To buy or not to buy?
I know this is an age old debate and I’m sure people are sick of talking about it. But… if anyone is willing to throw in their opinion on buying in this market, I would appreciate it. We are getting close to an accepted offer on a place in Park Slope. We have a personal…
I know this is an age old debate and I’m sure people are sick of talking about it. But… if anyone is willing to throw in their opinion on buying in this market, I would appreciate it.
We are getting close to an accepted offer on a place in Park Slope. We have a personal need to buy (first baby on the way and current rental a bit too small). We like the place we are negotiating on. We could see ourselves there for the next 5 years or so. But it’s also not like a dream, perfect home either. It’s doable, we like it, but wouldn’t be heartbroken if it didn’t happen.
Also, we are VERY nervous about the economy and the impact that is likely to have on Brooklyn RE. Manhattan and to a large extent Brooklyn have bucked the national trend of bloodbath in the RE market to date, but we’ve seen prices starting to get cut in Brooklyn and places just not moving- even in prime areas. So we’re worried that we’re at the cusp of a real downturn, and are pretty nervous that we are “buying at the top of the market”. We are likely to get our place for about 7-10% less than ask, but is that enough of a correction to insulate us a little bit if there is a downturn (which we feel is likely)?
It’s confusing. I know that no one has a crystal ball on this- I’d like to hear peoples opinions on the topic.
OP here – Thank you all once again. Your comments are very balanced and helpful.
4:27- we have indeed done the calc. We can carry the place on a single income (we both currently work) so I think we are in good shape to brace against a downturn. It’s more that we’re worried about what would happen if we want to move out when the market is still down (grow out of the place, leave the area, etc.).
Anyway, I think at the end of the day, our gut instinct is to try to move forward but be conservative about price and try to keep the emotions out of this. We feel that we have given a fair/generous offer but one that is at least slightly protective against a downturn (about 7% less than ask). We hope it is accepted.
have you done the after tax calculations with the deductability of mortgage interest and real estate taxes???
I was sure that I was buying at the top of the market in September 2005 but I was just too tired of renting to wait for the long-awaited housing slump that everyone was predicting. And, thankfully, Brooklyn properties continued to appreciate despite all the bad national stats. Prices in good nabes will stay high as long as Wall Street stays strong and unemployment low in NYC.
The national foreclosure stats will probably increase for another 6-9 months (based on the resets of 2/28 subprime loans) but everyone in the industry knows that, so I think that bad news is priced into the market. As long as the economy doesn’t totally tank, you can expect prices to go up despite national trends.
I think your own job security is a crucial factor. Will you be able to weather the storm if things go south? Obviously, the worst case scenario is that you have to sell your newly bought house in a down market because you can’t make your payments.
btw, just to address the thing about all property values except Park Slope dropping if there is a recession – the only way that can happen is if people move to the suburbs and give up on the city entirely, instead of buying in any area in Brooklyn other than Park Slope.
All studies and stats show young white professionals want to stay inside NYC. Those who move to the suburbs right now are people of other demographics. Those young white professionals might decide to rent not buy, but then rents go even higher. Which makes them want to buy. This isn’t something one should bank on enough to run out and blow the bank buying a place at top dollar! But it’s a major factor to why at least so far, knock on wood, NYC has hung in there when the rest of the country has sadly had a tough go of things.
If you have only one child, and it’s an infant (congratulations!) then you can stay in the place longer than 5 years if need be, even if it’s not ideal for long term. It’s a bigger dilemma for people when there’s an older child or more than one child to consider. If the market slows to where you don’t want to sell in 5 years, you can hang onto it. It’s a nice position to be in. Just utilize outdoor spaces and the numerous cafes and coffeeshops available nearby if the place is small and feels cramped. Also think about getting a storage unit (there’s one next to BAM) and use it as an off-site library room and storage room for the next few years. Which eases up the clutter in a smaller than ideal place. Good luck!
Also be sure to get an inspection and make sure there aren’t any big surprise repairs or updates on the building coming up in the next 5 years that you as co-op owners will have to chip in and help pay for. If it’s a co-op, that is.
Bottom Line, if you’re buying becuase you need/want more space don’t worry about timing the market, just find a place you like and do it.
traditionally, larger apartments fare better in a downturn. also nicer neighborhood fare better than more marginal neighborhoods.
In NYC in general and Brooklyn in particular, gentrification is going against the downturns due to larger economic events. As neighborhoods become more secure and add amenities, property values go up.
Quite honestly, I am looking to buy and not sure how it plays out myself.
5:52’s (and 7:30’s) comment that the glass is half full if prices decline because the price of bigger places will also decline doesn’t really work here, unless you bought at a low. If you can’t sell the current place for the cost of the outstanding mortgage, not only are you losing your original down payment, but you have no equity to put down on a larger place, even if the price is low. You are no better off than you’d be if you simply rented until the price of a bigger place became affordable.
That being said, as long as it is a place you are willing to stay in for a few (or 5) extra years, this isn’t a problem. And I don’t think it needs to be exceptionally large — if it has 2 bedrooms, you can always have the kids sleep 2 or even 3 in a room for a while if need be. It’s not forever, just until the market recovers. Hopefully the market will be fine and you won’t have to worry about this, but as long as the worse case scenario is something you can live with (i.e., having kids share a room, being a bit crowded for a while) you can wait it out until the market recovers.
Thank you very much to all of your for your advice! I really appreciate the time and thought you put into your responses. Very good advice and I’ll review these comments with my husband tonight and figure out our next move.