House of the Day: 145 Bergen Street
From what we hear, the market for nice houses in Boerum Hill is still pretty tight. And compared to some houses in the area that have been on the market recently, the $2,000,000 asking price for 145 Bergen is not particularly high. That said, there are too many question marks with this place to feel…
From what we hear, the market for nice houses in Boerum Hill is still pretty tight. And compared to some houses in the area that have been on the market recently, the $2,000,000 asking price for 145 Bergen is not particularly high. That said, there are too many question marks with this place to feel optimistic about its chances of selling at this price. The house had its last major makeover back in 1968 and, given the fact that it’s a four-family rental, it’s unlikely that the interiors are in great shape. (The lack of photos lends credence to that theory.) Has anyone been inside this place?
145 Bergen Street [Craigslist] GMAP P*Shark
Converting houses into condos: Profit because the condo price is way too high relative to the rental value. (At Bear Stearns, we call this arbitrage). Make lots of money short term. Also, increase supply of condos, decrease supply of rentals. The medium term market impact is predictable. Don’t get caught with your leverage down. I mean up.
6:22 here. Johnife is right; I did my math wrong. I wrote 7% but I calculated at 10%. So I’ll have to match the stock market, not the bond market, to get my $40m.
11:48 – how old are you? Prices dropped in most of NY almost every year from the depression through the 1970s. Adjusted for inflation, they took another big hit in the early 90’s.
Converting rentals to condos will work for a while, and then there will be a lot of condos on the market and sales will stop. If your timing is good, you’ll make lots of money and if not, you’ll go bust. It happened to Olympia and York and to Trump last time.
The important point is 7:33pm, 10:01am: the reason people who bought in 1997 made lots of money is NOT that the real estate market has some kind of automatic guarantee that stops owners from being losers. It is because they bought at the beginning of the biggest RE price increase in US history in the city that went up most of all.
If you bought your stock in 1980 and sold in 2001 you also made out like a bandit — 18% a year for 21 years — but that doesn’t mean that someone buying in 2001 had any reason to think that the same thing would happen again.
If you bought a Brooklyn brownstone at almost any time in the last 50 years except for the last 5 years, you could make a decent return renting it out — with no capital appreciation at all. Today, if you buy at current prices, you will lose money every month renting it (or relative to what you would pay to rent it, if you live in it).
You can only make money if you can sell it to someone else willing to lose even more money in the hope of flipping it to someone else with the same dream. That works for a while — at least the last 4 or 5 years for example — but it is impossible for it to last forever. In the end, lots of people in all income ranges in this city are willing to rent, and it isn’t all that hard to convert rentals to sales or vice versa, so rents and purchase prices can’t stay radically out of whack for long.
The only way to justify current prices is to believe that there is a large pool of centimillionaires willing to pay any price, because money doesn’t mean anything to them, to live in the neighborhood. There probably are some of those. But to keep prices up, there have to be more of them, over time, then there are homeowners who bought at 10k and are sitting on $2m capital gains and decide to cash out.
The second the crowds of homeowners who bought before 1996 and are sitting on capital gains decide that the beaches, or the suburbs, or retirement homes, are looking pretty good decide to sell, they are going to run out of buyers.
And don’t bother with the stories about the Manhattanites who sold their apt for a fortune. All the people trading one overpriced property for another don’t count — they just cancel each other out. Trade my million dollar cat for your million dollar dog provides some liquidity but doesn’t support the market price. It is the new buyers — the Bear Stearns bankers and the international elite — who supply the new cash to finance the ones going out — the early buyers who see other uses for their money than keeping it tied up in Brooklyn real estate.
The reality is that there are thousands and thousands of lucky homeowners in the newly elite neighborhoods of Brooklyn. And there are very few people — 15 or 20 in the last year? — who can afford and are willing to drop several million for a house in Brooklyn. It only takes a few more sellers deciding to cash out to end the bubble.
Then, we will go back to a more normal market in which the new money is first time buyers and additional mortgages by people trading up — which means that new money is constrained by income.
People who bought ten years ago were smart or lucky. They are going to do just fine even if their houses lose half their value. That’s exactly why people who buy now need to worry. The owner of this house might well be delighted to get one million towards his retirement if he starts to think that in a plummeting market he’s going to get less the next year. After all, he probably only paid 10k. Which means that the market is unsteady, hard to predict, and highly risky. A great time to sell. Not such a great time to buy, until prices make more sense.
Johnife: This is 6:22pm. I started with 2.6m, not 2m, because I included the saved real estate taxes — and I assumed that taxes were eventually going to get up to 1% of the current price of the house. I don’t have a spread sheet handy, so I just used the standard rule of thumb, the rule of 72. Feel free to post the more accurate number. It won’t be off by much.
Your tax calculations are completely wrong, as 7:33 pointed out. Unrealized capital gains aren’t taxed.
Never in my history living in nyc has the market dropped drastically, just minimally and it has, like the market and always will come back twice as strong, thats why Im converting houses into condo’s. You doomsayser really are probably losers, that why a small percentage of people are filthy rich. They know whats really going on and don’t listen to those who are clueless, like some of the people on this blog.
11:36 = the what
bear won’t exist in 3 months? can i quote you on that in 3 months when they are not only alive, but kicking? you are a TOTAL moron.
You think the Bear guys are going to get 2mm this year instead of 5, you know nothing about nothing. Bear won’t exist in 3 months. There’s about to be a glut of banker resumes making the rounds, just as other I-banks are cutting staff. Dream on, brokers, looks like The What had your number all along.
You think the Bear guys are going to get 2mm this year instead of 5, you know nothing about nothing. Bear won’t exist in 3 months. There’s about to be a glut of banker resumes making the rounds, just as other I-banks are cutting staff. Dream on, brokers, looks like The What had your number all along.