These Aren't Your Parents' Buyers
Guess what? Apparently this whole Internets thing is having a broad impact on how today’s twenty- and thirty-somethings go about buying an apartment. Daniel and Luciana Hyman, above, did online research on more than a hundred buildings in Manhattan before settling on a $875,000 two-bedroom co-op in Midtown. That sounds like nothing in comparison to…
Guess what? Apparently this whole Internets thing is having a broad impact on how today’s twenty- and thirty-somethings go about buying an apartment. Daniel and Luciana Hyman, above, did online research on more than a hundred buildings in Manhattan before settling on a $875,000 two-bedroom co-op in Midtown. That sounds like nothing in comparison to the page-and-a-half financial analsyis that one young Goldman Sachs banker submitted with her bid in an effort to convince the developer to accept her 11-percent-below-offer bid. (He didn’t.) We’re more comfortable with taking on debt and paying tomorrow, Mr. Hyman said, displaying the kind of blind optimism that seems to characterize many buyers today. If the cards topple, you can rent your place out and go somewhere cheaper. Or, if you are among the 65 percent of first-time home buyers that finance more than 95 percent of the purchase, maybe you shouldn’t be too worried. You can always walk away from your small deposit if the market crashes, right?
Young Buyers, Prepared and Fearless [NY Times]
Wake up people. The US economy crashed big time in 2001. Thanks to 9/11 and the Iraq War, the financial house of cards your fearless leaders foisted upon the people (Thank you Democratic Party! The Federal Reserve has worked great!), is still left standing just a wee little bit.
The inflationary floodgates were opened to an insane level to allow people to use fake money to buy houses.
The money you borrowed to buy your house wasn’t deposited by a prudent worker, it was total BS, created out of thin air. The lax lending standards exist because the US doesn’t make anything of value, we just create financial instruments and make-believe currency.
Your house WILL become worthless because the economy is going down bigtime. Wall Street exists today for a select few to rape what is left of this country so they can forify their private islands and south american ranches against the masses of soon to be desperate people.
Can ANYONE on this board farm? make ANYTHING useful that is not make believe? Can you build a doghouse?
The answer to these questions of course, is no. You don’t make the things people need. You just a part of the scam that gets other people to send us stuff from far away factories.
It is going to end someday. And that someday will be in the next decade.
Enjoy your rosey picture of the future because Depression II is coming to you soon!
And what if you are middle class and can’t? I’m screwed.
Well, you definitely should avoid using exotic financing to buy something you otherwise can’t afford. If you do decide to use some sort of no down payment ARM or something, do the math and understand exactly what you are getting into.
Stock brokers? Money from parents? How can I compete against people with so much cash?
Tighten up your belt, double check your wallet and dive in.
Skerd money dont make no money!
“As long as you can comfortably afford the mortgage payments and can aggressively pay down the non-80% portion of the mortgage, buying is almost always a smart move. You just need to know what you are getting into.”
And what if you are middle class and can’t? I’m screwed.
“And none of us will ever do as well as our parents all around. We’re the first generation who won’t, and it’s not limited to real estate.”
Yes! That seems to be the real issue here. But everyone’s acting as if we SHOULD be able to do better than our parents overall, and if we can’t, we’ll borrow money to make it seem like we are. The household savings rate in this country is now in negative territory. But people still keep thinking that as long as they can make the monthly payments on their student loans and mortgages, they can keep borrowing more and more money. Aaack!
Equity from a prior purchase could make anyone comfortable, eeek. Do you own a brownstone? I’m still not saying I think it’s particularly a great risk to take on, but if you have someone helping pay the mortgage that’s 6x your salary, well, that’s not QUITE as much of a risk, is it?
I am nervous about the whole “5-7 year” thing. Renting and/or selling is never guaranteed. And if everyone goes for that option, we’re looking at a glut either way, no?
These postings point out an interesting sea change in thinking about affordability – viewing it in terms of the monthly payment instead of the overall cost when you determine what you can “afford.”
Partly it’s driven by the banks, since that’s how they determine whether you’re eligible for a loan. But it’s also due to many people viewing their apartments as 5-7 year investments; if you’re never going to be responsible for the whole purchase price, why even get scared by that number?
Of course, at the end of the day you as a buyer ARE responsible for paying back that whole amount, and it can often turn out to be surprisingly inconvenient to sell or rent when you really have to. And if the affordable payment you signed up for is guaranteed to become unaffordable in the near future (when ARM increases or principal payments kick in) the risk starts to get scary.
While the 2.5-3X multiple strikes me as low given the interest issue brought up by other posters, I do think the question of “even if I can buy, should I buy?” is a valid one. That being said, I felt comfortable buying a home priced nearly 8X higher than my salary, partially because I rolled a huge amount of equity from my last home into it. Taking out those gains it’s still close to 6X, but at least I have a fixed mortgage!
By the way chickenmadness, I am not saying buying a home is a bad idea. I am just saying that’s it’s not always so easy as you make it sound.
And none of us will ever do as well as our parents all around. We’re the first generation who won’t, and it’s not limited to real estate.