To Own or to Rent?
Over the weekend The New York Times profiled a series of co-op or condo owners who became renters either due to the market downturn, size requirements, or both. The article begins, for example, with a family of four that moves from an 850-square-foot Upper East Side two-bedroom, one-bathroom co-op to an Upper East Side rental—three…
Over the weekend The New York Times profiled a series of co-op or condo owners who became renters either due to the market downturn, size requirements, or both. The article begins, for example, with a family of four that moves from an 850-square-foot Upper East Side two-bedroom, one-bathroom co-op to an Upper East Side rental—three bedrooms, three bathrooms, and 1,400 square feet for $5,200 per month. The praises sung for renterhood include: freedom from responsibility and anxiety, fewer financial requirements, more space, and sometimes more amenities. Some of those profiled in the article, however, miss ownership: the camaraderie in the building, the freedom to renovate and customize, the autonomy of ownership. Those profiled are primarily individuals, couples, or families who live in expensive Manhattan neighborhoods like the Upper East Side, the Upper West, or Greenwich Village—people who can afford rents of $5,000. It would be interesting to hear from readers with a wider range of incomes and locations. For example, has anyone out there had a similar experience in Brooklyn, where you have recently sold a house or apartment (either by choice or necessity) in order to become a renter?
Owners No More [NY Times]
Image by Mark Ovaska
“a once-in-a-lifetime experience.”
BHO–I think you are really killing it today and in general I very much commend your style of writing since your hiatus from Brownstoner has ended. You make your arguments without resorting to the sort of “poke you in the eye” school yard stuff you sometimes used to employ. I do however have to question the wisdom of so confidently stating that the bubble conditions are once in a lifetime circumstances. There is just no way you or anyone else could make that statement with accuracy. Better to hedge your bets a little and suggest that these are unlikely to occur in the near to medium term. A friendly suggestion…
“But a fresh loaf of bread will appreciate much faster.”
I’m no financial guru, but I’m pretty sure fresh loaves of bread are depreciating assets, especially if I’m hungry.
It is smart, as NSR and BHO do above, to differentiate between the psychological benefits and the financial benefits of owning. If, as BHO says, mentally lazy people assume that beneficial means financially beneficial then they definitely should be straightened out. In very few cases I think could you make the argument that owning is financially beneficial vis a vis renting in this economy. However, there are many benefits of owning, which I am enjoying right now. My life being what it is (self employed, in an arts related field) I would never be able to live the way I do now (home office, big yard for the kids) in a rental as I would not be able to configure the space in the very particular way that I have. So for me its worked out very well (since I sold my coop just before the collapse last fall and got a great price).
However, there aren’t too many people who I would advise to buy right now.
“sometimes the market goes down but overall his property is still going appreciate”
But a fresh loaf of bread will appreciate much faster. Eventually, the inflation adjustment calculation will sink his property value back underwater. Maybe not to the tune of $200K but he will lose. The mortgage giveaway, and hot-potato transfer, was a once-in-a-lifetime experience.
***Bill Thompson for Mayor***
We sold our small two bedroom co-op this summer because it was very tight with our two children (second bedroom was 6 by 10). We got a decent price for it, but since we’d only put down 10% when we bought in 05, we didn’t clear enough to put 20% down on a larger space in our area. So, we are renting in the same neighborhood, a much larger 3 bedroom apartment with a roof deck for several hundred dollars less than our mortgage+maintenance on our old co-op.
We love this apartment. It has room to grow, it’s beautiful, the roof deck is phenomenal, the location is ideal. I do wish we owned it, but we don’t have the down payment. So, we are here, saving money and loving where we live. It’s not so bad.
We would like to own again one day, but honestly, there is something to be said for this feeling of freedom and flexibility. Since this apartment is so right for us, we might look into buying a country house one day, or just keep saving up for a new co-op or condo. And we feel good knowing we have a lot of money in the bank should something happen with one of our jobs.
bedstuy11216- Considering how many elderly do rent and hardly live sad lives, I’d say that’s your personal problematic issue.
We sold our place in spring 08 and have been renting ever since. We sold since we needed to live in a different school zone for our child who was entering K, and we knew we would eventually need a bigger place, so the question was when, not whether, to sell. Given the cost of houses, and the already precarious state of the market in spring 08 (I had thought for years the rise was unsustainable), we figured it was best to sell first and know our budget for a house.
We lucked into a nice, economical rental in a great school zone, though at the time it was hard to find a rental (spring 08 being the last of the frothy moments). At first, I must confess I felt seller’s remorse since the bias was still so much towards owning vs. renting. Since Sept 08, it’s felt different, and many have congratulated us for our timing. That said, we would prefer to own again, since we liked being owners with all that implied (customization, tax credits, etc.). Also, since the next place we buy we intend to stay in for the rest of our lives, we would like to feel “settled” in our next home.
BUT, given the ongoing declines we predict will continue, we are patient, and enjoying our rental while we wait. It does not make economic sense to us to rush and buy at prices that IMO are still somewhat inflated (though coming down at last). The savings of waiting far outweigh the cost of rent and lost tax deductions. We do not plan to wait forever, and we ARE actively looking now, but feel confident we have at least a couple of years if need be, since we bet prices will continue to slide down and eventually stagnate before the market turns around, and even then, the gains on the market are likely to be modest.
In the meantime, we offer lowball-ish offers on places we like (in the range of 20-25% below ask) which often means we are offering far more than the sellers paid a few years ago – increasingly, we see sellers taking us seriously and wanting to negotiate with us, but the few we’ve engaged with this far along are still, in our opinion, unrealistic so we’ve just walked away. We are confident our patience will be rewarded.
Something tells me that the guy who’s owns the 1mm apartment in Park Slope won’t be down 200K on the value of the property in about 5 years. That’s what happens, sometimes the market goes down but overall his property is still going appreciate.
I’d rather own than rent. All the calculations and investment risk talk makes my head spin. I just know that I don’t want to be old and renting.
I don’t know why, I just think it’s sad.