Has the Bubble Finally Burst?
The NY Post certainly thinks so. They report that single-family home prices fell in the city 7.4% from July of ’07 to July ’08 (though the number is 16.3% for cities they surveyed overall). They point to a Park Slope brownstone whose price has sunk from $2.8 million in January to $2.35 million now; still…
The NY Post certainly thinks so. They report that single-family home prices fell in the city 7.4% from July of ’07 to July ’08 (though the number is 16.3% for cities they surveyed overall). They point to a Park Slope brownstone whose price has sunk from $2.8 million in January to $2.35 million now; still seems like pretty close to bubble prices to some folks around here. We’ve been seeing prices fall in some new condo projects around town. So is this it, the moment you’ve been dreading or dreaming of?
NY $$-Home Bubble Bursts [NY Post]
Bubble. Photo by Pepa….!
I am currently a brownstone seller, I may lower my price but not by much. Now if I was a developer with many 1 bedrooms and studios I would be nervous,
I totally understand Bxgrl and I think your feet will be fine ;).
It’s just that I’ve been listening to all the back and forth in recent days (weeks? months?!?) of the advantages of renting vs. owning and owning vs. renting I didn’t remember hearing anyone make this point.
We deliberately bought below what we could “afford” so we could set up and aggressive payment schedule and have 8 years before we retire to just bank our income. We got a traditional 30 yr. fixed but with the additional payments towards premium bi-weekly it’s end up being an 18 yr. mortgage. Provided we are able to financially maintain the extra payments.
As a renter, I’m able to sock away all that extra cash like mad. Its nice to be liquid and debt free in this economic climate. Also, keep in mind, there are plenty of good investments other than real estate to build a fat nest egg with.
I don’t hate, though. Some of my best friends are home owners.
“most renters I know are NOT socking away that “extra cash” they are supposedly saving by not buying” –11217
yeah. that is the scary part. I’m amazed when I talk to my peers (early 30s, working but not lawyers or anything) and realize that most couldn’t come up with anything beginning to resemble a down payment. I think there’s a correlation between that and the way I’m always envying their travel and wardrobes and stylish home furnishings.
The bubble may have popped but the deflation hasn’t even started.
Most of almost any market is psychology, and it is bad and going to get worse. And guess what it really wont matter all that much if you are in a “crappy” new condo; a “fancy” old Coop, or a beautifully restored Victorian brownstone – all are in the same market, all are affected by the same psychology , all have suffered price appreciation totally unjustified by sustainable economic conditions and ALL are coming way way down.
Trust me in 18mo->2yrs very few people will be criticizing renters for “throwing their money away”
It is entirely likely that NYC will will the same price deprecations as felt in places like Fla and CA – yes NYC has a much more “limited” supply and more inherent demand but NYC has also just lost its major industry for the foreseeable future.
Bxgrl….I think TL is referring to the fact that many people are finished paying for their home in 30 years or less. That’s when the REAL benefits of home ownership come into play.
In 2035 when rents (at current levels) will be $10,000 a month for a 1 bedroom, I will be finished paying for my home and will have only taxes, maintenance, etc. to pay.
I don’t want to be 65, retiring and on a fixed income and have to deal with moving, rent increases and all of which goes along with that. It would be fine if I were in rent control as many of our older population are these days, but that is no longer the case for most.
Buying a home means one thinks more about the future, I think. I’m happy to know that my golden years will be just a tad easier now that I am a homeowner. And that has absolutely nothing to do with resale value. It’s my home.
I certainly understand the flip side, but most renters I know are NOT socking away that “extra cash” they are supposedly saving by not buying. Half of this country’s population over 55 has less than 10,000 saved for retirement.
That is staggering and shocking.
As someone who both benefited from the real estate boom (we sold a few months ago) and is currently renting and planning to buy again soon, I can offer the following perspective. First, many people profited very handsomely from the recent boom and while I consider myself lucky to be among them, I also feel real outrage at the mess we’re in, and the many less fortunate people who will just be screwed by the current financial situation. And, while we made a tidy profit from our real estate, we, like many (if not most) people we know, are still nervous about how this economy will affect us personally. Unlike the rogues who really made a huge pile in the boom (wall streeters socking away giant bonuses), we are still in a somewhat precarious financial position should we lose our jobs since we have not been making 6-7 figure salaries all these years.
Luckily, we are pretty frugal (we’re currently renting a modest place, and while we need more space, we also don’t need something fancy). We did not originally plan to sell before buying a bigger place for our growing family, but needing to move to a better school zone forced our hand, and given the negative economic indicators, it seemed a good gamble. That said, for reasons many have cited on this list, I’m not sure if NYC will really crash per se. And, even though on a purely selfish level, I’d love to get a great deal on a house, I also worry for the greater good (my own stake included) if NYC really takes a bath. A big real estate crash, and all the attendant ills, will not really benefit anyone. In the same way that, as much justifiable outrage as there is now about the 700billion bail-out, no one will benefit if we let our entire financial system collapse.
So, I see this moment as one that is decidedly mixed for me personally. I guess the ideal outcome, IMO, is a significant correction in the market, to make it more affordable to the many people who were priced out in the boom years – good, hard-working people who just don’t pull in huge salaries but are involved members of their community – without pulling the rug out from the NYC tax base.
And of course, I’m still hoping we can get a deal on that house we’re dreaming of, but as I’ve said many times, we’re not waiting for a totally unrealistic price. We fully expect to pay significantly over 1mil for a decent, albeit small house in a good hood (i.e. PS, in a good school zone). But whereas prices for what we’ve been seeking have been hovering around 1.7+, we’d be thrilled to pay 1.2-3. Of course, this level of specificity is impossible to predict, but I’m simply saying that those who hope to buy a nice brownstone for a song might want to be careful for what they wish for. And lechacal, as to your point about overpaying for a home instead of stocks, for me, I still think that I will not mind overpaying somewhat (i.e. I won’t pass up the perfect house just to “time the market” as long as the price is reasonable). I know how hard it is to find something you love, and if you really are going to stay in there for life, as we intend to, eventually that small overpayment may not matter. Provided, and this is the key point that too many people forgot these last few years, that you are not stretching beyond your means in the price you pay. As the buyer pool shrinks in this climate, sellers will have to price more realistically as those buyers that remain, like us, will refuse to stretch to pay absurd prices that indeed may be beyond their means.
THL- oh I know there are many advantages to owning. I may be shooting myself in the foot, but I really have neither the resources nor the will to own a house. At least right now. And there are so many other expenses and responsibilities added to owning a house- believe me I have the utmost respect for homeowners who make that choice. I’m just objecting to the dichotomy that sebb has laid out and quite a few others have played into on brownstoner in the past.
(think you’re in trouble if you stop paying your mortgage- try not paying your rent! 🙂
“People have been documenting their income and forking over 20+% down-payments to get mortgages for their Brooklyn apartments throughout the entirety of this run-up in prices.”
Yes, but I’ve also seen a heckuva lot of 10% down sponsor sales in the past few years. It gives one pause.