Open House Picks: Six Months Later

bklnbaby: I seriously doubt you are ever going to see livable (ie, not in need of serious and expensive reno) brownstones in any of the best brooklyn neighborhoods ever trade for under $1 million again. You might find a busted up brownstone for under a million someday that you need to drop a ton of money into, but the price tag on that includes reno and therefore isn’t actually under a million.

You will see a lot of condos and coops that would have sold for well over a million at the top of the bubble trading for well under a million. You might see some brownstones that would have traded for $2.5 million at the top of the bubble trading for $2 million or maybe in the high $1s (or mid $1s if things really fall apart). You will see the low-quality vinyl-sided rowhouses in places like South Slope and west of 5th Ave in the slope trading regularly for under a million (the fact that any of those places ever traded for over a million mystifies me). But if your goal is to buy a brownstone in good condition in one of the best neighborhoods in Brooklyn for under a million I think you are going to have a very long search indeed.

So to answer your question: no, there are no such deals right now, and no, you should not wait. You should adjust your expectations and start looking in Bed Stuy or PLG or Kensington or similar neighborhoods.

Fillmore website says the 11th Street house is in contract. Does Brownstoner have reason to believe that that is not true?

Sure Danny, until you get caught underwater in a down market, your ARM resets, and you get your face ripped off. There are real risks associated with these things.

Let me clarify my views. I am not suggesting that everyone should finance their home purchases with a 30-year fixed rate mortgage. Also, not all ARMs are made alike, and there are some that are reasonably close to a 30-year fixed on the fiscal responsibility scale (like the 10/1 that FatLenny cites). However, my basic point stands: that under most circumstances one should not judge the affordability of a mortgage payment based on early period payments on an adjustable instrument.

A 10/1 amortizing ARM is very different from, and a lot safer than, a lot of the other products out there. This entire discussion could just have easily have focused on interest-only products, and frankly probably should have. I think IO mortgages (and I’m not even getting into option products and other completely toxic instruments) are more dangerous than ARMs, ignoring of course that the two often go together.

But let’s not get too hung up on the argument that a few ARM products aren’t really that dangerous, which I will concede. The point is that the affordability of any product whose payments can increase meaningfully within the time period that someone is expected to own the home (or could be locked into the home in a down market) should not be judged by the amount of the initial payments. It should be judged by a sober assessment of what the payments might be under an adverse interest rate environment. There are a lot of people who never did this analysis on instruments that will reset in the coming years, and a lot of them will lose their shirts.

A very shorthand way of saying all of this is to say that if you can’t afford a 30-year fixed rate mortgage you can’t afford the home. Everyone got way to caught up in thinking that I was saying all mortgages should be 30-year fixed.

Rookie, insideschools.org shows all the zone maps for NYC public schools, as well as reviews of the schools. There are other such sites by the way and various parents may have other opinions of the schools, but it’s a respected resource.