You Have $140K Down, Where Do You Buy?
Competition is heating up amongst developers as all the new towers started during the boom years are beginning to come on the market. Unfortunately for developers, an inconvenient thing happened with the mortgage industry — it crashed. The time when buyers could put as little as nothing down on their mortgage is over; now they…
Competition is heating up amongst developers as all the new towers started during the boom years are beginning to come on the market. Unfortunately for developers, an inconvenient thing happened with the mortgage industry — it crashed. The time when buyers could put as little as nothing down on their mortgage is over; now they are expected to come up with 20 percent. “Developers better have a good product if they want to sell,” commented Halstead Director Bill Ross. First-time home buyers, without the equity from the sale of their previous property, will have the toughest time meeting the new requirements, he said. In some places, prices will have to drop. We decided to play a game of comparison shopping for two bedrooms, and a few other options with more space, all priced between $600K and $700K. Pretend you’ve got $140,000 burning a hole in your savings account. Scores of new condos are on the market all vying for your attention; the borough is your oyster. Which one do you choose…
The first choice is a four-room condo at The Crest in Park Slope along burgeoning Fourth Avenue, quick walking distance from transportation and two of the borough’s best retail and restaurant strips. This sprawling duplex in Bushwick (er, East Williamsburg) has two floors, a private garden and a working fireplace. Or you could give up some space to live in the real Williamsburg and have everything you could possibly want at your doorstep. This even smaller condo in Downtown Brooklyn’s BridgeView Tower is literally right next to the bridges into Manhattan, saving you money on cab fare, has SubZero appliances and a “cascading waterfall” in the lobby. Or you could snag an extra bedroom at the lofty Washington Condos in Prospect Heights, an up-and-coming neighborhood and right near Atlantic Yards. And then there’s always the fuhgeddabout-Brooklyn option, this two-family home with an above-ground pool and double curb cut in Lodi, New Jersey. Which one is it?
David Leonhardt of The New York Times advised in a column Monday that you answer none of the above. While he chose to finally buy a place in Washington, he said New Yorkers should invest their down payment for now until the rent ratio (see link, it involves math) decreases. His philosophy as “an evangelist for renting” has been that once you add in the closing costs, repairs, property taxes, mortgage principal, mortgage interest, and other monthly bills if you own a condo or co-op, you might be earning more on your $140,000 down payment if it were invested in something besides real estate.
As Home Prices Drop, Committed Renter Buys (in Washington) [NY Times]
I am looking to buy in Bed Stuy also.. the homes are absolutely gorgeous. My best friend just closed on a 4 story brownstone on a great block for 800K with every detail from 1885 still in place… I love the southern end of the area near Fulton Street. The only thing right now that I don’t like about the area are the schools but other than that the crime really is not all that bad… Some people on here seem to like to hype things up…
Bed Stuy houses can be had for under $700K, but you will be forced to deal with black people. I think that scares more of the idiots on this site than anything else.
“On the other hand, if you rent but don’t invest the money you save (v. buying) in some reasonable manner, then you will almost certainly be worse off than if you had bought.”
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This is the KEY!!! Barely anyone in this country has enough saved for retirement, even homeowners. Something like 60% of the population has less than 10K saved for retirement.
I’d prefer to at least own my home by the time that rolls around. Stock markets don’t always pan out either…
I don’t even want to THINK about what rents will cost when I’m 65. With potential health problems, etc, renting sounds like a very scary proposition in old age. That’s just me, though.
Dave Leonhardt is an idiot. You buy in or close to Downtown Brooklyn. Conservatively assuming, your $700,000 condo increases in value @ 2% per year. You’ll be earning a return of 10% on that $140,000. More than likely, you’ll double your investment in 5 years in or around DT Brooklyn. No-brainer!
Guest: First, I appreciate the discussion. My case is not on the merits of buying versus renting. I believe that in a fairly priced market, there are definate advantages. Rather, my analysis is on whether prices are high/fairly priced/low when compared to rents and whether anyone believes the model has any predictive power.
12.21 – you’ll stuill be paying property taxes and insursnce forever on your fixed income – or do you think they will be abolished?
Yeah, I’d have to think the best buy would be in Bed Stuy, if you like brownstones, or perhaps you could find something in Ditmas Park. Ridgewood Queens probably would get you a lot more for your money though. To whoever was talking about Columbia County – can we just keep that one to ourselves, so the riff raff doesn’t find out? It’s so cheap there it makes your teeth hurt.
900K for Bed Stuy is absurd.
That neighborhood is still a total ghetto. High crime, horrible poverty and the absolute worst schools. You think that’s worth 900K?
You are VERY foolish.
12:21, the idea is that if you are renting because it is cheaper than buying you are saving and investing the savings over 30 years (rather than pouring that money into a mortgage).
So, when the person who bought has paid off their mortgage and has all the value of their property, you have the value of 30 years of investing (stocks, bonds, gold, whatever) stored up to support you in old age.
On the other hand, if you rent but don’t invest the money you save (v. buying) in some reasonable manner, then you will almost certainly be worse off than if you had bought.
Renting is better than buying (in the current market) if and only if you actually do something sensible with the money you save.
And probably the most sensible thing is to keep it somewhere safe so you can buy sometime in the next few years when prices get closer to 15x annual rent.