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]
4:46 – At a $570K purchase price you put down 20% and finance rest with a $456K mortgage. At 6% interest, 40% tax shield and $400/month maintenance your monthly costs are approx $2,200. Figure 4% closing costs ($22,800) and amortize this in over say a 5 year period and this adds an extra $380/month. So, very comparable to the monthly rent; and then you can figure that you’re adding about $500 of equity with every monthly payment. This assumes no appreciation (or depreciation for that matter), so not sure how you can say the cost of owning is much more expensive.
And Benson, if you were going to purchase a couple of years ago in Brooklyn, how would you not have been ahead given the market appreciation?
Benson
No one is saying that an investment is a sure thing.
What we are saying is that real estate is an investment.
Renting is not an investment.
5:00 so true – except that if you play the lottery, statistically, you are a complete moron.
4:46 – that is the most moronic comment I have ever heard.
I am huge contrarian and even I think that you are a complete and utter moron.
I am glad there are people like you who will be there for the next 20 years to send me those rent checks at a 10-15% increase year on year.
Really 4:50? Are you serious? You believe it is a “no-brainer” that a 1br in the Novo is going to be worth 1M within the next 10 years????
Personally I think your probably wrong – but my guess is as good as yours – that being said – if it is such a no-brainer then 1. Why havent every single new condo in these buildings sold out and 2. since you are saying that an 80% increase in 10yrs is a no-brainer, I assume you have invested every dime you have (and borrowed even more) in these projects.
Buying Real Estate is similar in a way to platying the Lottery.
And as they say, you gotta play to win!!
4.51PM;
I’ve done fairly well for myself, given where I started in life (the Red Hook Projects). My guru in invsting (in general) is the venerable Benjamin Graham,who wrote the classic “The Intelligent Investor”, which I recommend to you. Though this book deals with the stock market (where I have made my real money), there are lessons that apply to investors in general.
I recommend that you read this book, particularly the concept of “margin of safety”. It seems to me that you don’t consider it. Anyone who touts an investment as a sure thing, and thinks that “dramatic” appreciation can continue, is touting the greater fool theory, which I’m not buying. If I’m selling, however, I’ll be sure to look you up.
Benson.
Actually Benson, if you were given that opportunity “a couple years ago” as you state, you were foolish not to buy.
So far…EVEN in 2007, Brooklyn real estate has appreciated dramatically…double digits dramatically.
But anyone with a brain knows that SOMETIME in the next probably 10 years that Novo 1 bedroom is going to sell for a million.
Sure there is a small chance that won’t happen, but if you get lucky and happen to still be in the place when the market is on a hot note, you are going to make more money in one transaction that you will have ever made renting.