 1 percent to $3,786; and two-bedrooms fell by 1.1 percent to $5,700.

Posted by: guest at June 25, 2008 5:47 PM

Great post from 4:03. Until people start renting out their nicely renovated townhouses with long term leases, it is hard to compare owning vs renting on these types of properties.

Posted by: guest at June 25, 2008 5:51 PM

True that! BK heads have always called Manhattan the city.

Posted by: guest at June 25, 2008 6:00 PM

And "BK heads" have always seemingly had a much lower IQ as well...

Sigh.

Posted by: guest at June 25, 2008 7:45 PM

My fear is we sell now, plunk the money down and then the bank goes belly up. Wouldn't it be nice to lose one's account in a bank mess!

Ugh!

Maybe we'll sell our house quick and then buy gold and hold that for a while...not sure how...Anyone know the best/safest way to do this?

Thoughts?

Posted by: guest at June 25, 2008 8:27 PM

I love the person who keeps talking about the Fed's "bail out" of Bear Stearns as being the beginning of end and, accordingly, how any closing price pre-March is no longer valid. Hello, read the newspaper ever? The impact of the Fed's actions vis a vis Bear Stearns was to invigorate the markets - Wall Street getting a free ride, knowing that Uncle Bernanke will step in (with taxpayer money) to remedy investment banker excess! The credit markets since then have begun to improve - you know, the ones that with margin and collateral calls brought storied Bear to its knees. Of course it takes time for this to trickle down to Joe Homeowner, but Wall Street is always ahead of the curve - bankers are getting over the crisis; Joe Homeowner will benefit next.

Posted by: guest at June 25, 2008 9:06 PM

9:06 pm again.

And to the ever so well-informed who call Clinton Hill the ghetto, and throw around a recent 'crime spree' (ooooh) as a reason to quarantine and judge the entire neighborhood, have a look at comparables and then get back to us. Just a couple weeks ago there was a Just Sold house posted here on Brownstoner - on Greene, across from the basketball courts between Washington and St. James - that sold for, guess what, $2.1 million! I guess that person - and their TWO MILLION DOLLARS - didn't rely on the opinion of anonymous couch potatoes in making that investment decision!

Posted by: guest at June 25, 2008 9:11 PM

Dearest 7:45,

How's it going tonight pilgrim?
I just wanted to reach out to you, and wish the very best and longest beat down possible in broad daylight tomorrow. Also may your ipod be turned sideways and shoved up your ass right after your 2 front teeth are kicked across the street.

Kind regards,
A BK Head

Posted by: guest at June 25, 2008 9:30 PM

9:06/9:11/9:30 = the seller

Posted by: guest at June 25, 2008 9:56 PM

Dear 9:56,

Nope. Just someone who gets mildly annoyed by what this website has devolved into. Not a seller, just a disappointed long-time reader (from the autumn of 2004) who wishes that Brownstoner would moderate once in a while.

Sincerely, 9:06/9:11.

Posted by: guest at June 25, 2008 10:06 PM

Yes, I have to agree with Long-Time Reader.

This heavy reiteration of the rising tide of street assaults in CH is tiresome. There are lots of muggings all over, including PS.

There is a sad tone of racism on this thread and an apparent desire to bash neighborhoods that have African-Americans still living in them.

Look, I don't care who you are or where you live, a long (or even short), lonely walk from the subway on a very quiet street late at night can be nerve-wracking anywhere in the big city.

I used to be nervous walking from the 6 at 77th to the low 80's and Park (location inexact to protect identity)... and if you think it is all relative, that I was a scaredy cat UES'er (okay, chuckle...maybe I was!), a friend was violently mugged on that walk and a car window was smashed and the stereo grabbed RIGHT in front of our doorman entrance! Gads!

Anyway...

BASTA with the Italian word "Ghetto" or at least implying it the minute we hear of any mugging no in PS or BH.

Yes, CH has houses selling for a lot more than most houses in Brooklyn. It cannot be denied.

FortGreeneGardener (in suffering with Long-Time Reader)

Posted by: guest at June 25, 2008 11:16 PM

Why is there total denial by some that prices can stagnate, soften and yes decline? 9:06/9:11 sounds like a very angry person indeed. Markets are cyclical, we've just had a huge run-up, and many statistics point to a softening of the market. No, that does not mean the sky will fall, and things will crash, but when we've seen the biggest run-up in history, it seems perfectly credible that that run-up will stop (which it has), soften, and then, eventually go back up in the long run. Question is, when will it pick back up. Of course, timing markets is notoriously difficult, but actually real estate is easier to time than other markets since things in real estate happen quite slowly. So, when the writing is on the wall (as it is now), it can help make decisions that are much harder to make in, say, the stock market, which can change much more radically day to day. Anyhow, I for one am actively looking (lucky to have sold some places in the past and have cash) and will not hesitate to buy something that is reasonably priced (or open to reasonable negotiation), but will not settle for overpaying when many properties are clearly becoming more negotiable. As for those who point to how much rent you will have wasted in the meantime, I would say that there is an equal if not greater risk that you could overpay right now with an adamant seller with an overpriced property, and chances are likely that with time, that seller will have to negotiate. There are numerous properties in prime areas that have had price cuts for this very reason - I sure would not have wanted to pay the initial ask, when in some cases, the prices were later slashed by 200k.

Posted by: guest at June 26, 2008 12:55 AM

Hmmm, I keep reading about how Wall Street is in for more pain, not that they are "ahead of the curve". Things look pretty gloomy for the forseeable future...

Posted by: guest at June 26, 2008 1:07 AM

For those who say renters have no money/means/sense. Some have already sold property, and are taking their time about getting back in (i.e. someone trading up). I agree that nice rentals (2-3BRs) in prime areas are actually NOT that hard to find at reasonable prices (below 4000/K) despite what some would want to make you believe. Really - go through Craigs List, talk to brokers, and you should find that out yourself. And some have been saving for years, only to see the market run up and up and up, and now are finally seeing a possible window of opportunity in the next year or so - I know many people like this.

Posted by: guest at June 26, 2008 1:11 AM

9:06/9:11 - what are you so disappointed by? The huge run-up in prices often celebrated on this blog? The many who gloat about all the money they've made? Or the fact that there is a healthy debate over the current state of the market? I don't quite understand your problem - please clarify.

Posted by: guest at June 26, 2008 1:13 AM

1:11 I agree there are a lot of rentals in the 3k-4k range, but I don't see what that has to do with $2M houses. For people looking for 2000+ sq ft, outdoor space, and recently renovated kitchens/baths there isn't much to rent at all.

Posted by: guest at June 26, 2008 9:12 AM

There are no brownstones to rent. Having the rent vs. own conversation with regard to that is ridiculous.

Some people love, want to own and live in brownstones.

End of story.

Posted by: guest at June 26, 2008 10:37 AM

Well, we have a budget of up to 2mil to spend on a brownstone (w/a garden rental) but are fine camping out in an economical rental until we find the right one at the right price, rather than overpaying 100-200+K. I'm amazed at some of the crummy houses brokers are trying to sell these days, or the prices asked for mediocre houses. That said, I also know many people who have found perfectly good houses in this price range or far less within the last year, and we see plenty of places becoming more negotiable. I don't love brownstones so much that I can't wait a year to find the right one and avoid overpaying, and the market is working in our favor.

Posted by: guest at June 26, 2008 11:02 AM

Actually, there are brownstones to rent - from people who can't fob them off at the ridiculous prices they are asking. For example, anyone see 64 Prospect Place (see Corcoran site)? Case in point. Been lingering on the market, and now they are seeing if they can rent instead. Good luck to them - they should just cut the price (they jacked it up hugely in one year, which is ridiculous) and be done with it.

Posted by: guest at June 26, 2008 11:05 AM

for 8:27: if you are that worried about safety, or if you are planning to buy relatively soon and will need cash for that, put your money in several banks, keeping under the FDIC limit, or buy T-bills. The only way you lose money doing that is (a) if the federal government goes bankrupt, in which case your problems are going to be much larger than financial losses, or (b) a massive inflation without a corresponding increase in interest rates.

But you'd probably do better with a diversified portfolio of index funds if you are not planning to buy in the next several years.

Posted by: guest at June 26, 2008 11:09 AM

In the short run, it may be hard for an individual to find a townhouse to rent long term (although there are several for rent right now in prime neighborhoods for far less than purchase costs).

But in the long run, if single family homes sell for more than their rental value (split up or whole, whichever is higher), then investors will buy rental properties and convert them to single family homes.

At equilibrium, single family or owner occupied houses have to be relatively close in price to rental properties (within the cost of conversion), or conversions will continue until they are.

So, if you are trying to figure out which way prices are heading before you buy, you should assume that over the next few years rental value and purchase value will tend to converge. Obviously, it's only a tendency; sales prices have gotten way ahead of rentals over the last several years, and they could overshoot the other direction as well.

Rents tend to be tightly connected to incomes, because renters are only paying for current services and normally won't pay more now for promises later (contra the Mynt). Of course, it's always possible that enough people will decide that NYC is so great that they are willing to pay an ever higher portion of their income to share with an ever larger number of roommates. But somewhere around 100% of income for a "hot bed" flat, some of them will start to see the virtues of LA or San Francisco.

Purchase prices are much more flexible, since sometimes (e.g., last year) banks are willing to help people buy things they really can't afford on the assumption that they'll catch up later, or to pay what they imagine will be next year's price today, and sometimes (e.g., next year), buyers and banks are unwilling to pay even current value because they figure if they wait prices will come down even more.

But even with speculative unpredictability of prices, it's pretty clear that when purchase prices are above rental value (in any configuration) and above replacement cost, developers are going to make more of the stuff to meet demand.

Posted by: guest at June 26, 2008 11:30 AM

8:27 - we just sold our place and are renting while we look for a larger place, which means we have a lot of cash in bank. Almost every financial advisor I spoke to said a massive run on the banks was highly unlikely, but yes, if you're worried, diversify at several FDIC insured banks and/or low risk investement funds (we're doing that but not in an overly cumbersome way). The risks of your property losing some value from the frothy recent peaks is a much greater danger these days, so if you are planning on selling, you'd be wise to do so ASAP - the interest alone on your sale will probably be more than the potential lost value on your property. This is what we found for ourselves, since our place went over ask a few months ago and despite occasional bidding wars here and there, a much more common scenario these days is places going under ask, or having to cut price...

Posted by: guest at June 26, 2008 11:50 AM

"bankers are getting over the crisis"

Now that's a real ribtickler.

Posted by: guest at June 26, 2008 5:58 PM

Folks, Gabby misunderstood the ACRIS filing on the Sterling Place unit. There was not a recent sale. It sold last year at $1.485M. For whatever reason, the sale was only just recorded. Her description ("3-bed, 3-bath last sold for $1,485,000 almost exactly a year ago, according to Street Easy. Deed recorded 6/17.") is correct EXCEPT for the word "last" - this was the only sale. Search block 1058, lot 1207 on acris and look at the actual deed - it's dated 6/22/07 and was recorded 6/17/08. So the "last sale" that shows up on streeteasy for 6/22/07 is the same one that recently popped up on acris as recorded 6/17/08.

Posted by: guest at June 26, 2008 6:16 PM