Oh, Inverted World: Renting Better Than Buying?
As prices for residential real estate were reaching all-time highs around the country back in 2005, the smart money decided to wait it out on the side lines in a rental, says the New York Times today. And even though purchase prices have fallen considerably since then and rents have ticked up, when you add…
As prices for residential real estate were reaching all-time highs around the country back in 2005, the smart money decided to wait it out on the side lines in a rental, says the New York Times today. And even though purchase prices have fallen considerably since then and rents have ticked up, when you add in all the expenses of owning (taxes, maintenance, mortgage), it’s still a better bet to rent in most markets. For buying to make sense, the article asserts, you have to believe that your local market will appreciate five percent a year for the next five years. Do you think Brooklyn, and New York City as a whole, can do that?
A Word of Advice During a Housing Slump: Rent [NY Times]
Photo by bondidwhat
The best way to afford to live in nyc is to buy in a fringe or unhip hood, sit on your investment and when your equity rises, cash out and upgrade.
The problem of course, is that wher you want to move, the rates in the hip areas have also risen so you’ll have to settle for something smaller in a more desirable locale. It’s not impossible but does take patience. Good luck.
WT Economist,
It’s very possible to save for a down payment, but most people are loathe to sacrifice their cars, vacations, take-out, happy hours, etc. In the end, the desire, patience, and maturity required for such a big step is simply not there.
(As a homeowner, I would like to see more couples and families of all kinds with kids buying to “settle”–to be part of the nabe, have their kids play with mine, use the local schools, hang out with me on the stoop, help shovel the walks of the old-timers, etc.)
Makes sense to me. Now two things have happened in the market, once cyclical, one structural.
Structurally places closer to the center have become more valuable that those further away, reversing the last century’s suburbanization trend. When we bought in 1994 our WT rowhouse cost the same as a 1940s rowhouse in Forest Hills and a 1950s ranch in the Levittown school district. Now, I would expect WT to sell for more, significantly more if the schools were ever reasonable here. That is real.
But the cyclical thing, with the credit bubble, overwhelms this. I expect NYC real estate prices to remain high. But it is quite a distance down to high.
Must be something in the WT air or water, but I am also an owner praying for a market, um, adjustment. Prices are so out of scale–remember, median income in this city is something like $36K, meaning HALF the people who live in NYC earn LESS than that–that it seems like only investors are buying. As a homeowner, I would like to see more couples and families of all kinds with kids buying to “settle”–to be part of the nabe, have their kids play with mine, use the local schools, hang out with me on the stoop, help shovel the walks of the old-timers, etc. I have a lot of equity I’m not looking to use because I’m happy where I am, and I would genuinely like to see other people afford this piece of the “American dream.” More people owning would benefit my community and me more than fewer people getting super rich. Hope that makes sense.
uh anon 10:05 if you missed it most of the posters on this board need someone to help them master the obvious…which is of course the fact that NYC real estate is a game that everyone will win!
David, one thing I can say is that it is a damn good thing we have the brilliant light of your powerful, rational mind to illuminate every discussion on this board. What would we do without it?
And what have you said here? That the market may go down, you don’t know, but that if it does, the NYC market – intertwined as one asset class will eventually cause price pressure on brownstones? You are a master of the obvious.
Bravo.
All you need to know is that GW Bush wants you to own. The “ownership society”, remeber that? Ever wonder what his motivation was?
It is scary how many people believe anecdotes, insults or hyperbole is a rational response to what is essentially a macro economic question.
I also think it is funny how people believe that their own purchase is somehow insulated from the rest of the market – i.e. I bought in a fringe area so I got a better value and wont be hit as bad vs. I bought in a prime area which will always be desirable so I wont be hit or I bought a Brownstone which are unique so my home wont depreciate like those condos or NYC is different etc…
These arguments may or may not have some validity but no one will know until the future has come and gone.
One thing is certain on a macro level – at some point NYC Real Estate will fall in value by some % and residential real estate is essentially a single asset class, and New York City is a completley intertwined market; so if prices fall they will tend to fall across the board – it is possible that one subset (be it neighborhood or house type) will fall less but in the end the prices are all related and rise and fall together – and if one subset gets too out of wack in relation to others the market corrects – which is why when PS Brownstones rise like crazy, nearby neighborhoods begin to rise shortly after (since people soon figure out that it isnt worth 2x the price to live in PS), hence if condos/coop fall in price by a large % it will only be a matter of time before Brownstones fall, b/c all but the most diehard Brownstone lover will be forced to consider the relative value of an apartment vs a Brownstone…and so on.
I just hope that the people here who seem so convinced of their RE purchases/investments based on what are so clearly emotional rationalizations are in fact protected by a lot of equity, high salaries or both.
Even a stopped watch is right twice a day