Open House Picks
Park Slope 108 Berkeley Place Corcoran Sunday 12:30-2 $2,650,000 GMAP P*Shark Windsor Terrace 1604 10th Avenue Turner Structures Sunday 1-3 $1,775,000 GMAP P*Shark Windsor Terrace 247 Windsor Place Brooklyn Properties Sunday 12-2 $1,250,000 GMAP P*Shark East Flatbush 3325 Farragut Road Fillmore Sunday 1-3 $559,000 GMAP P*Shark
Park Slope
108 Berkeley Place
Corcoran
Sunday 12:30-2
$2,650,000
GMAP P*Shark
Windsor Terrace
1604 10th Avenue
Turner Structures
Sunday 1-3
$1,775,000
GMAP P*Shark
Windsor Terrace
247 Windsor Place
Brooklyn Properties
Sunday 12-2
$1,250,000
GMAP P*Shark
East Flatbush
3325 Farragut Road
Fillmore
Sunday 1-3
$559,000
GMAP P*Shark
When I commented earlier that I thought 108 Berkeley would go for at least 90% of asking, I was making a bunch of assumptions that turned out to be dead wrong. I went to the open house, and am now of the view that the asking price is hugely aspirational (I am trying to be as generous as possible in my words). I don’t care how hot Brooklyn brownstones are, there is just no way they find someone stupid enough to pay anywhere near asking. Buyers picked that place up for $1.3 million in 2004 and have clearly done absolutely nothing to the place since then. Now they are trying to flip for $2.65 in a softening market? This is a 50′ lot, which means the lower duplex can’t even be turned into a proper 3-bedroom (i.e., a decent-sized family needs to take over the third floor too, leaving some meager income from the top floor to offset costs). There is a ton of money that need to go into the place before it is worth even close to asking.
Anyone else go to the open house who disagrees?
But you’d be homeless.
FOOD FOR THOUGHT
For the asking price of 108 Berkeley, you could:
– Send 22 kids to a private college for 4 years (with no scholarships at all).
– Buy groceries for an average American family of 4 for the next 368 years (that’s until the year 2376). Put another way, you could have been buying the same family groceries since 1640, shortly after Boston was first settled by Europeans).
– Buy 662,500 gallons of gas at $4/gallon. At a rather uneconomical 20 miles per gallon, you could drive to the moon and back almost 30 times.
– Have a concert in Madison Square Garden with your favorite band, and be the only person in the audience.
– Buy private health insurance for a New York family for the next 200 years.
– buy 8 Rolls Royce Phantoms (picture them parked along Berkeley Place bumper-to-bumper).
This trail of comments is coming to an end, but I still want to make one more post: I still hold that all of you finance “geniuses” are missing the bigger picture.
Your analysis is based on refuting the assumption that:
“247 is a unique house….”
Once again: Yes it is (Not that I have ever been in it, nor will I be attending the open house….).
Don’t believe it is a unique house?
Then please, somebody send me the link to where you can rent that equivalent property in the 11215 (Park Slope/Windsor Terrace) neighborhood…. Here are my requirements: I want to rent a family-sized place (3+ bedrooms, 2 bathrooms, and basement storage for bicycles, etc.), within a couple of blocks from Prospect Park, with a back yard, and some “charm” (period details, or a front porch, or something like that).
Guess what? There is nothing for rent like that…. So how can “finance guy” tell me it is cheaper to rent?
Stop counting beans and looking at your spreadsheets – pull your head out of the sand and look around…
“Where’s the What when ya need him? Summering in Lodi, again.”
Nope just chilling. This is a great weekend. I’m just resting and waiting for Monday.
BTW Gas prices are coming down but still retarded anyway.
lechacal I’m glad someone is using their experience investing money. The sad thing is the Hot Money has the Asshats believing they are “So smart”. You talking to people who are in the Worn Hole and their concept of reality is warped. The fundamentals are out of whack and trying to explain this is futility. Just let the market forces take care of this and you be able to pick up some great bargains.
The What
Someday this war is gonna end…
FatLenny: What you are doing is collapsing two different concepts: opportunity cost of down payment and capital appreciation. You are absolutely right that buying into a rising market means you earn a return on your down payment, but I think the most careful and thoughtful way to approach a real estate decision is to separate the two concepts, because they really are quite different.
Just for example, if your opportunity cost were very high (for example, if you were the owner of a successful small business that needs growth capital), then you actually may have been much better off renting and putting your cash into the business than buying in 2005. Just saying “I made money” isn’t even close to a good analysis. You need to be able to say “I made more than I otherwise would have,” and you need to have a good argument based on your own opportunity cost.
You clearly made a good decision to buy when you did. But that is the past, not the future, and humans have a curious inability to understand that a market’s immediate past is often a counter-indicator of a market’s immediate future. I have been through plenty of market cycles, and I always see the same herd-like behavior. I wonder how many people in 1988 would have had contempt for a claim that prices would be flat for the next 10 years. I’m sure they were all looking at prices from 1982 – 1988 when they said that was impossible.
And no, of course I’m not putting my money in a mattress. I am putting it in the financial markets, where I am doing just fine. I think there are a lot of reasons why New York real estate has kept going up during the credit crisis (this could be the topic of a separate and very long post), and I strongly believe that the exact opposite trend is about to take place (credit crisis will abate as New York real estate sees a sharp drop in prices).
Hey FL:
I happen to agree with you and I myself am bullish on Brooklyn RE and the South Slope in particular. Having said that, I will lay out the theoretical rebuttal, which is:
The S&P is in a bear market so some or all of the excess has been wrung out of it. Therefore we can expect a reversion to mean sooner rather than later, so you can start expecting a 9% return on that downpayment pretty soon.
However NY real estate has not yet been thru a corresponding bear market similar to what we experienced in the depression of 73-74 and the recession of 1989-1994. Therefore, it is time for one to occur, and certainly it is happening in the rest of the country.
Where’s the What when ya need him? Summering in Lodi, again.
lechacal – unless I’m missing something, your claim that a down payment is an expense (and not an investment) is entirely dependent on your curious assumption that the value of your home will remain flat or possibly decrease in value.
Let’s take a concrete example. I bought my brownstone in September of 2005 when everyone was predicting a bubble. I was sure I was buying at the top of the market, but I have 2 small kids and needed a home, so I just took a leap. My down payment was $500K for a $1.5M house with good rental income. After lots of renovations, I would say that I’ve made at least $150K (taking into account my increased cost basis) in 3 years on my $500K investment, a return of 30% in 3 years. And this in the midst of a difficult market.
Meanwhile, the S&P was at 1228 in Sept. of 2005 and is now at 1296, an increase of 5.5% over 3 years or 1.85% annually. Now, please explain to me how my down payment is an opportunity cost and not an investment, when I’ve just made more than $120,000 more than I would have if I had put $500K into the stock market? And don’t tell me that you can consistently outperform the S&P. If you can, most of us certainly cannot.
As for the Real Estate market in Brooklyn over the next 10 years, I happen to be bullish especially considering how well it has retained its value during this credit crisis. I would be shocked if you could buy any house in the PS area at the same price 10 years from now. If you’re right, you should put your money in a mattress. That will have been the only safe place.
Slick, that’s because WT was traditionally a cop neighborhood, according to my friend’s retired cop uncle. Something he told her when she took an apartment in WT.