To Buy or Not to Buy
We rent a two-bedroom in Park Slope for over $3,000/month. We have $120K sitting in the bank ready for a down payment and could easily make a payment of up to $4,500/month. We could afford to buy an apartment, but we are in no rush as we live comfortably now. When we do buy, we…
We rent a two-bedroom in Park Slope for over $3,000/month. We have $120K sitting in the bank ready for a down payment and could easily make a payment of up to $4,500/month. We could afford to buy an apartment, but we are in no rush as we live comfortably now. When we do buy, we are looking for a 2 bedroom w/ outdoor space. What are your thoughts about the market – should we hold off and sit tight until the market falls further, or should we jump in now? Is there a general sense it still has up to 30% to fall?
And CrownHeights07 – I agree with your 2002-2007 numbers, but if your cousin had waited til 2009 to sell, the profit would have been much less (and probably even less in 2010). What am I waiting for? The right house, at the right price, and those prices indeed were back a few years, and I am convinced we are heading back there.
my theory on this:
prices fall in different areas on different pace.
Prices in bad areas fell quickly because there is a lot of people used strange assumptions when took loans. A lot of blue callar jobs lost, people in bad areas did not have savings/401Ks to fall back. There is a lot of foreclosures, which drive prices very rapidly, etc. On the other side “good areas” do not have foreclosures, which drive prices down. A lot of houses in good areas do not have mortgages and owners not in rush to sell house in discounted price. So there is obviously a gap widened between good and bad areas as prices fall.
The question is: is this gap realistic? Slowly the gap will narrow to get in line with income difference. In other words prices in bad areas fell sharply, but quickly. Prices in good areas will keep falling slowly. So I would expect Park Slope prices to fall.
PS I own house in BayRidge so it would be natural for me to give opposite advice – buy, save the prices, save my equity.
Benson – Money is tight all around now, and contrary to your suggestion, I’m a civic-minded person. I would hate to see this person make a big financial mistake.
I’m not saying no one should buy now, so this is not about my “investment in my position”. To someone who finds the house of their dreams, at a price they can really afford, where they can stay for a very long time, I would say: sure, take the plunge if the property is unique and you love it. It will almost certainly go down in value (perhaps a lot) in the short-term but if you stay there for 20 years, it will also likely come back up.
But buying a 2 BR today – unless they want to stay there for a very long time, which I guess is possible if you don’t have kids, or like smallish spaces – seems unwise, verging on foolish, unless you find a deeply discounted property.
Miss Muffett;
Please take a deep breath. Reconsider the use of paragraph spacing in your posts.
To the OP: please take the LONG message without paragraph spacing as an indication of the mental “investment” someone has in their position.
Miss Muffett, if you had bought a 4 storey house in 2002 and sold it in 2007, as my cousins did, you would have walked away with 500,000 USD. What are you waiting for ? Laughter…if you find something you love, and know it is your home, negotiate hard and make an offer. Dont wait. Just pls dont go for an apt. with that kinda of money Get a house. You will regret it one day.
Mrs. Limestone – I must take issue with your comment that it will be too late to act when we hit bottom. Real estate moves slowly and so what you say is just not really true. I mean, yes, perhaps you cannot time the bottom exactly, nor should you aim to, but missing out and having to deal with galloping price increases is really the least probably scenario anytime soon. Even the rosy forecasts that predict a relatively short-lived downturn concede that what follows will be very modest growth, nothing like what we witnessed in the previous decade. Those who predicted price declines earlier were calling out that the emperor had no clothes and were mocked, but ultimately were proven correct. We are now in a totally new environment, and I think it is irresponsible to scare people into “missing out” and buying precipitously.
It is currently common wisdom among many people in the Brooklyn market that one who is able to buy should do so regardless of where we may be in the market cycle. I find this view to be held largely by those who already own.
I believe that in the next few years it will become common wisdom that one who is able to buy should wait. It is then that the greatest buying opportunities will present themselves.
I’d get a cheaper rental, save more and hold. If you’re paying $3K a month your rental is probably nicer than what $4500 a month would cost you to own — however, you’re already at the high end of the current rental market for 2-bedrooms, so why not economize there?
As someone who has been following the market VERY closely for years now (including studying the past very carefully when we first bought years ago), I urge you to take your time in buying. If you have a comfortable affordable rental, and don’t need to move, time is on your side. That does not mean you should not be looking – we basically have looked continuously since we first started thinking of buying in 2000 and even after that since I became interested in the market and knew our first place was a “starter” home and that eventually we’d want more space. The advantage is that I became extremely familiar with the market which is always very important to be an informed buyer. Prices now, while starting to come down, are still very high by historical metrics, and there is nearly unanimous consensus that they have significantly farther to go down to correct (the debate is the exact % of declines, but pretty much everyone concedes they will fall more – some say 15% more, some more draconian think up to 50% from peak, which is not crazy when you factor in a 300% rise in the last 10 years). That said, you may get lucky and find a motivated seller who does not want to wait 6-months to a year for this to happen, and may cut you a big discount (some say this decline will ultimately be steeper than previous ones). And, if you find the home of your dreams, and you can afford it, and – crucially – plan to stay there for a LONG time, go for it. But I would especially caution against buying a starter place now that you will outgrow in 5 years or so (which is what happened to us with our first apartment) since it could decline in value from here forward and then take a long time to climb back up. I myself can afford to buy but am also renting a very nice, economical apt and feel absolutely no rush – I am certain my patience will be rewarded and we’ll get a much better deal – but I am constantly looking out for what’s out there, to keep informed and possibly spot a deal…