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March 5, 2009
If we sell, can't afford to buy
We are considering putting our co-op on the market, but it looks like we will not have 20% down on something bigger in the area we want to live, and no banks are giving jumbo loans with less than 20% (even 15% doesn't cut it). So, we will have to rent until we can save up some more money. We will be lucky to get out of our coop with our down payment and enough to pay off the realtor, I think.
We want to sell because we have two kids sharing a very tiny bedroom, and it is cramped. They are 1 and 5. But then, if we sell low, and can't buy low, are we kicking ourselves because the market may turn in the year or two it will take us to save up 20% for a bigger place? Sorry for the rambling... just feeling very confused by all of this and it seems like the market is changing daily.
Comments
Sounds like you are a little confused (which I'd think would be normal in this market).
Are you selling because the place is too small, or are you selling because you're nervous about the market?
Once you figure out which, it might be easier to give advice.
Posted by: 11217 at March 4, 2009 5:17 PM
wishinone,
When your kids are older their memories will not be of how cramped their room was when they were little. They'll remember a loving home.
I can't tell you what to do but if it were me, I'd try to stick it out. Jobs and money are not guaranteed right now so be cautious, save those pennies and enjoy the smiles on those little faces.
Posted by: TownhouseLady at March 4, 2009 5:40 PM
I wouldn't go from owning to renting if you love the nabe so much. Stick it out if you think you will be able to come up with the down payment eventually. The time will go fast.
We were sort of in the same situation 4 years ago. We lived in a 2 bedroom in Park Slope on the 4th floor. We had one child and knew we would have another withing the next year or so. Going up and down stairs was tough and we had no outdoor space. We loved the nabe but there was no way we were going to be able to afford a bigger place there. That's when we decided it was time to move to another nabe So we left PS for Bay Ridge. But for us space was more important than living in Parks Slope. So it was an easy decision.
If you love your nabe and want to stay I wouldn't give up ownship. You know, my mother's friend grew up in a 2 room tenament on the LES with her two siblings. She also had to share a bathroom with the rest of her neighbors who lived on that floor. And she has some great memories of those times.
Posted by: italiana71 at March 4, 2009 5:57 PM
Depends on what you think the market will do. If it goes lower, a distinct possibility, then you will be able to rent for a coupla years and take advantage of prices that have declined even further. But no one knows really.
Posted by: denton at March 4, 2009 5:59 PM
Denton, that is what we were thinking. That we should try to get out now before things go further south and we are in this place for much longer or lose even more money when we do decide we can't put off selling any longer. We like our apartment, but the second bedroom is 6 by 10, and we can barely fit a toddler bed and crib in there. My daughter really needs a regular twin bed and it's going to be another 1-1.5 years before we can do bunk beds, so I don't know how that is going to work.
I do think we can save up enough for a full 20% down payment (assuming we are able to sell this place and get our original down payment out of it), but it could take about 2-3 years.
Thanks for your thoughts, everyone. I appreciate it.
Posted by: wishinone at March 4, 2009 9:51 PM
Wishinone -
If you save up for the downpayment, will you be blowing your entire savings? That is not advisable, certainly not in the current economy (and when I say "current" I mean the next few years). Most everyone I know who is thinking of selling, is either resigning to staying in their home for the next bunch of years or "getting out now" and cashing out while they can. The important thing for you, as a seller, is to understand that your home, as an asset, has decreased in value from a year or two ago, and will continue to lose value for at least another year or so. Most pundits will tell you to sell now, and then rent (as NYC rents now are almost uniformly lower than ownership carrying costs), and wait until you can afford the bigger place when the market has hit bottom.
But, then again, it may be time for you to think about another neighborhood, sorry to say. You are seeing alot of owners outgrowing their small 2-bedrooms, and resigning to a move. Thats becoming a problem in Brownstone Bkln, where you have many converted coop apartments that have that tiny second bedroom, and young families having their 2nd kid and needing the space... It will be interesting to see how many sellers are likewise motivated to sell due to space and how that will affect the market in Brooklyn..
Posted by: saminthehood at March 4, 2009 10:51 PM
Sell now or regret it later. Prices will come down big time. RE never bounces back quick. It falls slowly and stays down (look at past busts like that of the 80's/90's - lasted more than 5 years). Plenty of time to take advantage of cheaper prices. You'll never see a housing boom/bust like this again.
After you sell, rent a duplex. If you can't afford it, temporarily rent outside of brownstone Brooklyn and buy back in when the market bottoms (NY Case-Shiller Home Price Index records zero change from previous year).
***Bid half off peak comps***
Posted by: Brownstones Half Off at March 5, 2009 12:00 AM
I have to agree with BHO. Put your coop on the market ASAP and list it low. Six months from now the local real estate market will likely be drastically worse.
Rents are more reasonable than they've been in years.
Park any profit in a money market fund and plan to stay in your rental for at least a year.
With a young family it's especially important that you don't go underwater on your current mortgage, so you really should sell ASAP.
The NYC sales market has held up well so far, but it's just a matter of time before the big declines become evident. Wall Street is history. It's not rocket science what's about to happen.
Posted by: IronBalls at March 5, 2009 5:38 AM
BHO, that is exactly what we wanted to do... list ASAP and rent a duplex. I've looked at rents and they seem pretty reasonable and we can get much more space for our same mortgage payment. Though, we will probably have to spend less to account for the tax benefits of owning.
As for list price, we would like to at least keep our original dp intact. I hope that is possible in the current environment. We bought at the end of 05. Two recent appraisals (within the last week even) in our building for refinances have come in pretty high, which was surprising to everyone.
It feels sort of lousy to go from renting to owning, but if we are going to stay in our area, that seems to be the best option for us. I would hope not to blow our entire savings on the next place, and maybe renting will give us a clearer picture of whether we can afford to stay in our neighborhood.
Posted by: wishinone at March 5, 2009 7:26 AM
I think the first poster had it right. If you are selling because you need more space, the whole topic of the market is moot anyway. Sell and find a larger space.
If you are selling for financial reasons, it doesn't sound like a good deal to me. If you could make some money off your place, then selling and waiting it out sounds like a reasonable gamble. But if there is a possibility you are going to lose out on the deal and then live in a rental while you wait the market out, I don't think that makes a lot of sense. Obviously its a gamble either way but the costs and annoyance of selling and moving are something to be considered too. You're presuming you will be able to time the market and very few can do that sucessfully.
Posted by: Mrs. Limestone at March 5, 2009 10:16 AM
If you are able to afford your current mortgage and are able to stay in the apartment even though space may be tight, I really don't think you should sell. Townhouselady is right - living in small quarters isn't bad for kids at all. I think you have missed the window for a clean getaway before the market goes down. Also, remember to factor in the transaction costs of selling, renting, and then re-buying. Give your kids a sense of permanence and comfort. Stay in your place, don't second guess yourselves, and stop paying attention to the market.
My advice would have a very different flavor if you were currently a renter deciding whether to buy. But you aren't. It also would be very different if this were 2007, but it isn't. By the time it is common wisdom that the market is falling, it is almost certainly too late.
Posted by: lechacal at March 5, 2009 10:17 AM
wishinone,
Sorry when I gave the advise above I didn't realize by tiny you meant that it had become truly untenable.
List it, you can always pull it off the market if the offers aren't what you'd imagine. Also, there is no shame in renting. You're planning for your families future. That's a good thing.
Posted by: TownhouseLady at March 5, 2009 10:18 AM
I too didn't see your follow-up about the space being too small when I posted. If you have to sell, then you have to sell. Not sure what to say other than that. Be prepared for a long and emotionally draining process that could end up giving you a price that is lower than whatever you currently consider your bottom line. Be prepared for buyers who know the market is weak and give you very low offers. I'm sorry you are in this position.
Posted by: lechacal at March 5, 2009 10:30 AM
quote:
but the second bedroom is 6 by 10, and we can barely fit a toddler bed and crib in there. My daughter really needs a regular twin bed and
that doesnt make sense. i lived in a 6 x 7 room (seriously) as an adult and was fine for 4 1/2 years. why would a toddler need a room bigger than 6 x 10? im not saying anything mean, but i think you should just stay put and take the advice of people here who are saying it. kids don't worry about square footage and how many bathrooms they have. live the best you can with what you got and try not to worry so much. things should get better eventually.
*r*
Posted by: PitbullNYC at March 5, 2009 10:49 AM
Since when is a bedroom 6 x 10 feet?
This spanks of the crazy ways that developers, etc. marketed places in the boom period. But that's not helping, I realize. Refinance appraisals can be a bit higher than sale appraisals, but they are still based on reality.
You say you bought at the end of 05. You may not MAKE money on the deal, but think of it this way: if you get out now, you might not have lost money either. If you price it fairly, I think people will respond in kind. Also, if you price it fairly FROM THE START, people will look at it, and that's half the battle. I think it will work out in the end!
Here's an interim idea: would it work to put the kids in YOUR bedroom, and kit out their bedroom with your bed? That way the kid stuff would be contained in a room, and you and your partner would have the rest of your apartment when they're asleep.
Posted by: Minmin at March 5, 2009 10:56 AM
Tough call. On one hand, for the first time in recorded Brownstoner history, I have to say I agree with BHO that selling now will give you a better chance at getting a decent enough price to make the "rent for a while and buy at the bottom" concept work. On the other hand there are the emotional/psychological aspects of moving, being a renter again, schlepping your kids and your stuff around, that make sticking it out in a too little space at least something to consider. Whatever you do I would say do it soon. Sell right away or decide not to and stop worrying about it (and the market). Most of all trust yourself and your decision making process. I also feel for your predicament but truly it could be worse.
Posted by: wasder at March 5, 2009 10:56 AM
I'm just going to throw this out there... it is totally worth looking in other neighborhoods for a place to buy. It won't hurt anything to look. Go to some open houses and see what's out there. You haven't said where you live or the price you could get for your coop, but entire houses can be bought now in some "less desirable" neighborhoods for the price of a 2BR coop in a "better" neighborhood (in quotes because good vs. bad is just a matter of opinion). Just sayin', it's worth a look. Also, if you sell and then rent without buying something else within a year aren't you taxed out the wazzoo for the profit?
Posted by: herkimermaid at March 5, 2009 11:05 AM
Rob -- They have 2 children in that 6x10 room.
We have a 6x10 room in our apartment, and it would be fine for one child, but with two it is not a good situation.
I would say, if the space is not a good living space for your family, then you need to find a good living space for your family. The finances are a secondary consideration.
Once you decide to move, you just need to figure out how to get the most for your money, which most likely means selling the current place quickly and renting for a while.
I'm among those who think the NY market will be going lower. I think the city hasn't yet felt the full effect of the finance layoffs due to severance packages that are letting people maintain fairly high income levels for 6-12 months. Those are going to start running out over the summer.
Posted by: northsloperenter at March 5, 2009 11:14 AM
Have you tried a trundle bed? I agree the younger one would be too young for a bunk, but a pull out trundle might work nicely. It could at least offer a short term solution until you decide what to do.
Italiana's idea of a move to Bay Ridge is a good one. Check it out, you may be pleasantly surprised - if you can work out the commute. And you will do well for schools too.
Posted by: HmmWhichNeighborhood at March 5, 2009 11:18 AM
if i were you, i would try to sell my place now and find the best rental in the best school district i could afford. it doesn't make sense to buy right now because although no one can tell where the market will bottom out, it's definitely still sinking. and no one can tell what might happen with your job, etc. but your current place isn't working out for you, and it sounds like you can afford the increased space you need (at least as a rental). use the rental process to learn about new neighborhoods you might like as much, or better, as your current neighborhood. you'll keep looking for places to buy while you rent, so that you won't miss the mark by too much even if the market does turn.
if you have minimal web skills or know someone who does, you can test the market for your place with very low costs. pay someone to stage your place for photos, list it in the NYT, and try to FSBO it. if you simply can't make any offers work, or you get none, then there's your answer. if you get good feedback but have problems with strategy or whatever, then you can bring in the agent and pay the commission.
Posted by: i disagree at March 5, 2009 11:26 AM
I think selling now isn't the worst idea, but I agree that you might want to rethink some other neighborhoods too. There are some deals to be had, in good school zones even! We recently did the same, two kids, same ages, but their room was 6x8! So I hear you. We ended up moving to a different neighborhood and although I was hesitant we are now very very happy to put down long term roots in Brooklyn. The weather is getting nicer, go for long walks and explore some other neighborhoods - you just might be surprised what is out there.
Posted by: WTbound at March 5, 2009 11:30 AM
I agree, trundle bed or sell now and rent. Or move the 1 year old into your room until he or she is a bit older and then reconsider the market.
Posted by: Heather at March 5, 2009 11:46 AM
Thank you for all of your thoughts, everyone. I agree that we do need to look at other neighborhoods. We live in Park Slope now, and my daughter goes to our zoned pre-k program. I think once we are secure with our kindergarten registration, I will feel more open to looking at other areas to buy. I want to look at Windsor Terrace, Kensington, Ditmas Park and Bay Ridge. I might consider Prospect Lefferts, as well, but I am not sure it is as family friendly.
My gut tells me to list it and see what happens. I'm definitely expecting low offers, but I think that if we can't make enough to get our down payment out and pay off the realtor, then we will know we need to stay put and explore ways to make our place work for us. I like the idea of a trundle bed (although our son is just 11 months, so it will probably be a while before we can pull that off), and we can also look at stuffing our bed into the little room and giving them our bedroom. Both good ideas. And, if we are able to sell for a decent price, then we will go find a bigger rental in our area and plan to stay there and save up and continue our search for a home we can really live in for a while.
You guys have been great at helping me clear up some of my thinking. I appreciate it.
Posted by: wishinone at March 5, 2009 11:53 AM
I could have written this myself. I'm in the exact same boat, but we've kept the baby in our bedroom so the older one could have a "big girl bed." (As a result, the little one is a terrible sleeper, and we're exhausted - but that's another story). Anyway, we're planning to sell and rent in Park Slope. We're held back temporarily by two things (1) the older child is starting kindergarten in September and we're waiting to hear on some school applications, which will affect where we want to/feel we can move to (i.e., are we limited to the 321/107 school zones?) and (2) our building is replacing the elevator, which will be totally out of commission until June - so, we can't move anything or really show the place.
But I agree that rents are getting more reasonable, and if you need the space, you do what's best for your family.
Good luck!
Posted by: Lesloaf at March 5, 2009 11:59 AM
Good luck wishinone - I just have to laugh, my son starts K next year too. I imagine we've all been at the same tours. Who knew?
Posted by: WTbound at March 5, 2009 12:21 PM
It's sad testimony that you need a "jumbo" loan to get a 3-bedroom home. Just throwing that out there.
Posted by: tybur6 at March 5, 2009 12:35 PM
i'm sure you know this, but getting your 1st into a PS school doesn't solve your problem for the 2nd, given that out-of-zone sibs are now far from a sure thing. in your situation, i'd wait to register at the K i wanted but make sure i move into a zone where i'd be happy to have both kids.
Posted by: i disagree at March 5, 2009 12:47 PM
i say go find the space and worry about schools later. it all seems to work itself out. just in the last 2 weeks, it's been announced that there are going to be 3 new schools in williamsburg: a new charter, a new montessori, and williamsburg northside is opening a new school that will go until 5th grade. not saying that you should move to williamsburg, just pointing out that all over gentrified brooklyn, parents are coming together. the pre-k and k programs at several public schools are all excellent too, btw: 132, 17, 84, 31, 110 etc...
Posted by: wine lover at March 5, 2009 1:30 PM
Can you rent out your coop enough to cover costs and then rent a new bigger place?
Posted by: boroughbred at March 5, 2009 1:49 PM
I am assuming just getting rid of one of the kids is out of the question? You're already "attached" to both of the? :-)
Posted by: tybur6 at March 5, 2009 3:06 PM
On the school issue, charter schools do reserve spots for siblings (we've applied to one charter school in our district and will find out in April), and other schools give some priority to siblings. But sure, the safe thing is to live in a school zone you're happy with (if you can afford it).
Regarding Bay Ridge, it's a very long commute to mid-town from there. No offense to the neighborhood, which seems to have a lot going for it, but if I have to leave Park Slope, I'd just as soon pack it in and move to Maplewood or Montclair.
Posted by: Lesloaf at March 5, 2009 3:22 PM
Our daughter is in pre-k at PS 39, and we have been happy there. I also really liked PS 10 and PS 107. I didn't tour 321 since it's already overcrowded and wasn't going to apply as an out-of-zone.
I do know a couple of people who've gotten younger sibs in at 321, even though they no longer live in zone. I figure if 321 can make it happen, the rest can, too.
I hear you on the sleeping arrangements, lesloaf. We had to kick our #2 out of our room because he was keeping us up all night. He sleeps through now and it is such an amazing difference. What's more, even if he does holler, his sister sleeps right through it (even if we don't).
And WTbound, I am glad you found a place to put down some roots. We would love to do the same, and who knows, maybe one day we will also be WTbound. ;-)
We are definitely not suburb-bound. We love Brooklyn and will try to find a way to stay, even if it is not in our much-loved Park Slope. I think as long as we can be walking distance to the park, I will be OK with it. We have a car so we can drop off at school in the am. My husband is much harder to please in terms of neighborhoods, and he commutes to midtown (west side). I WAH, so I just need a little corner of a bedroom and I'm set.
Posted by: wishinone at March 5, 2009 3:35 PM
As somebody who sold first and is currently renting, I strongly advise you to sell now. Since we sold last year, more and more friends of ours are deciding to sell first, rent, and then wait it out for a better price on a new place, which will surely come in the future. Already, since we sold, we've seen price declines that more than make up for the rent we're spending. And there is basically unanimous consensus that prices have much further to fall in NYC, since it held up for so long, but is now starting to show real signs of cracking which will probably only accelerate.
I would not advise this to just anyone, since if you love your place and it works for the long haul, there's no point in selling. But if you *know* you are outgrowing your place then it definitely does make sense to sell now. As your appraisals attest, prices are still relatively high, especially in hoods like PS, since quality is the last to go in these market downturns, but they are also not immune, as recent news suggests (i.e. NYT article of people walking away from 6-figure deposits in prime Manhattan since they are waiting for inevitable price declines. Also, spring is a great time to sell - who knows, maybe there will be a burst of optimism and you will get a good price. Since the alternative is to stay where you are (you don't really HAVE to sell, the way you would if you'd already committed to a new place), you really have nothing to lose by testing the waters.
As for the emotional part, yes, it can seem difficult - I was sad to leave the apartment where my kids were born, etc. but it was actually very liberating to become a renter and now I'm very happy. Believe me, having cash in the bank in times like this is very comforting. And since rents are coming down too, you are actually in a really good position.
I know how complex this all is - for us, school was a main driver of our decision, and I think as a result we sort of lucked out in terms of our market timing. But I see so many people struggling with these decisions which are all intertwined. I agree with the poster who pointed out that the most important thing for your kids is not the size of their room, but the amount of love in their home, which is really the most important thing. But if you can create a better financial situation for yourself now by selling (relatively) high and buying low later, you will probably be glad in the future that you took that opportunity. Good luck!
Posted by: Miss Muffett at March 5, 2009 3:38 PM
"Regarding Bay Ridge, it's a very long commute to mid-town from there. No offense to the neighborhood, which seems to have a lot going for it, but if I have to leave Park Slope, I'd just as soon pack it in and move to Maplewood or Montclair."
I am former PS coop owner and now live in Bay Ridge. My sister used to live in Montclair so when we wanted to upgrade to a house, we considered Montclair. I liked it. But it is not Brooklyn. I can hop on a train in Bay Ridge and be at BAM or BMA within a half hour. I can walk to do all of my shopping, school, library, etc. here in Bay Ridge. Plus my hubby's commute is just about an hour but doesn't have to drive his car to park it at the NJ transit train station. He walks two blocks to the subway.
If you want to live in a beautiful suburban town, move to Montclair or Maplewood. But if you want urban life stay in Brooklyn.
Posted by: italiana71 at March 5, 2009 4:29 PM
I will echo others and say you should sell now. I will also go out on a limb and suggest looking in the 'burbs. We recently left B'lyn for Westchester. We loved B'lyn, and it was hard initially, but now we are much happier. We love our yard, the space, the incredibly short commute to midtown (28 mins by train). And, we bought a nearly 4000 SF house built at the turn of the century that had been renovated for less than what we would have paid for a 3 BR apt in B'lyn. But, to each his own.....
Posted by: Splenda at March 5, 2009 5:46 PM
Splenda, where did you move? I can't imagine what we'd do with 4,000 square feet. Do you lose your kids inside? :-)
Posted by: wishinone at March 5, 2009 9:05 PM
First, tybur, shut up. Can someone ban this nujob?
Second: Definitely list it and see what happens. I'm starting to get really pessimistic that prices will recover any time soon. I'm thinking a total decline of around 40% from peak, then incremental (i.e., less than inflation) increases for a long time.
Posted by: Bolder at March 8, 2009 3:50 PM
wine lover,
Of the 3 new schools you mentioned, only one is public. The Montessori school that is opening is only up to age 6. Williamsburg Northside preschool is now going to 5th grade? Wonderful to hear that I have the option to be financially raped for $15k+ until age 10. God forbid I have a second child. For 30k+ I can afford to quit my flextime mom job and homeschool my kids, despite the fact that I might hang myself in the process.
Posted by: bqe1970 at March 9, 2009 12:37 AM
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