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September 27, 2007
Some levity--The More Things Change...
I'm gorging on my recently acquired copy of Bricks & Brownstone (Charles Lockwood) and I came across this quote by a Park Slope real estate broker in 1888--thought I'd share it:
"Houses on Eighth Avenue [in Park Slope], four-story brownstone residences, we sell for $28,000 and $30,000. The same class of dwelling in New York on the West Side, from Seventieth Street up along that fashionable section, command from $50,000 to $55,000 each, while some sell for $60,000." (Lockwood, p. CP 58)
Comments
very interesting.
that was a helluva lotta money back then.
Posted by: guest at September 27, 2007 2:20 PM
The inflation calculators I found show 1888 prices of $30k and $60k to be about $650k and $1.3 million today.
Sweet deals, really.
Posted by: deadnancy at September 27, 2007 2:59 PM
I found the same figures. If the gain was consistent over the 120 years, that'd be a great investment to beat inflation by so much over such a period of time. But it looks to me like the entire gain (roughly) is attributable to the current boom. (I.e. if you adjusted that price for say, 1995 dollars, you'd find that the home value merely kept pace with inflation.) Which implies there is a LONG way down from the current market highs back to prices more in line with historical rate of appreciation. I think this is well supported by the Case-Schiller index of home prices over long periods of time.
Posted by: guest at September 27, 2007 3:19 PM
"Which implies there is a LONG way down from the current market highs back to prices more in line with historical rate of appreciation."
Absolutely--you couldn't have said it better.
Upper West Side brownstones are still about double the price of Park Slope houses, no? And many times they're a bit more than double.
Posted by: guest at September 27, 2007 3:29 PM
I've also chuckled over this quote. The irony is that back in the 1960s/1970s, people were buying brownstones for the same price (in actual, not adjusted, dollars) as they cost eighty years earlier!
Posted by: guest at September 27, 2007 3:58 PM
"If the gain was consistent over the 120 years, that'd be a great investment to beat inflation by so much over such a period of time."
I'm not so sure. If you had $60,000 in 1888 and put it in the bank at 5% interest, it would be worth $21,000,000 today. Those Eighth Avenue brownstones are worth a lot, but not nearly that much. You'd have been better off putting your money in just about any other investment than residential real estate.
Posted by: guest at September 27, 2007 4:04 PM
3:58, too true. A relative of DH's owned a 25-foot wide single-family brownstone on Remsen Street between Hicks and Henry in Brooklyn Heights. They sold in 1969 when they moved the family to CT. She remembers the sale price at around $65K though she thinks that might even be high. (*gasp*)
Posted by: zeebee_in_bklyn at September 27, 2007 4:06 PM
Oops, sorry, the Park Slope houses were worth only $30,000 in 1888, so that's only $10.5 million at 5% today. Still, buying one of those houses wasn't any better than putting your money in the bank.
(me again from about 4:00 above)
Posted by: guest at September 27, 2007 4:07 PM
I do concur about how cheap houses in the slope were in the 60's and even '70's. I had a friend who got a place on 1st St. just above 7th for about $72,000 in about 1977. That was a lot less than the, say, $20,000 it would have been worth in 1888.
4:07
Posted by: guest at September 27, 2007 4:24 PM
Yup, over in PH you could buy a rundown brownstone for 30K or so in the late 70's. If they had not degraded to rooming houses they were in pretty good condition, generally still had lots of detail. So much for the posters who say prices only go up.
Posted by: guest at September 27, 2007 4:42 PM
yeah, but in 1888 they were brand, spanking new with all the latest stuff (like a luxury condo today, only better on the finishes, like beautiful woodwork), in a neighborhood just built for the rich, or upper middle class, or whatever the purchasers were considered then. While in the 1960s/1970s, they were run down, out-of-date, in need of substantial renovation, and some were on streets with drug supermarkets.
And, what those who calcuate the investment gain over time always fail to work in is, if the home was your residence, you have to consider what you would otherwise have paid in rent (or to own someplace else to live) during all those years. After all, you gotta live somewhere....
Posted by: guest at September 27, 2007 6:26 PM
Hard to really compare risks back to 1888. Did bank deposits really average 5% over the last 120 years? What if your deposits were wiped out by a bank run in the depression? No FDIC then, so your $30k in 1888 might have been 0 in 1931, and you can compound 0 all you want and it is still 0. For housing you would also have to factor in your repairs over 120 years, although, according to some posts on this site, not every house had repairs over the last 120 years. Just goes to show how meaningless the comparisons can get over that amount of time.
Posted by: slopefarm at September 27, 2007 9:30 PM
I think the most interesting part of this quote is the Park Slope v. Upper West side pricing comparison-it still holds true and is accurate, 120 years later.
Posted by: guest at September 28, 2007 12:12 AM
The denial on the part of those who think housing is the best investment is really remarkable. Suppose, for example, that you had $30,000 in 1888 and put it in your sock until 1929 (not the best intervening investment and not the best year to invest) and plumped it in September of that year into the Wellington fund of mixed stocks and bonds (now part of Vanguard). That money would be worth $18,000,000 today, notwithstanding the intervening Great Depression.
Sure you would have had to pay rent, but give me a break, througout most of the intervening years, a very nice apartment in Brooklyn could be rented for a few hundred a month, or less for much of the period.
Housing is a perfectly decent investment because you need a place to live and want your savings at least to keep up with inflation. But the people who think they're getting rich on it (except the speculators who make out like bandits in good times, but a fair percentage of whom end up in bankruptcy when the market goes down) are deluded.
I think a perfectly decent case can be made that the best thing to do is to get the cheapest housing you can bear, or to rent, and to put the money you save on not having that jumbo mortgage in normal investments. It will add up to more in the end.
Posted by: guest at September 28, 2007 9:25 AM
Me again from above. Let me just address a few counterarguments that were made to try to explain away the fact that Park Slope housing declined drastically in value from 1988 to 1960-80.
1) The houses got in disrepair. D'uh. That's because they weren't worth enough to keep up, people couldn't sell them anymore as one familys and had to cut them up into rentals, SRO's etc. This point confuses cause and effect. What happened is nobody wanted these houses anymore, which caused their prices to drop and their resulting disrepair. That happens, and when it does, real estate is a pretty horrible investment.
2) "Other investments are more risky, your bank might fail." Of course you lose some money, sometimes. But you do in real estate too, see above. In regular investing you diversify; not all your banks fail. But you only own one house. All your eggs are in that basket.
3) You have to pay rent. Addressed above.
4) I'm not sure what the point that you have to make repairs on houses means. You don't if you put the money in the bank. And if you put your money in a house, that just means your profit at the end sale is actually less than what you imagine it is.
I'm getting old. Over the last five decades or so, I've seen ordinary people lose money when they sold their houses. Sometimes they didn't know it, because mere inflation masked the loss, but sometimes it was obvious and really hurt. Housing is a respectable investment, but probably not the best one over the long run.
Posted by: guest at September 28, 2007 9:51 AM
i know no one who has managed to live in cheap housing all their life that has anywhere close to 18,000,000 dollars saved.
most of the time it's 18.00.
so while your comparison makes sense, it only does so in an ideal world in which we do not live.
Posted by: guest at September 29, 2007 4:14 PM
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