Local Housing Market Headed for the Trash Can?
Real estate experts are convinced that the New York region’s housing market is about to undergo a serious correction, according to an article in yesterday’s Times. Analysts expect the coming bust to be significantly worse than it was in the early ‘90s, particularly in New York’s suburban markets. Nevertheless, Manhattan—and by proxy, pricey Brooklyn—has so…
Real estate experts are convinced that the New York region’s housing market is about to undergo a serious correction, according to an article in yesterday’s Times. Analysts expect the coming bust to be significantly worse than it was in the early ‘90s, particularly in New York’s suburban markets. Nevertheless, Manhattan—and by proxy, pricey Brooklyn—has so far mostly weathered the national housing meltdown, and the decline in values here isn’t expected to be as bad as in our outlying suburbs. During the year that ended in November, prices in the NY metro area fell 4.8 percent, according to Standard & Poor’s/Case-Shiller Home Price Indices—a drop that pales in comparison to Sun Belt cities, many of which saw double-digit declines. Still, economists predict that house prices in the region will drop by at least 15 percent in the current correction. Ouch.
Home Prices Start to Dip, Recalling ’90s Slump [NY Times]
You cite Hawaii as example of why housing in NYC will appreciate (i.e scarcity)
Currently (and in earlier periods) Hawaian Real estate has declined significantly in value (after Japans bubble popped for example) despite “scarcity”.
If you buy at the high and sell at the low – scarcity will be irrelevant (see Gold prices for example), scarcity is just one factor (albeit a potentially important one) –
5:20 – 4% is a bit aggressive for an after tax risk free rate (maybe 2.75% – 3%, with rates on their way down I might add). You’re right real estate taxes are likely abated here and after tax, essentially negligible (although I haven’t looked up the actual listing to tell). Repairs and maintenance should be negligible (if something like plumbing, pipes, heating, would be borne by the condo/coop board). In most rentals, the renter pays electricity, gas and in most condos/coops (at least in mine) water/sewer is included in maintenance so utility charges should not differ. As for closing costs on the sale, true not factored in; but I was just figuring the costs to move in and live in a home by buying vs renting.
I also haven’t included the 7.5%-10% increase in rent next year and the year thereafter, and thereafter, etc.
My point here is that the costs are very similar and when you figure in the fact that each month you increase your equity, buying probably comes out ahead.
Renting is not an investment. But the money you save by renting — in many BK neighborhoods, close to 50% — can be invested.
And investments, especially highly leveraged ones, can go down, not just up. Invest your downpayment, and if prices drop 10%, you’ve lost half your money. You can probably do better than that elsewhere.
Even three or four years ago, buying was comparable to renting if you ignored capital appreciation. Not now.
5:25 – there will be a response that people who bought in the 80’s or early 90’s had some time of negative equity.
However, if they were not flippers and lived in the properties for a few years these people made incredible money.
If they owned for 7-10 years they made hundreds of thousands.
Anyone who says that they can save money, and in turn invest that money in the stock market making more money than a RE investor is a fool.
Actually 5:24 unless you can back up the rationale that housing will continue to appreciate with some sort of economic trends that would support higher prices – (and I am not saying they don’t exist) – simply asserting that housing will appreciate in the future simply because it appreciated in the past is the ultimate in speculation/day-trading/market timing
The fact that you cannot see this – is EXACTLY why we are in the mess we are in now. No one is saying that renting is ‘better’ then buying – what is being said is that (on an accounting basis) it DEPENDS.
Yes, I do think interest rates will hold relatively steady over the next 10 years…and HOPEFULLY go up a bit. But they were in the TEENS in the 80’s, 5:29.
And yes, I also expect incomes to rise over the next 10 years.
I guess that’s the difference between us. I’m a little more optimistic.
The sure fire way I will be wrong is if we end up with McCain in the White House.
the median price of a home on maui is more than the median price of a home in new york city.
what was your point?
5:12 – no they are NOT – a 1br apartment in those neighborhoods generally doesnt go for 1M today, especially not in PLG or PH.
But your right, very few people would have predicted the price appreciation over the last 15 years – but what does that tell us about the next 15 and WHY (do you expect interest rates to continue to fall? Incomes to rise?? or just pure speculation?)
FYI – the median price of a home declined 7% yr over yr on Maui.
I know the reaction I get at parties when I say I just bought my first place is overwhelming.
Much moreso than the stories i used to tell about when I stayed in my apartment for 3 straight days to avoid running into my landlord for fear of receiving our renewal lease.
I find the former priceless, personally.