Is this the right time?

I'm jumping in. I think the low end of the market is pretty safe.

find the right apartment for you and the price that is good for you. timing has nothing to do with it. it's all about what's on the market and at what price.

Christian Szell: Is it safe?... Is it safe?
Babe: You're talking to me?
Christian Szell: Is it safe?
Babe: Is what safe?
Christian Szell: Is it safe?
Babe: I don't know what you mean. I can't tell you something's safe or not, unless I know specifically what you're talking about.
Christian Szell: Is it safe?
Babe: Tell me what the "it" refers to.
Christian Szell: Is it safe?
Babe: Yes, it's safe, it's very safe, it's so safe you wouldn't believe it.
Christian Szell: Is it safe?
Babe: No. It's not safe, it's... very dangerous, be careful.

I'm probably going to get lambasted because I'm a real estate broker, but I think that this is probably one of the best times to buy. Especially if you have been looking, know the inventory and know when you have found the right place for your money (ie, if you can negotiate it down or if it is actually a good price).

I was recently in contract on a condo in a new building with services at just over $1000 per square foot (ultimately it didn't pan out though). Two years ago I was personally telling people that if you wanted a condo fixer-upper you were probably looking at between $1,000-$1,200 per foot... oh how times have changed.

The only thing I can add is that I know a lot of sellers who are waiting until after labor day (or Sept 1st) to either drop the price or put their listing on the market). If you see something you like that is a little high, better to negotiate now before Sept 1st so that you are the first one in line (assuming they were going to reduce it) or wait until after Sept 1st/Labor Day to see what new inventory comes to the market. It has been over a year since the market froze so there are lots of good comps out there for buildings. Meaning that the brokers with listings should be able to convince their sellers as to what a realistic selling price is and not some number based on what they think it is during a recession.

Best of luck!

(Matthew Russell - Brown Harris Stevens)

MRussell, you know I'm not one to lambast. Are you buying right now, or do you already own something? Also, looking back, when in the past did you no think it was a good time to buy? I know you have broker-colored glasses that tint everything you see, but I'm curious to hear what you have to say.

And I also.

Plus I want to know how "first one in line" works ... I love Soviet-style alternatives to "one with the most money for me me me"!

Lemme add something to the conversation rather than just ask questions.

I was poking around some rental listings, and I came across one with a 6-figure annual rent that is also for sale at some 7-figure price. The investor bought the place at 20-25% below the current asking price, and I think comps put the place at 10% below asking price. The place has been available for rent for almost 5 months now with no takers yet.

So I look into the mortgage this guy has, and I see that if it rents for, say, 10% less than the current asking rent, then this guy's monthlies are double what the rental revenue is. I.e., he bought the place for 10-15% below current market, yet still for every one of those 6-figure dollars that the renter puts in, he has to put in a dollar of his own just to feed the alligator.

Is this a sign of "one of the best times to buy" to you?

Damn -- I've asked another question...

he clearly stated that he was recently in contract, though it fell through
and you've clearly asked and answered your own question

and its pretty creepy that you pore through documents to find out these details - do you pick through your neighbor's trash to find out how much they spent on dinner last night?

"didn't pan out" = MRussell is smart enough not to pay what seller is currently demanding.

So researching publicly available documents is creepy and akin to looking through someone else's garbage? Seems like trying pretty hard to shoot the messenger. Could it be that you don't like the message?

I'm renting a condo I would love to buy. Location, layout, view, everything is perfect for me.

However, the monthly nut (to buy) is more than double my monthly rent, even after putting 20-25% down. The price is too high. :-(

"he clearly stated that he was recently in contract, though it fell through"

Maybe it was a new dev he signed a year-and-a-half ago, and he rescinded. Maybe he's changed his mind since he last went into contract. I politely asked whether or not he's in the market now. FYI, I've defended MRussell on all sorts of stupid crap thrown his way by posters and have enjoyed a dialogue with him. He's answered a number of my questions in the past in a very helpful manner. Why you feel the need to throw snipes in the middle of a conversation that I'm looking to start is beyond me.

"and its pretty creepy that you pore through documents to find out these details - do you pick through your neighbor's trash to find out how much they spent on dinner last night?"

It's called due diligence. If I'm looking to rent the place, I want to know if the guy's in default or about to go belly-up as I'd rather not rent a place that might be headed towards foreclosure. If I'm looking to take the temperature of the market w.r.t. whether to buy or continue renting, it gives me a good indication of the sort of stress (or lack thereof) that is going on in the seemingly stable market.

Is that explanation good enough to get me removed from "creepy" category back into purgatory?

"I'm probably going to get lambasted because I'm a real estate broker, but I think that this is probably one of the best times to buy."

The reason brokers get lambasted is because the majority have not stopped saying it since before the crash.

My take.... we just lost a few hundred more points on the dow, folks are more worried about a double dip than they have been in a while.... I think you have to figure that prices aren't going up anytime soon, so waiting really doesn't cost you much (especially with carrying costs being higher than rents..)

Essentially, you're being paid to rent.

Julia, op, you spent $56k in rent. How much would you have paid in maintenance, taxes, upkeep, etc... how much would you have lost in equity? In the last 2 years in a leveraged RE investment at Manhattan prices, if you only lost $50k you'd probably be ahead of most homeowners.

not just this - there was the acquaintance of yours who you delved into mortgage records of, etc. in an earlier post. you are a voyeur- it would creep me out if I actually knew you. have a great weekend.

Who really knows if it's a good time?

Ask yourself three questions:
1) What would your monthly payment be relative to what you pay for rent?
2) How secure is your job? What's your marketability like if you lost your job?
3) How much of a cushion / emergency fund do you have?

If the answers are similar, very, and at least two years, I'd say you're OK to buy if you find a place you love and want to stay for a long time.

We looked in '07, '09, and '10. In '07 and '09, we were able to get two of the three (which two varied!); it took until this year for us to feel like we had the trifecta.

So we bought, knowing we could lose money but also knowing that we'll be OK barring some kind of extraordinary collapse where two secure jobs both fall apart at the same time that FDIC insurance fails, in which case we'll probably have armageddon and martial law will ensure. (What a pleasant thought, right? LOL.)

Question four: how long would it take you to reacquire any lost equity?

Question five: Do you think we are in the midst of a one in many generation economic event with unknowable results?

Hmm, let me see. On that thread, I explicitly state that this person is not a friend, but rather an acqauintance, and that I don't poke into details of friends. I've seen this person face-to-face exactly once in my entire life, and I know him in the context of a Manhattan RE investor, nothing else. I had particular information whereby I could put together a more complete picture. I did so, completely anonymized the information, and shared it with a bunch of like-minded people on SE.

How exactly is this different than people who post all those comps? Why don't you get on their cases too? FYI, back when people were posting names along with comps and whatnot, it was me who suggested people stop doing that so as to not have the person's name show up in random Google searches people might do.

(That last post was directed at printer, in case there was any question.)

Wow, I go out for a few hours and come back to all of this!

To answer various peoples questions, I am in the market, but I am only looking for a modern condo (preferably with a doorman) in the eastern downtown area (think East Village / LES, not Financial District). Because of this, my options are fairly limited and I'm VERY on top of what pops up. I was circling a New Dev in the LES for a while and the very first weekend they had an open house (they waited until they could show the actual units, smart move) I put in an offer at the open house and got it accepted (I tried to negotiate but they were getting so many people submitting offers I went in at full ask). My attorney later reviewed the offering plan and he told me to RUN from this property because of a plethora of reasons, the main reason being that 45% of the building was commercial. Considering that I have worked with him and recommended him for 4.5 years and never heard him say this to anyone, I rescinded my offer and never looked back.

The reason I avoided it was purely because of red flags that my attorney found during his due diligence. Now I'm staying in my current rental until I find something else worth purchasing.

@inonada: I came into real estate when people bought off of floor plans 18 months out and I've watched the whole business pretty much do a 180. I unfortunately don't have a deep and moving answer as to when people shouldn't have bought. When the economy was taking a landslide, everything stopped in its tracks, and that was a pretty good indicator as to if you should buy or not. What I can tell you is that I've lived in the city my whole life, and depending on who is trying to buy what, I tell them WHERE they should or shouldn't buy. Don't get this confused with steering... my buyers will say, "what do you think about the financial district" and I will flat out tell them that I think owning down there is a horrible idea. Recently a buyer of mine wanted to buy a hip apartment for his 23 year old daughter (up to 2m). He inquired about far west chelsea and I told him that while it is a cool area, his daughter is young and her friends will have one hell of a time getting over to her. She would be better off a little further east in the chelsea/flatiron/village areas near transportation. That kind of stuff. But right now, I'm seeing a lot more people looking to buy apartments in a serious manner and my colleagues are busy showing their listings and getting offers. I don't have a crystal ball, but I have a very good feeling about this Fall and I think that while we may not see prices increase immediately, we will see sellers get realistic about their pricing and prepared buyers jumping on listings like they did back in the day.

@alanhart: "First in line" means that if something is incredibly overpriced, that listing will not pop up in a lot of peoples searches. But when it drops to the right price levels it will. If you see something that you KNOW is overpriced (like a certain listing I have on second avenue), I'm saying that you are better off putting in a low offer and getting the bidding process started instead of waiting for a price drop (like a certain listing I have on second avenue will be getting). Sellers are going to deal with one bidder in a better manner than two or more bidders after a price drop trying to submit low offers. That's all I'm saying.

Russell thank you for giving me some insight in the market...I've been looking at apartments which will cost approx what I'm paying in rent.

@ MRussell - "while we may not see prices increase immediately, we will see sellers get realistic about their pricing" - could you please explain?

Are you saying the prices will fall because sellers get realistic, and sales volume will then increase due to lower prices? How much should the seller lower the price to get realistic? (2004 price level? 2003? 2002?)

Thanks!

@drujan: I'm saying that overpriced listings will probably get reductions and new listings will probably be priced for today's market. For a while you couldn't get good comps, and thus couldn't accurately explain to sellers what their apartment should list for and why. Now, it's a different story. You'll still see overpriced listings for those sellers think their apartment is the best thing since sliced bread, but I've been speaking with several sellers that want to list their apartments and they seem pretty receptive to pricing apartments based on recent sales and not what other things in the building are being offered for, which is key.

As for sales volume, that is already up, mainly because people have more confidence in the real estate market.

i can't keep living with when prices will fall or rise...

So what is the today's market comparing to prior years? E.g., are we about at mid-2005 levels, 2004, something else? Is the benchmark year different for coops vs. condos?

No. Julia $56k, as opposed how much wasted on a purchase. This is your homework for the weekend. Pick an apt you might have bought two years ago. Run a comparison with 20% down, closing costs etc over the two year, now do a what if I needed to sell today and all the costs associated.

You are welcome. Mr Russ, a NYC lifer, who after being exposed to the greatest education, arts, science, over-achievers becomes a re borker and tell everyone, allz clear! Buy buy buy. Fing nimrod.

Oh look at me, I came into the mkt when ppl bought on spec. Boy this downturn was a doozy. But allz clears!!!! Omfg. You can't make this up.

Julia,

Market timing for stocks or real estate or any investment is very difficult. Some of the factors that concern me, as a buyer, are things like making sure that the maintenance charges (including any assessments) on the apartment are expenses that I can easily handle for many years to come and finding a well-run building.

Buying low and selling high is great, but if you're planning on living in your apartment for many years then it's just one of many factors to consider. Looking for an apartment to buy is a big PITA - buying an apartment at the absolute lowest possible point in the market is asking alot of yourself. You seem to me to be making a real effort to find an apartment = give yourself a break, you're doing a good job.

I understand everyone is looking at my question from a financial aspect and I appreciate that but what about setting up a home..I still have boxes in my apartment that I haven't unpacked because I know I'm not staying for that long...should I equate that into my decision..I remember Kylewest posting about his beautiful kitchen and how it made him feel to walk into his apartment

julia, no one can advise you on that because it's completely subjective. people are crunching numbers for you because that's what they do here, numbers are numbers. no one can tell you what should be important to you and how you should live. sorry to overstep an obvious boundary, but i remember you having health issues. remember to take that into account when laying out your potential financial liabilities, even if you have very good insurance. you clearly want to own your home, so if the numbers work, you probably should just do it. but, again, remember that kylewest loves his post expensive renovation, completely customized home. so add that your expenses as well, unless you have found an apartment that you love as is. good luck to you.

I moved to NYC in '99 and have rented 2 places and owned 2 places. It's not just about apt size or monthly cost. There are advantages to owning & renting (as I'm sure you know- I'm just pointing out that I see both sides). But, I can say that, overall, I've been happier when I owned than when I've rented. When I rent, I (like, Julia) don't feel like unpacking, because I always feel like it's temporary (the reality is, I've rented and owned about the same amount of time, but I always THINK I'll stay longer when I own). That feeling makes the place feel more like home, and less like a hotel. I can never understand why people make improvements to a rental (one friend put new floors in an old rental on his own dime- I told him I don't even like to hang pictures when I'm renting, but we're just different like that). It seems a lot of folks on SE act like it's a simple equation (whether to buy or rent), but it's not. Like, if you were paying 2K/month, you will automatically be happier than if you are paying 2200/month (regardless of the other factors surrounding the apt. (I really like the losers who say an apt is a total POS, but if it were $200/sqft cheaper, they'd buy it- so, a shitty apt AT A GOOD PRICE would make them happy.)
One thing which makes buying attractive right now is that interest rates are so damn low... I can afford so much more for the same monthly payment than I could 2 years ago.

Julia, I think that if you are ready to settle into a space for the long term - and it has sounded like that was the case for a long time now - and you can find a space you like for about the equivalent you'd pay to rent, you should go for it.

Julia you should keep looking. When the right place comes along you will know. After nearly two years searching from the Village to Washington Heights for a studio in a doorman building I am now in contract. I believe you were looking for a studio also? Have you seen this one FSBO? http://51west81.tumblr.com/

Julia,

Go for it. You are better off buying today that 5 years ago. As for the next 5 years, no one knows. Not even the geniuses on this site. But some of the commentary is useful to consider so that you are not getting ripped off.

well. no one can predict every detail of everything, but any reasonably informed person understands that our economy is in a general across the board decline, and will cotinue along this trajectory for a very long time. that just seems painfully obvious.

some people place a premium on ownership and make their decisions based on that. housing is an odd animal, but from a purely economic point of view, julia should continue renting. but julia wants to settle in and stay a while, and that's her choice. if she can afford it, she should do it. she is an adult.

exactly--purchasing in Manhattan right now makes no financial sense and prices most likely have a long way to bottom. However, you should go for it if you can afford it. Have a little luxury. People rushed to buy ipads and iphones although they knew they would depreciate shortly after.

Julia, you should keep looking because you might find what you seek. I'm sorry that you spend so much on simple housing. As an owner, my cost has never been more than $1500 per month after taxes in the past 20 years. My income has varied considerably over time and buying below what I could afford has been a sound decision. A market rate one bedroom on the upper west side could be leased for around $1300 in the mid to late 80s. That's obviously not the case today. It turns out that locking in part of housing costs has its long term advantages.

julia..have you looked in williamsburg or someplace else just outside manhattan. You can get much more for less. That studio someone listed on w 81st seems SO tiny to live in , and so absurdly priced.

Julia, you seem to agonize over housing every year. I think you have not come to terms with the market. Right now, the market puts the cost of ownership at some premium over renting, even accounting for the fact that owning fixes some costs long-term. In my corner of the market, this premium is over 50%. You should figure out what the premium in your corner of the market is. Having done so, you should ask yourself "Would I rather own, or would I rather rent a place 50% (or whatever it is) better?" I know many people who take the former, and that's fine. However, if you chose the latter, you really should _choose_ it. This means setting up longer-term leases, moving every few years, and enjoying the process. It also means unpacking your boxes within a week of moving and _living_, not waiting for the market to maybe turn or not. The market is a beast, and it will do crazy things on its own accord. All you can do is ask yourself whether you'd prefer to own at an X% premium or discount and act accordingly. If you decide that your X% is 0%, and the market right now is at 50% (say), then understand that it's either going to take a long time (i.e., decade-ish) or a major shock (low likelihood, so should not be counted on) for the market to reach 0%. As such, have your decision be long-term and _live_ accordingly. If you go with renting, don't sweat that things haven't changed much from the prior year. If you go with buying, don't sweat that you're getting less for your money. In either case, focus on ENJOYING!

See, I'm not all numbers ;).

MRussell, much thanks for your perspective. I always have respect for brokers who practice what they preach, and I like the honesty with which you give your advice (e.g., above, or the good vs. bad condo hotels). I like you, and I hope that the falling out of the contract will be a blessing in disguise for you.

PMG, that $1300 rent is now up by a factor of 2-2.5x, in line with inflation.  A person who is looking to match a future liabilities (housing costs) to future assets (income from working) will find a very good matching between the two because both track inflation.

In terms of "fixing your housing costs", you can't really look at that in a vacuum.  Back in 1985, if you put $50K (which is a bit over $100K in today's money) into US treasuries for 30 years, you'd end up with a whopping $1M in 2015.  If you do the same today with $100K, you'll only end up with $300K in 2040, which inflation expectations put at $170K in today's money.

Given the huge discrepancy in ultra-safe long-term investments (10x real returns vs. 1.7x expected real returns), there's a world of difference between "fixing your costs" now vs. having done so 30 years ago.

Great information and support...I moving in the direction of renting and upping my budget to rent a one bedroom on the UWS for a year or two..I'm hoping I can rent for $2500.

' Mr Russ, a NYC lifer, who after being exposed to the greatest education, arts, science, over-achievers becomes a re borker and tell everyone, allz clear! Buy buy buy. Fing nimrod'

w67thstreet...ya kill'in me

Falco - I thought you had bought a little while ago - weren't you in contract on something,with the terrace you wanted) went through board interview etc?

murry888
good memory

Hope you're enjoying your new place

inonada, once again your math is off. What ever do you do for a living? 1987 of which I speak (mid to late 80s) 30-year treasuries yielded 8.59% (see data source below); Assuming you pay federal taxes of 35%, your annual yield after tax return is 5.58%. If you bought a 30-year zero coupon treasury in 1987, then in 2017 you would have 5.43x your money. If you put $50k into a one bedroom apt in 1987, that would likely be a 33% deposit on a $150k purchase price in 1987. Needless to say, not counting the tremendous savings of ownership cost vs. renting, nor the near pay down of the mortgage over 23 years, your equity in a typical one bedroom would be worth at least $600k TODAY not 2017, or 12x your money. There is a good reason people buy their homes vs. invest in 30 year zero coupon treasuries. Are you saying that because investing in 30 year zero coupon treasuries is less rewarding Today then 23 years ago, that investing investing in a home is going to be less rewarding? That may be true, but what are your alternatives. Homes are not just investments, they are a major living expense. Are you saying that inflation is over because 30 year treasury yields are so low?

http://www.federalreserve.gov/releases/h15/data/Annual/H15_TCMNOM_Y30.txt

inonada, don't forget that the reason people pay a premium to own is that in their lifetime (30 years) they pay down their mortgage and have 100% equity in their home. Whatever else you might think, your income generally declines in retirement. It's a good idea if your household expenses decline as well.

@ inonada: Thanks for the kind words. I too think that it is a blessing in disguise. As for my advice, real estate is the most expensive thing that most people purchase. As for my honesty, that's just the way I do things for better or worse :)

@ falcogold1: You are right, I'm an NYC lifer with probably more school skills than I need for Real Estate (although they certainly aren't being wasted). But having said that, I get to work alongside my father everyday which is incredible. I have always had a genuine interest in homes (in college I would go apartment hunting with my friends because I loved to explore new areas/apartments), and I get to meet the most amazing people... every single day of my life is completely different and I wouldn't change a thing. As for if now is the right time to buy, you seemingly did so, so I'll let that speak for itself. Then again, I'm only giving my (educated) opinion, you can leave it or take it... on your new terrace.

Whoops, that line "real estate is the most expensive thing people purchase" was an incomplete thought that I didn't finish, just ignore it.

Pmg, your goal in life is to fix your costs. You fix your costs THEN pick a job/career. Flmao.

It's make the most $, regardless of how you get there. So should I have bought 3bdrm as a bachelor in anticipation of my future? Boy I wonder how many $mms I wouldve wasted by buying my 3 bdrm bubble apt as a 21yo and waiting 20yrs to fill it. Flmaoz

Julia. Wait 2 yrs. Ian not telling you to wait 5. This year is gonna be a doozy for sellers.

@Russ, cut the umbilical cord. Work at a fine restaurant in Paris. You'll meet dictators, Russian mobs, trashy Lohan.

PMG, I am not saying anything about whether treasuries vs. RE made for a better investment in 198x.  I'm simply saying that an environment in which a 20x nominal return over 30 years is given by treasuries is different enough from one in which only a 3x return is given such that blanket statements about one may not be applicable to the other.  Just that and nothing more.

On the math, I used 10% from 1985 vs 3.66% currently, and I assumed a tax-deferred or tax-free account where most of the money sits (401k, pensions, Saudi Arabia, Japan, China).

Most of the developers are trying to make deals before September. If you are in contract and the prices start to go down even ever so slightly at 5% you may loose right now, but if you plan to stay at least 10 - 15 yrs you are good. This market is not going to stay down for ever. I am a buyer after waiting 5 years I am currently out of room in my place. Need more space if the banks will approve a loan I am trading up from rental to buyer.

inonada, home deposit money is not tax free money. now, is probably a horrible time to buy long term treasuries. what does that have to do with buying a manhattan apt if you find one where the after tax costs approximates the rental cost?

w67, envious? I've traded condos once for lifestyle/income needs. It's costly, so I recommend it as infrequently as possible. Remember AboutReady selling her 2 bedroom bought at a lucky time of 1995 on a whim? And now she complains that homes are too expensive? That's my point. A home is an expensive purchase, not to be traded like fashion or stocks.

Small one bedroom asking price $429k, not renovated, but the apartment dirctly above sold for $380k in '07..would it be too much to point that out and offer $390k?

Julia, 9% off ask is a serious offer. The sellers may stick to their price or closer to it, but 390k isn't an insulting lowball. Go for it. Not renovated means you can renovate to your taste on your time. I took ten years to update a kitchen.

Is it a walk up? why is a lower floor apt asking more?

No, it's a full service beautiful pre-war bldg. The apartment I looked at was a one bedroom but not a large one bedroom..i estimate at 600sf on the 5th floor..

'Not renovated means you can renovate to your taste on your t/dime. I took ten years to update a kitchen.'

Sounds fun!

sunday, do you just post off topic to annoy?

pmg, why was my post off topic?

I posted an opinion on what you posted. How is that off topic?

If my opinion annoys you, well, then can't help you with that.

what is the sarcasm of your post directed at exactly? renovating in general being fun? waiting 10 years being fun? or merely posting on SE being fun? I'm just curious.

Why do you think it's sarcasm? You don't have to answer it. I'm not that curious.

Sunday, you're not interested in the opening post or the topic, you just want to annoy. you've succeeded.

PMG, are you telling me what I am not interested in or just trying to read my mind?

My 'initial' post was not intended to annoy you. I inserted an additional two characters, "/d", in the statements I quoted from you to more accurately describe what I think 'not renovated' means. As for the "Sounds fun!" comment, sure it can be read as sarcasm, but it does not have to be. I know plenty of people who enjoy the process of renovating to ones taste, especially when time and money is not an issue. It's just a preference, like some people like pink and some like purple.

Getting into fights on streeteasy is overrated.

I don't understand how people can believe it's the right time to buy when the NYC unemployment rate is still at 9.4%. I think it will be closer to being the right time when it's below 8%.

Julia - I have no idea if it's the right time. A more important point is the fact that you could have roaches laying eggs in those unpacked boxes. UNPACK my friend!!! Save yourself!!!! But seriously, settle into a nice rental. Get cozy. Paint. Toss up some fancy-pants drapes. Toss a few pillows around. Whatever. As soon as you get settled it will be the right time. Good Luck.

"inonada, home deposit money is not tax free money. now, is probably a horrible time to buy long term treasuries. what does that have to do with buying a manhattan apt if you find one where the after tax costs approximates the rental cost?"

I think finding such a thing in Manhattan is generally not doable except in certain segments of the market: non-descript coop apartments in less-prime areas.  I don't think this can be done with condos or prime coops.  If Julia can replicate her $2500 next rental with a $500K coop (which is doable is select sub-markets) and has a very long time horizon (never will be forced to sell) and will not care if she misses future potential opportunities, then she should go for it if she prefers to own IMO.

The concern with coops is that you cannot freely sublet, so you are forced to sell when you leave.  You might have a non-negative carry situation set up, but if the interest rate environment has shifted, your buyers will not be able to replicate your financing, and hence price will be adversely affected.

In 1987, 30-year mortgages averaged just over 10.2% or so.  This represented a spread of 1.8% over the 8.4% average 10-year treasury yield.  This in turn represented a 1.8% spread over the average fed funds rate of 6.6%.  This in turn represented a 3% spread over 10-year inflation expectations of 3.6%.

Fast forward to today, we have 4.5% mortgage rates that are at 1.9% spread over 10-year treasuries at 2.6%.  This in turn is at a 2.4% spread over fed fund rates of 0.2%.  That in turn represents a -1.4% spread over 10-year inflation expectations of 1.6%.

If you look at all those numbers, it's the +3% vs. -1.4% real yields (short-term rates vs. inflation expectations) that stands out as highly abnormal, not anything else.  This is the big lever that is being used to support the economy, and should this lever be taken out to once again give savers a positive real yield, interest rates across the board will rise accordingly.

While the lenders have a fat spread to deal with the risk (borrow from savers at 0.2%, lend it out at 4.5%), and current buyers have a fine situation in the case of some coops (non-negative carry), new buyers may not have the same financing, which puts pressure on prices.  If the govt engineers what I believe they are targeting to deal with the imbalances (flat RE prices for a while), then it will probably work out fine for a current buyer of a non-negative carry coop.

For the long-term buyer of less-prime coops, it's a risk to be handled.  For buyers of negative carry properties, on the other hand, there's little financial upside.

The fat spread enjoyed by lenders has probably more to do with decreased competition resulting from fewer firms operating in the space than the cost of hedging their servicing rights, especially form loans they plan on selling to Fannie Mae or Freddie Mac. The average fixed rate including points paid vs Fannie & Freddie commitment rates is too high to explain otherwise.

If history is any guide being the owner of an asset has been more rewarding than the renter of an asset.
And add to that government policies which have tended to and can be expected to continue to add to that.

But, what about inflation?

"If history is any guide being the owner of an asset has been more rewarding than the renter of an asset."

Hm.

That's why every sophisticated corporation spent the '90s and '00s moving from owning its assets to renting or outsourcing them, why companies routinely substitute bonds (renting money) for equity ("owning" money), why commercial leases and secured lending are generally viewed as completely interchangeable, why retail car buyers "buy" or rent depending on the deal they are offered, and why affluent countries have completely different rent/buy ratios in retail housing depending largely on trivial details of history, taxation and financial institutions. Oh, and why NYC, the most affluent city in the US, has the highest level of renters, while Wasila, which depends entirely on government handouts, is largely owner-occupied.

What history actually indicates is that owning the equity interest in a highly leveraged asset in the upward phase of a speculative bubble is an excellent way to get very rich, and owning the same thing in the downward phase is a sure-fire way to lose money.

"I don't understand how people can believe it's the right time to buy when the NYC unemployment rate is still at 9.4%. I think it will be closer to being the right time when it's below 8%."

Maybe if you are in that 9.4% it is not a good time to buy. If you are in the 90.6% then could be ok if you think the direction is toward 8% rather than 18%. By the time it gets to 8%, prices will be 10% higher.

zzzbuyer, if you believe the 9.4% unemployed doesn't effect you or the other 90.6%, then I can see how you came to that conclusion.

I am one of those people who believe even the minimum wage effects me.

> Oh, and why NYC, the most affluent city in the US, has the highest level of renters, while Wasila, which depends entirely on government handouts, is largely owner-occupied.

I hear that many people in NYC are broke (some may even have debt!).
And they rent. That doesn't sound very wealthy to me.
It sounds like people pretending to be wealthy.

zzzbuyer, from another thread, you made a comment about how if someone wasn't forced to sell by early 2009, they're probably ok now. A person can be out of work for a year or two before they are forced to sell. Some of these apartments are/will be in the foreclosure/short sale process by the time the job market is better.

Again, you can believe that the outer boroughs or apts below your price range doesn't effect your target location, but I don't share that believe.

That's why every sophisticated corporation spent the '90s and '00s moving from owning its assets to renting or outsourcing them, why companies routinely substitute bonds (renting money) for equity

---
acually a lot of that is driven by accounting gimicks. Here's one example

The world’s two major accounting rule makers, the International Accounting Standards Board and the US Financial Accounting Standards Board, do not agree on much. Differences between them have already wrecked attempts to create a single set of global accounting standards in time for the Group of 20’s 2011 deadline. But they are not beyond reconciliation. This week, the bodies published a joint proposal to overhaul the reporting of lease contracts. The new rules, if not diluted, will bring about important and long-overdue changes to how companies record assets and liabilities.

The existing conventions for reporting lease contracts are a mess. Under both IASB and FASB standards, such contracts are classified either as operating leases or capital (or finance) leases. The former, but not the latter, allow companies to keep the liabilities they incur from renting assets such as property and equipment off the balance sheet. This is both arbitrary and misleading. Groups using multiple operating leases can vastly understate their true levels of leverage. The new proposals will fix this problem. The distinction between operating and capital leases will be abolished and companies will have to report liabilities arising from all lease contracts. They will also have to account for important variable features of leases, such as the option to renew or terminate contracts, which current rules neglect. It is true that assigning a value to such liabilities is not an exact science. But it is still better to have them on, rather than off, balance sheets.

http://www.ft.com/cms/s/0/73c8ff5a-aafb-11df-9e6b-00144feabdc0.html
---------------
and

About 25 years ago I worked for a few months with a team of deep thinkers who were trying to convert Capital Leases into Operating Leases for tax and accounting purposes. The objective was to get the most optimal treatment; (1) tax deductible amortization of the asset and (2) keep it off the balance sheet so as to hide the true debt level and therefore improve balance sheet ratios. There were strict rules that were supposed to avoid this. But is was a goldmine idea if it could be done. This was early derivative days. Make something look different than what it actually was. I thought it was a dumb idea, so I quit and went to sell junk bonds at Drexel. Turns out the folks involved figured it out and made a bundle selling it. I am still glad I was not involved.

http://brucekrasting.blogspot.com/2010/08/how-much-debt-does-s-500-have.html

That's why every sophisticated corporation spent the '90s and '00s moving from owning its assets to renting or outsourcing them, why companies routinely substitute bonds (renting money) for equity

and

the tax code favors debt over equity when it comes capital. Dividends are taxed twice(as earnings at the corporate level and at the shareholder level when distributed), but interest is deductible.

zzzbuyer, from another thread, you made a comment about how if someone wasn't forced to sell by early 2009, they're probably ok now. A person can be out of work for a year or two before they are forced to sell. Some of these apartments are/will be in the foreclosure/short sale process by the time the job market is better.
----
I agree. I was just trying to say that unemployment tends to lag the health of the economy.

"Is this the right time to buy?"

The people I am currently working with WANT to buy and have time horizons from 8 years to "I will die in this apartment." I think it is the right time to buy if that is what you really want to do, finances are strong, time horizon is 8+ years and price is in the 2005 area. I think there are some deals to be found that will stand up to the very real possibility that prices will continue to decline in the short term. A customer just signed a contract for a prewar jr.4 in a doorman building on the East Side that translates to about $600 dollars a F2,not bad.

I try very hard to balance the emotional component with the financial component of every purchase, I think both are equally important. I tend to get a bit more hung up on the financial though, especially as I personally feel renting a home can be equally as satisfying as owning on the emotional level. So if you have to rent, rent until, if ever it makes sense to buy. We are looking to purchase now, but moving out of the city has complicated this for me (emotionally) and because the mortgage markets are so tight, not so easy for me to get a loan these days.

All this said I would like to add that I advised clients NOT to purchase around the end of 2006 (not perfect I know) and started the Burkhardt Group to focus on discounted rental brokerage fees(not common at the time and highly criticized by my ex-coworkers.)

Fairly recently I got back into sales and work with clients to make an informed, hopefully smart purchase. The backbone of the consulting model is rebating from 50% to 60% of the buy-side commission back to my client at closing. It's a true collaboration with 100% transparency through out the process.

To wrap this up, yes I think now could be the right time for SOME people to buy, definitely not everyone, some should probably never buy. When it comes to buying it's just not a one size fits all ever. If you dig around enough you may be able to find some deals that make sense to you.

Not only do I enjoy reading W67th streets posts I do heed his warning that we are coming off the greatest credit bubble ever. So be careful out there, very careful.

Keith Burkhardt (broker,surfer, recently broke 80 golfer)

http://theburkhardtgroup.com/agents_details.php?agent_ID=7619

Pmg. The only reason you are able to barely hang onto NYC and not in the same boat as Julia is bc you 'bought' at the beginning of this massive credit cycle.

Julia, are you actually afraid of lowballing? To me any listing is a white flag. It says to 'me ' I can no longer afford to live here, can someone more financially able take it over please, please, please. You Julia are that lemmingz saviour, take a hammer, at least a broom stick.

You shot an 80. Nice nice. This depression has been good to you, at least your golf game ;)

As to inonada's Treasury comparison. Back in 1995, while you set up your $1800/month imputed rent, I 'bet' I was putting down not much more skin in the game into commercial real estate. Now I don't give a shit about my $8k rental, bc it's such a small portion of my commercial rental income and net worth. Here another lesson in life. Don't think yourself a success by mocking a homeless person.

w67th...you're right..i left word yesterday with the realtor but haven't heard back.

Julia. You should be bidding on multiple units. I believe in symmetry. A seller casts a wide net, a buyer should.....?

Never read into silence while negotiating re. The math stands on it's own.

West67.... You're pretty good with numbers but obviously not golf numbers. Keith said he "broke 80" which means 79 or lower. That's a huge difference to a golfer.

"To me any listing is a white flag. It says to 'me ' I can no longer afford to live here..."
Seriously? What about "I want a bigger/nicer/etc apt"? Most people I know who have sold in the last year were simply upgrading. Same with the people who were renting and decided to buy... it wasn't economics as much as they wanted a bigger/better place.

"I am one of those people who believe even the minimum wage effects me."
Wow. I could never live like that. Yes, maybe the min wage affects me on some macro scale, but if that sort of thing concerned me, I couldn't sleep at night.

I have a feeling a lot of SE posters will die rich and miserable.

Nycd. You are indeed correct. Read too quickly. I'm more of a drive for show, then hack around with my pitching iron around a green all day. True story. I was at a new got course playing with a old timer. I take out a 4 iron, dude is like this plays into the wind and is deceptively longer than it looks. I shrug, take out my driver and nail it 40 yards past the green. The guy looks at 'me and says, why didn't you f'king tell 'me you can drive like that? I look back and say, 'why do you think my f'king game sucks so much?' ;)

Broadway. The sucker trade. Bubble popping, fed propping by low interest rate=> compared to rents! I'll buy. What happens when interest rate spikes and you wanna upgrade? Will you be nimble, or caught flat footed w zero equity post selling your starter home? And to think a 3bdrm with 10% interest would only cost $600psf? Oh damn!

I know plenty of ppl that own 2 or 3 homes and had not had to sell thru this depression, so keep them all. If one is good, two should be better no? I mean rent it out for 5yrs you'll make money. Flmaozz

broadwayron, understanding something does not equate to losing sleep over it. The closer you are to making the minimum wage, the greater the impact to you if the minimum wage increases.

In your upgrade example, if the one upgrading is selling into a weak lower range market (or sub-prime neighborhood), it will effect how much s/he can pay in the higher price market (prime neighborhood). That was my point.

Even though the "buy vs rent" discussions are very common on SE, I enjoy reading them to hear everyone's perspectives on this issue. But I do think there are different kinds of buyers and the same buy vs rent analysis doesn't apply equally across the board. And to go back to the point that PMG made earlier, one of the best part of owning IMO is that you will eventually pay off your mortgage and need only concern yourself with your monthly maintenance charges. Personally, I don't want to still be renting at a time that my monthly income will drop considerably. And broadwayron, please participate in other discussions - your point of view is refreshing.

If I'm spending $2500 a month on rent how much would you say I can spend on an apartment, I've been looking at $450k and below which keeps me out of the one bedroom market.

Julis, I completely agree with your budget and analysis. I think a limit of 450k is perfect if you want to limit the aftertax cost to around $2500 per mo. Why are you insisting on a 9% discount on a 429k ask if you really like the place and it is within your budget?

financeguy, your name got me to read your post in more detail while I was skimming StreetEasy

>"That's why every sophisticated corporation spent the '90s and '00s moving from owning its assets to renting or outsourcing them

I suspect you understand the point of leverage. That is all that is being done here, further enhancing the returns to equity. There's also tax considerations at play that are fundamental to the decisions that were made.

>, why companies routinely substitute bonds (renting money) for equity ("owning" money)

Exactly, because of the move to boost returns to owners, and because of tax policy.

>, why commercial leases and secured lending are generally viewed as completely interchangeable,

They are from an accounting point of view because before this was required, this was a loophole for corporate balance sheet optics. However, one way or the other, this doesn't offer any support whatsoever to your point about preferring renting assets vs. owning assets. Nor does it contradict - it is entirely irrelevant.

> why retail car buyers "buy" or rent depending on the deal they are offered,

Retail car buyers make as rational a decision as they are capable given the facts available and their circumstances. This hardly supports your point.

> and why affluent countries have completely different rent/buy ratios in retail housing depending largely on trivial details of history, taxation and financial institutions.

That's a rather amazing statement with no support one way or the other. You also ought to know better that there is no such thing as a trivial difference in taxation. People are very rational about taxes - they want to pay less in taxes. And comparing the US and Canada, for instance, Canada doesn't allow tax deductions on mortgage interest expense. That is so material that to say that differences between US and Canadian rent / buy ratios have nothing to do with it is entirely disingenuous.

>Oh, and why NYC, the most affluent city in the US, has the highest level of renters, while Wasila, which depends entirely on government handouts, is largely owner-occupied.

Among all of your statements, this is the most blatantly misleading, so much so that the average person could call you on it. The comparison between Wasila and NYC falls apart based on volume, density, and liquidity, not to mention history, political makeup, and rate of population change / immigration. Your point about affluence falls apart because you fail to look at the cost of housing relative to income in the two locations, and the greater diversity of income in two cities. I'm also not sure if your statement about Wasila depending on government handouts is for real or based on your bias that NYC is a net tax payer to the federal government while Alaska is the opposite

>What history actually indicates is that owning the equity interest in a highly leveraged asset in the upward phase of a speculative bubble is an excellent way to get very rich, and owning the same thing in the downward phase is a sure-fire way to lose money.

I don't at all disagree, but your phrasing gives your bias - highly leveraged asset, speculative bubble.

Simply, are housing assets priced high, yes such that biding time through renting can make sense. But, for each house or apartment that is rented, that same apartment is also owned, just by someone else who expects to make a profit. Many fortunes have been made in real estate.

"I've spent about $56k in two years on rent..my lease is coming up 2/1. I'm tired of chasing apartments looking for a "deal" which never happen but should I hold on for another year or two and hope the prices will come down."

Julia, prices dropped 20%, all the while you noting you didn't see any deals. What's this "hoping prices will come down". They did. Dramatically.

Either way, we told you to wait, and we were right.

somewhereelse..prices have dropped on the high end but studios (with alcoves) are still over $400k, one bedrooms are still over $500k..straight studios are over $380k...nothing has changed but I appreciate your input.

Julia imagine if you bought this apartment 2 years ago at 650K
Today it's 499K....asking....you just saved 150K!

Don't know your criteria but this one's worth a look.
What's it hurt to offer $399?
http://streeteasy.com/nyc/sale/446144-54-east-8th-street-greenwich-village-new-york