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
How can anyone save a downpayment?
We did it in the late 1980s and early 1990s, be living as absolutely frugally as possible, something that (with Metrocard and free entertainment all summer) is easier here than elsewhere, housing costs aside.
At first prices were skyrocketing faster than we could save, making it seem like we would never catch up — just like now. But then prices crashed back to levels people could actually afford — just like they are about to.
The answer to the Times question is that it is better to own thatn rent if you plan to stay — except in a housing bubble, which is what we have.
It was reported recently that there are seomthing like 5,000 new condos in development in or near downtown Brooklyn (not counting elsewhere in the boro). And, of course, these are all luxury condos ($400K+ for studios; $800-900K+ for 2 bd). No one can tell me that either a lot of them will end up as rentals (as in the recent item about the building in DUMBO) or will have siginifcant price cuts. Time to buy a condo is 12-18 months form now…
they did. we’ve just got many of the bitter renters out in full force on this one today.
I thought Brooklyn home values jumped 20% last year?
“500k with $750 per month”
so find a place for 400K and a 500 a month maintenance. it’s possible if you want to buy something similar. you clearly don’t and that’s fine for you.
“I personally believe they will remain flat at best for a long time ”
yes, because everything now and in the past has shown us that home prices in new york stay flat for long periods of time.
can you tell me what you’re smoking, exactly?
This is the Ben Stein article referred to above:
http://finance.yahoo.com/expert/article/yourlife/21845
10:33 – I don’t know what $800K property you’re talking about that costs $15K in taxes and $10K per year for heating. My $750K townhouse only costs $1900/year in taxes and about $3K to heat.
Then I also get the interest deduction. And the rental unit income. And the rental unit tax deduction. And a back yard. And 2 whole floors to live on. And the option to actually make my house nice instead of being subject to some cheapo landlord’s crappy taste (ie: my apartment prior to buying).
And when you net this all out, I’m paying about the same as what I was for half the space in a neighborhood where you hear gunshots at night.
And this doesn’t even take into account that comparable sales in my neighborhood have already gone up at least 5% in the past year.
What do you think of this WSJ article that made a similar argument? (you need to subscribe to read it, but there is a quote):
Q: But I have to live somewhere! And I have to pay something for a place to live. Certainly it’s better to pay “deductible” mortgage interest than rent.
A: Buying a house with a long-term mortgage is just another form of renting.
Mortgage interest is rent that you pay to your lender for the use of its money rather than to a landlord for the use of his house. Yes, the government picks up a portion of that with the tax deduction, but most of your monthly payment neither builds equity nor is deductible. It just goes down the same black hole that sucks up any other renter’s money. And it takes 20 years before a typical borrower pays more principal each month than interest.
“I have to pay something” is a rationale that home buyers use for going deeply in debt and paying tens or hundreds of thousands of dollars in interest to buy a house that, they mistakenly believe, will make a big profit for them down the line.
http://online.wsj.com/article/SB117329581356629863.html?mod=djemTMB
Ok, maybe “normal” people need to buy a starter apartment in the city before they can get a brownstone, but you can’t tell me that “normal” salaries have kept pace with housing appreciation in the city over the last 7 years or so. They haven’t. So yes, Rachel, it used to be easier for a normal person to buy a brownstone. Now it’s not.
By the way, (and this is kinda sorta but not really totally off-topic, sorry) whoever it was who mentioned the price of milk and eggs made a good point. We’re seeing some serious inflation in this country. That’s going to be a problem very soon. Anyone read the Wall Street Journal article “Crop Prices Soar, Pushing up Cost of Food Globally”? It’s subscription only, but you can google the title and find it for free. Anyways. Who cares if the value of your home appreciates 5% a year, if the price of everything else is “appreciating” even faster?