NYC rentals scarce and costlier

New York had the lowest apartment vacancy rate in the second quarter, at 2.2 percent, Reis said. It also had the largest increase in effective rents from the previous three months, up 1.7 percent to an average $2,935 a month.
http://www.businessweek.com/news/2012-07-05/apartment-rents-in-u-dot-s-dot-rise-most-since-2007-as-vacancy-falls

Lol! Yeah baby!

Jim how's your cleaning lady?

Of course this is NYC, not Manhattan, but its still like the 20th data point in a row to point to rising YOY rents in NYC, despite Inonada's insistence that rents are really lower because [link to an anecdotal SE listing that has come down in price.]

rents are going higher, definitely. There is no debating that point. however, a few friends who are looking to move have told me that landlords are getting very stringent in there financial background checks. One friend said 2-years of tax return, in addition to your W2 and employment verification, despite being on the job for more than the usual 2-years minimum, is required in a few instances. Another friend said he heard 50x rent-to-income ratio is being used in some UES and UWS buildings.

Good thing my lease isn't up for at least another 9 months but what I am hearing is rents are going up but "financial" requirements are also going up. Does that say that the "rent" is "too high" if the landlord requires tax returns and 50x income, say I take those two examples of "requirements ?"

When certain studios and 1BRs are cheaper between mortgage and maintenance than your monthly rent, here in Manhattan, then yes, the rent is too damn high.

What's driving rents up in NYC are the growing number of 20-somethings who are willing to double, triple, or even quadruple up on studio and one-bedroom apartments. They're not afraid to live like college students. It's not because the job market for them is "strong" in NYC, it's because with three other roommates in that Williamsburg studio, they can now afford the $3000/month rent working only part-time at Starbucks.

Matt you sound jealous. Are the union rules even overwhelming you?

str33teasier
about 1 hour ago
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rents are going higher, definitely. There is no debating that point. however, a few friends who are looking to move have told me that landlords are getting very stringent in there financial background checks. One friend said 2-years of tax return, in addition to your W2 and employment verification, despite being on the job for more than the usual 2-years minimum, is required in a few instances. Another friend said he heard 50x rent-to-income ratio is being used in some UES and UWS buildings.

Good thing my lease isn't up for at least another 9 months but what I am hearing is rents are going up but "financial" requirements are also going up. Does that say that the "rent" is "too high" if the landlord requires tax returns and 50x income, say I take those two examples of "requirements ?"

The demand is simply allowing landlords to pick the most qualified applicants.

"...What's driving rents up in NYC are the growing number of 20-somethings..."

Wrong. In fact, the trend has unambiguously been the opposite. NYC used to be filled with dorm-style housing for single people. Like on the show "Bussom Buddies". The last such place for men closed in like 2001 and for women maybe in 2007, but really they started declining in the early 90s.

Meanwhile, colleges around the nation are having to build ever more single-occupant dorm rooms because so many kids grew up with their own rooms their whole lives and simply cannot function with a roommate.

There have also been several stories about the city cracking down on illegal apartment diving walls and too many unrelated residents per unit. These stories in fact quoted LLs and Re agents saying that THIS would drive up rents. The inability of 20-somethings to bunch three per studio meant more people chasing available units, not less. This is literally the opposite phenomena than you describe.

There have ALSO been endless stories about empty nesters thinking Manhattan is "safe" again, and moving here in their later years. These people have far more money than 20-somethings.

There have ALSO been endless stories about families with children thinking Manhattan is "safe" again, and staying here or moving here, thus driving up the price of 2-, 3- and 4-bedroom rentals.

Its all of these things driving up prices. If in fact 20-somethings had the OPTION of living doorm style like they did 30 years ago, they would in fact take up LESS real estate square footage, not more, and make it cheaper for those of us who don't want to live that way.

And to the extant it IS 20-somethings, they don't make money from Starbucks - its their parent's money or a trust fund.

...economists have actually written about my second to last paragraph, with NYC in mind. If the law allowed more people PSF, it would make rents cheaper, not higher.

jason10006, the dorm-style places you refer to were so few in number as to be statistically nonexistent. A bigger factor then were townhouses, vast numbers of which were cut up into rooming houses and then SROs.

The biggest factors now are the return of concentrated wealth in huge numbers, leading to consolidation of smaller dwelling units in fewer but larger ones; the return of cheap immigrant labor to help facilitate those larger homes and accompanying lifestyles; social trends favoring cities over burbs.

Economists love to look at NY when they try to illustrate one isolated theory. The reality is that density restrictions are a minor factor in rents compared with two others:
1. construction labor costs, which are outrageous in NY even compared with similar construction in NJ. Even the $25,000 minimum bathroom renovation that we read so much about would be something like $3K on the mainland, tops, materials & labor. For example.
2. rapid transit -- we used to have much more than now, especially elevated lines (that don't get stuck in car traffic) but also streetcars. That causes a nearly-manic desire to concentrate in a very small number of neighborhoods, for fear of being on the outside looking in. Sprawly dumps like Los Angeles have a progressive downgrade as you move out from whatever the core might be (I was never able to figure that out anyway). So basically you can live anywhere at all, except of course Palms and then you'd have to kill yourself anyway, and it's just sort of death by a thousand cuts. No need to move back to Iowa.

I guess I will ask the question again,

If rents are going up but "financial" requirements to qualify for these rental units are also going up, doesn't that say that the "rent" is "too high" if the landlord requires tax returns and 50x income ? 50x is normally reserved for double-income couple and 2-year tax return is almost like criminal background check. Are we at a breaking point for rent increase ? The pool for qualified renters in the 50x income plus "tax return", assuming they are looking for liquid networth, is not very big considering it rules out "foreign renters", i.e., non-US income.

I agree we are now entering a rental bubble. Just like the housing bubble income will not be able to keep up with the rising rent that is being asked. Sooner or later something is going to give and it's not going to be a spike up in incomes.

Was just told by friends that out-of-state guarantors are being told they have to have 100 times the monthly rent. That seems totally insane.

I really don't get this "income über alles" restriction for rentals.

Someone who wants a $1500/mo rental (modest by NYC standards) and makes $60k per year, but has ZERO savings, is A-OK, but someone who wants that rental, has $150k in the bank, but makes $50k per year will be refused?

If that first person gets fired, good luck getting rent arrears paid if you're the landlord. The second person will never leave you in the lurch.

That's right.

Because that $150K won't last very long, since that $50K-per-year tenant will be dipping into savings to make ends meet because he got into an apartment he can't comfortably afford.

$150k would last an awfully long time, if you presume that the tenant earning $60k can live in the apartment with no financial trouble. Even if the $60k person spends every last dime to live there, the person earning $10k less will have to dip into savings at a rate of at most $10k per year.

And they're probably pretty good at saving money, given what they've got in savings now.

If someone under the 40x threshold wants to rent, just make them post a larger security deposit in proportion to how far under the 40x limit they are.

It's a bizarre market where people can be eligible to *buy*, but not eligible to rent, the exact same apartment.

str33, your question was answered by jim_hones who said "The demand is simply allowing landlords to pick the most qualified applicants." This is exactly what is happening. Not only is rental demand so strong that it has driven rents up and vacancy rates down but it has also enabled LLs to pick and choose the tenant because they have numerous candidates to choose from.

Landlord dilemma:

Same apartment
Choice 1: $4K per month. Tenant earns $200K per year
Choice 2: $5K per month. Tenant earns $150K per year

Or rent from RAL. Ask for the Free Parking Space deal, available for females only.

Triple_Zero
about 1 hour ago
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I really don't get this "income über alles" restriction for rentals.

actually it's "credit ubber alles". most other issues (short on income, etc) can be dealt with a guarantor, or extra security. but poor credit (or even middle of the road credit) is a deal killer.

Jim how's your housekeeper?

what's it like living with mommy and daddy at your age?

What is your goal for posts today? presuming it doesn't interfere with your busy social and work schedule?

Gotta have a streeteasy comment- posting goal. Or a streeteasy goalpost.

GOAL!, GOAL!, GOAL!!!

(I'm in Barcelona. "GOAL!" is big here.)

"CHEERS TO dwell"!!! ( This has been the second annual Truth in Barcelona toast to dwell)

>at your age?

What's my age?

The number of years you have lived since you were born

Thanks Truth, very helpful.

Its reasonable, if you have more than one applicant, to pick the one who seems most financially secure.

As for the 150k saving example - THAT person COULD offer to pay an extra month or two in deposit, which often is enough.

>As for the 150k saving example

Jason, remember, you have me on ignore.

Would you rather play "What's My Line", huntersburg?
Get out the blindfolds!

"If someone under the 40x threshold wants to rent, just make them post a larger security deposit in proportion to how far under the 40x limit they are.

It's a bizarre market where people can be eligible to *buy*, but not eligible to rent, the exact same apartment."

***

The problem is, they really *can't* afford the apartment.

Oh sure, someone making $50K could possibly swing that $1500/month apartment, but it'll take THREE weekly paychecks just to cover the rent each month ($50K/year = approx. $528/week net pay). In any financial universe that is absolutely insane, and landlords know it. The tenant would have only $614 PER MONTH left over for EVERYTHING else, from electric/cable/internet/phone to food, clothes, and MetroCard.

NOT. GOING. TO. WORK.

At most -- at the absolute most -- no one should be paying more than 50% of their monthly net take-home in housing. And even that is insane. A healthy metric is one week's net pay should cover the whole monthly housing nut.

Sad to say, but $50K/year in this city means at best you can afford to live with roommates.

Someone earlier said some landlords were raising the bar to 50x the rent for eligibility. It's certainly about time.

>NOT. GOING. TO. WORK.

So on top of all of your other weaknesses, you also have a stuttering problem.

>Someone earlier said some landlords were raising the bar to 50x the rent for eligibility. It's certainly about time.

So it's about protection for the tenant. Interesting theory. Moron.

"So it's about protection for the tenant."

No.

It's about protection for the LANDLORD. Duh.

> empty nesters thinking Manhattan is "safe" again
> families with children thinking Manhattan is "safe" again,

THIS is why NYC real estate has been a fucking TANK that has steamrolled all idiots that oppose.

> It's not because the job market for them is "strong" in NYC, it's because with three other roommates in that Williamsburg studio, they can now afford the $3000/month rent working only part-time at Starbucks.

sounds appealing. why not figuring out how to work part-time when the job mkt doesn't reward allocating all your life to work?

> Another friend said he heard 50x rent-to-income ratio is being used in some UES and UWS buildings.

we had to satisfy exactly that ratio back in 2006

> so many kids grew up with their own rooms their whole lives and simply cannot function with a roommate.

or maybe many kids wised up and are not willing to pay +$35k / year while living in shared tiny rooms

> Was just told by friends that out-of-state guarantors are being told they have to have 100 times the monthly rent. That seems totally insane.

our landlord doesn't even accept out-of-state guarantors, it makes sense to me. a landlord wants a guarantee in the same jurisdiction.

notadmin -I also thought it was because of out of state, but according to today's NYTimes, it seems to be the standard required of any guarantor, even in-state.

> Someone who wants a $1500/mo rental (modest by NYC standards) and makes $60k per year, but has ZERO savings, is A-OK, but someone who wants that rental, has $150k in the bank, but makes $50k per year will be refused?

landlords that weren't renting to the first person that dropped by take into account income produced by savings (thanks to Ben, right now that part is negligible). tenant's cash flow is then calculated as (wages + unearned income from savings) and should be 50 x rent or above. landlords don't assume that the tenant will use savings to pay the rent if fired in part cause those savings might have been consumed before the event.

"annual income above 50 x monthly rent" is equivalent to require that "housing-related costs stay below 24% of annual income". if you take into account that the government considers those who spend more than 30% of income on housing-related costs as in financial distress, then it's not that outrageous. it's just that the biggest housing bubble in history made people comfortable over-spending on housing-related costs. we are going back to normal, adjusting housing costs back to what income can support. not a bad thing imho.

30yr mortgages at 3.6% yet RE continues to suck azz, 80k jobs created for 300mm ppl. Rents up. Porque mr.w67?

A temp bump up in rents must mean =>
1)your bubble nyc re purchase was an excellent buy!
2) re is no longer an asset class that ppl want to own no matter how cheap the financing, so ppl choose the rental option.

Let's put mr .67 theory to the test, go on try to rent your $1mm studio on w42 for $4k/month!....

Thats awesome! 2% yield!!!!! Go you!

Hahahahahahhananajanaaaaaaaaaaa

Why does 100x seem totally insane, ph41? Where would you put the number and why?

>Hahahahahahhananajanaaaaaaaaaaa

More jungle sounds.

"($50K/year = approx. $528/week net pay)"

I'm happy to debate numbers with you, but how did you arrive at this? That implies a total tax rate of nearly half your income. Brief tests with a few online paycheck calculators have such an earner keeping a bit over $3000 per month, or just under three-quarters of what they earned. You lose about $900 per month in fed/state/city tax and $250 per month in SS/Medicare/miscellany.

"I'm happy to debate numbers with you, but how did you arrive at this?"

I arrived at this by going back and looking at my old pay stubs from when I was a young lad earning just over that, living in NYC.

When you account for EVERYTHING that's taken out of your paycheck, at that salary it's 46%.

BTW the online paycheck calculators are bullshit, particularly when trying to figure out net income in a city with as complex a taxing structure as NYC.

just how complex is the nyc taxing structure?

this took about 15 seconds to find and another 10 seconds to check.

http://www.tax.ny.gov/pdf/current_forms/it/nyc_tax_table.pdf

Of course, after the fact, columbiacounty is an expert in tax compliance.

>I arrived at this by going back and looking at my old pay stubs from when I was a young lad earning just over that, living in NYC.

It's nice that you keep the old pay stubs.

Did you remember to add back the dues from your four unions?

@Matt -- Then if it's not too much trouble, could you post all the details on that pay stub showing where all the parts of that massive tax bite go? And no cheating by pretending that voluntary company pension contributions count as things taken out of the paycheck.

>>>NYCMatt: "I arrived at this by going back and looking at my old pay stubs from when I was a young lad earning just over that, living in NYC." ..."BTW the online paycheck calculators are bullshit, particularly when trying to figure out net income in a city with as complex a taxing structure as NYC."

Matt's Mensa accountant navigates through the 'complex taxing structure in NYC' and manages to get him an incredible tax refund of over $8000 during those years where he made a measly 50K.

At $50K income, you will have $9.5K of exemptions & standard deductions, and federal tax would be $6155.

Social security runs at 6.2% (once the temporary post-2009 stimulus reduction runs out), so $3400 there. FICA runs at 1.45%, so $725 there.

For state & city, you will have $7.5K of standard deduction, so taxable income is $42.5K. Works out to $2516 in tax for state, $1439 to NYC.

So total tax is $14,235, and overall tax rate is 28.47%.

Work out to $686 per week in after-tax income.

Minus Matt's 4 union dues, and his monthly Metrocard.

Inonada, even assuming your calculations are correct, someone bringing home only $686/week STILL cannot afford a $1500/month apartment. Needing THREE WEEKS of paychecks just to make the rent is fiscally irresponsible.

You're preaching to the choir, NYCMatt. To me, even 50x is tight. This $50K-income person is looking at $3K a month after-tax. Spend $1000 on rent, $1400 on everything else, and save $600.

Completely agree with renterjoey, we're in a rental bubble. It's the last hurrah. Think of the analogy as different asset classes rolling over and rent is that last asset class.

> Someone who wants a $1500/mo rental (modest by NYC standards) and makes $60k per year, but has ZERO savings, is A-OK, but someone who wants that rental, has $150k in the bank, but makes $50k per year will be refused?

Agree, it's asinine. Let's take a look at the 50x rent-to-income. Say the apartment is renting for $4000. It would require someone to make $200K/year. Fed tax rate is 33%. NYC tax is around 3.68% but let's just round it off to 3.5% for amount over 50K. So, give or take, let's just have an overall tax rate of 37%. FICA is around 13.3%, lets make it simple and call it 13% and we pay 1/2 of that or 7%. So, the cummulative tax rate is about 44%. And to make things simple, forget the amount above 50K for NYC, we'll just tax the full income. So $200K & 56% = 112000 is the "take home pay."

112000/52 weeks = $2150/week or $8615/month. Now, the rent is $4000 so the rent is taking up 46.4% of the take home pay! .... 8) Almost over 50% of the take home pay goes to rent and we have not even talk about the other expenses.

If this is NOT A RENT BUBBLE, then I don't know what is!

BTW, it has NOTHING TO DO with finding the most qualified renter even though that's the "by product." It has everything to do with milking the last drop of profit without completely collapsing the rental market. 50x rent-to-income ? Do the math and see the insanity :)

Also, a lot of REITs depend on ever "growing" rental income to roll over the debt ... something to think about also b/c many rental properties, i.e., buildings, were packaged into REITs.

> empty nesters thinking Manhattan is "safe" again
> families with children thinking Manhattan is "safe" again,

> THIS is why NYC real estate has been a fucking TANK that has steamrolled all idiots that oppose.

Hahaha, dealboy, can't say I don't see the axe you're trying to grind. Regardless, you will see the tide turn. We're in a global deleveraging cycle :) RE as a "safe haven" was so 2000 dude. Carrying cost will eat away at anyone thinking RE is a "safe" investment. So, carrying cost and decline RE price will be such a double whammy that I have no idea why anyone is so willing to pile back so quickly without seeing the tidal wave just over the horizon.

Dealboy, wake up the smell the rot :)

http://www.youtube.com/watch?v=U5DBHxF0x0I&feature=plcp

> Another friend said he heard 50x rent-to-income ratio is being used in some UES and UWS buildings.

> we had to satisfy exactly that ratio back in 2006

You must have been in some very luxurious building. The "norm" that I know of for the longest time was 40x and I have been in the city "way too long to remember."

Personally I find rentals in the better buildings to be aggressively priced.

"You must have been in some very luxurious building. The "norm" that I know of for the longest time was 40x and I have been in the city "way too long to remember."

Not really.

Back in 1995, for instance, most people easily surpassed the 40x rule because rents simply were not that high. Studios south of 96th Street in Manhattan were going for $1000/month. One-bedrooms in doorman buildings were $1500. Or you could "save" money and live in Park Slope for just $500/month! And incomes were roughly what they are today.

Hey Cc.

Nada on sprint. I took a 10beta trade and am (was) up 45% versus your 20% on a 2beta trade... So I'm actually really down vs you at the moment, but I'm a big time long hold on sprint. I'm looking at $6 bf I even re-assess. In fact I'm getting $500k more into it in the next several quarters. The question is, do I wait for after earnings release or lever up my bet with some cooly placed options?

Str33easier... Matt's a tool, in every sense of the word. Nice YouTube video. Damn that is one nice necklace that reporter is wearing.... It's so shiny.

> Personally I find rentals in the better buildings to be aggressively priced.

Agree, they are aggressively priced. However, it is still high relative to where income is, i.e., stagnant, especially the bonuses.

For the perma-bulls, from Steve Forbes,

[As long as America continues moving away from sound money; away from sound financial and economic policies; and, ultimately, away from freedom, its future grows more dim. The dot-com and housing bubbles followed by the 2008 financial crisis and the most severe economic decline since the Great Depression serve as powerful lessons. A future of bigger government, higher taxes, more burdensome regulations, less consumer choice and more unrealistic government promises requires more and more Federal Reserve play money.]

http://www.heraresearch.com/images/HRN_20120706_Part_03_Interview_Steve_Forbes.pdf

Do you perma-bulls seriously think that NYC RE is sustainable without the "play money ?" You perma-bulls seriously think NYC RE is based on sound fundamentals ? If you think that's true, you're seriously more delusional than any bears can imagine.

10beta, 2beta, all dollars in the end. Throw us more scraps on your next move.

But why didn't you buy Sprint when he told you to?

>Do you perma-bulls seriously think

Who are the purma-bulls?

" A future of bigger government, higher taxes, more burdensome regulations, less consumer choice and more unrealistic government promises requires more and more Federal Reserve play money."

This won't be good for anyone.

Agree

I have been shorting the mkt again :(.

You are suppose to tell us _beforehand_ so we may take the other side...

and steve forbes has done how well in politics ? Obama is gonna be out and then its full speed ahead sans socialism. buy the dips.

>You are suppose to tell us _beforehand_ so we may take the other side...

like how w67 said to buy Sprint, so you said you bought AT&T and Verizon?

What gets me is that any affordable apartment advertised turns out to be a 2x2 rat hole. You can't tell me that landlord greed is not at work here, driving up prices.

bump

marco_m .. sold to you :)

I am reposting my previous post b/c I didn't see a reply and was wondering if anyone bulls can provide a counter-argument not to entice throw cold water in their face but to see whether any of this makes any sense ?

[Agree, it's asinine. Let's take a look at the 50x rent-to-income. Say the apartment is renting for $4000. It would require someone to make $200K/year. Fed tax rate is 33%. NYC tax is around 3.68% but let's just round it off to 3.5% for amount over 50K. So, give or take, let's just have an overall tax rate of 37%. FICA is around 13.3%, lets make it simple and call it 13% and we pay 1/2 of that or 7%. So, the cummulative tax rate is about 44%. And to make things simple, forget the amount above 50K for NYC, we'll just tax the full income. So $200K & 56% = 112000 is the "take home pay."

112000/52 weeks = $2150/week or $8615/month. Now, the rent is $4000 so the rent is taking up 46.4% of the take home pay! .... 8) Almost over 50% of the take home pay goes to rent and we have not even talk about the other expenses.

If this is NOT A RENT BUBBLE, then I don't know what is!

BTW, it has NOTHING TO DO with finding the most qualified renter even though that's the "by product." It has everything to do with milking the last drop of profit without completely collapsing the rental market. 50x rent-to-income ? Do the math and see the insanity :)

Also, a lot of REITs depend on ever "growing" rental income to roll over the debt ... something to think about also b/c many rental properties, i.e., buildings, were packaged into REITs.]

So, if the above calculation is correct, isn't spending 50% of your take home pay a little insane ? Just curious.

"So, if the above calculation is correct, isn't spending 50% of your take home pay a little insane ? Just curious."

oh haii, when's the last time you stopped jerking off to malcolm gladwell statistics and actually had sex?

where did you impute mom and dad's help from ridgewood, nj to help their daughter who guilts them for being absent through her puberty so she can post pics from the griffin lounge on facebook with some 7 body/10 face, who probly's is more interested in her gay roomie who flew in from san joooo brooo??

http://www.businessweek.com/news/2012-07-09/nyc-silicon-alley-office-tower-sells-for-140-million

ironically, where does one from moscow find a broker for a pied-a-tierre in wayne, nj? factory worker loses his job via automation, is money lost or transferred? jus sayin brahhh

'Let's take a look at the 50x rent-to-income. Say the apartment is renting for $4000. It would require someone to make $200K/year. Fed tax rate is 33%. NYC tax is around 3.68% but let's just round it off to 3.5% for amount over 50K. So, give or take, let's just have an overall tax rate of 37%. FICA is around 13.3%, lets make it simple and call it 13% and we pay 1/2 of that or 7%. So, the cummulative tax rate is about 44%. And to make things simple, forget the amount above 50K for NYC, we'll just tax the full income. So $200K & 56% = 112000 is the "take home pay."'

Someone needs to learn the difference between effective and marginal tax rates.

What is a rent bubble? Is there an implication here that there will be - POP! - and suddenly rents will decrease by 40%? Or that developers will stop building rentals? Or that everyone will live on the streets and all the rentals go vacant? I'm just not getting this concept. When rents are too high, no one rents. When everyone wants to rent and less is available, rents go up. When cartloads of people move out and no one can afford to take their places in rentals, the units are offered for less.

> Someone needs to learn the difference between effective and marginal tax rates.

Jordyn, let's stop to obfuscate in order to complicate. Yes, technically, there is a marginal and effective tax rate. However, for the sake of our example, it matters little but I'll play along so you don't get the "cozy" feeling that you actually "made a counterpoint" and so "smart a*sly", with the one line response succinct showing how "smart" or "dumb" actually, you are but let's play along shall we ?

Here's the tax bracket for 2011

10% on taxable income from $0 to $8,500, plus
15% on taxable income over $8,500 to $34,500, plus
25% on taxable income over $34,500 to $83,600, plus
28% on taxable income over $83,600 to $174,400, plus
33% on taxable income over $174,400 to $379,150, plus
35% on taxable income over $379,150.

Let's do the calculation shall we ?

10% at 8500 = 850
15% at 26000 = 34500-8500 = 3900
25% at 49100 = 83600-34500 = 12275
28% at 90800 = 174400-83600 = 25424
33% at 25600 = 200000-174400 = 8448
and that totals = 50897.

Now, add in NYC's tax schedule which I won't replicate but to make thing simple
3.68% * 200K = 7360 and we arrive at 59000

Add in FICA = 7.65% but we'll round it off to 7% to make things simple so 7% of 200K = 14000 and our total tax is around 73000.

Therefore, the take home pay is "roughly" 200000-73000 = 127000.

In the original "rough" example the take home pay was 112000!!!! or a difference of 15000 or about 1K more a month! Good for a month of SBUX and 2 dinners in NYC.

BIG F****G DEAL :) Now go back to school Jordyn and learn something called "back of the envelop calculation" ... I'm ROFLMAO at you Jordyn. ROFLMAO at you Jordyn.

> What is a rent bubble?

What is a housing bubble ? :) Where have you been lowery ? Living under a rock ?

I don't understand "rent bubble" either.

How would the usual bubble pattern play out for rent or food or some other thing we consume?

(Other than, as lowery said, either more supply, or more regulation, or more people giving up and moving to Kansas City.)

"Add in FICA = 7.65% but we'll round it off to 7% to make things simple so 7% of 200K = 14000 and our total tax is around 73000."

SS is capped at 106.8k for 2011, just sayin brahhh

"Now go back to school Jordyn and learn something called "back of the envelop calculation"

touche?

rent bubble is same as any other bubble - LLs price up expecting to get higher rents, renters initially play ball and take it fearing they'll have to pay more, this goes up and up until that marginal last renter does not show up. then LLs have to lower rents to rent that last unit and all of a sudden the clearing price is lower than many of the rents done until then. Given lenght of rents, this bubble deflation will happen over time.

> touche?

It's a back of the envelop calculation .. geeeeshush!!! Do you want to differentiate whether the person is self-employed or not b/c self-employed pays the full 12.65% of the FICA, self-employment tax, while employees do not and then with the self-employed, do you want to do the math for the tax deduction ? K, then I guess the next step is to construct a tax return right ?

As I said, obfuscate to complicate. The fact of the matter is, the 50x income is way too high while you and Jordyn just want to complicate the matter by obfuscating reality .. enuff said.

> How would the usual bubble pattern play out for rent or food or some other thing we consume?
(Other than, as lowery said, either more supply, or more regulation, or more people giving up and moving to Kansas City.)

How does a ball fall back down after reaching the apex ? Exhaustion.

Re: So, if the above calculation is correct, isn't spending 50% of your take home pay a little insane ?

No, not if you're single. Not too hard to live off $4600 a month after housing is paid for. What if you take home $1Mil? You saying you cant live off $500K a year?

> No, not if you're single. Not too hard to live off $4600 a month after housing is paid for. What if you take home $1Mil? You saying you cant live off $500K a year?

What you said is true but someone making a mil wouldn't be renting a 4K rental :) Single making 200K also probably wouldn't be renting a 4K apartment either, most likely north of 5K is my assumption. Single making 200 large, you are only renting a modest apartment ? Come on dude, live it up.

> What if you take home $1Mil? You saying you cant live off $500K a year?

As for someone living off of 500K, we're not talking about the same demographic. Folks making a mil+ or even 500K+ don't factor into this conversation and 50x rent-to-income means absolutely nothing to folks in that category.

"Do you want to differentiate whether the person is self-employed or not b/c self-employed pays the full 12.65% of the FICA, self-employment tax"

strawman, SS threshold FICA remains at 106.8k whether employee or self-employed, so point is moot which you failed to pick up in your example..

so if you want to stick to your uber-blurry grey back of the tampon calcs, what's the emotional cost for mom n dad grossing 1.5mm earned/30k passive to dole out 35k annual studio rental for their pudgy SATC daughter so they can use that as guilt ammo when it comes time to request a grandchild from someone worth breeding?

but in your world such scenarios don't exist, of course.. anything that makes your rent goes up must be a caveat? don't pout - cheaper rents on 11th ave, can use the endorphins on the jog to the subway.

You did not need to do all that calculation. You could have just googled the effective tax rate and found all sorts of websites that will tell you your effective tax rate by income.

50x is 24% of gross, which'd be a dream for most renters.

Check http://furmancenter.org/files/sotc/Manhattan_11.pdf. The UWS's median rent burden was 24.4% in 2005, 23.6% in 2009, and 26.6% in 2010. That's in a neighborhood where nearly 43% of apartments are rent-regulated.

Once you get out in the other boroughs, the rent burdens get really crazy.

> You did not need to do all that calculation. You could have just googled the effective tax rate and found all sorts of websites that will tell you your effective tax rate by income.

Jason, you are absolutely correct, I didn't need to but it was to make a point since some folks, if I had use a website, would be nitpicking some other parts of the argument like the website is incorrect or outdated, etc. Never winds when someone is trying to complicate the matter to obfuscate reality.

wow , here we go again

Rents are higher because fewer people want to buy.

I'll take the increases (and real rents still close to what they were a decade or more ago)... versus the massive losses folks who bought in the last few years are seeing.

Ok str33teasier.

Sorry, I'm not getting the concept of a "bubble" for something that is not an asset. When stocks "bubble" they reach a point where they crash. What are you saying, that rents will crash? People don't buy rents. When real estate, or dotcom stocks, crashe after a "bubble" it means that people trample each other in a stampede to buy, basically to be able to sell because they see everyone else stampeding and trampling over each other in competition to pay ever higher prices, so they want to get some of that profit. How do you expect to profit by paying a high rent? Sublet it to someone else at a premium over your rent when the market rents for vacancies are even higher?

lowery .. don't make it any more complicate than it has to be ...

> People don't buy rents.

It is still base on supply and demand. When demand falls b/c folks are no longer able to afford the price, doesn't matter if you buy or own it or not, you are still paying a price for it right. Therefore, there is a point where it becomes TOO EXPENSIVE relative to income. As mentioned in other post, 50x rent-to-income is getting a little "RICH" or too expensive. When things get too expensive, what happens ? Fewer buyer. What happens when fewer buyers are willing to buy .. inventory sits, i.e., supply ...

The greater fool theory you are alluding to has to do with the next silly renter willing to pay the exorbitant rent even though he or she could be using upwards of 50% of their take home pay to cover the rent. Then it becomes unsustainable ... or exhaustion as I mentioned earlier

I agree with you, but when you call this escalation in rents a "bubble" it sounds like you're predicting a sudden pop followed by a precipitous decline. Rents decline, but not as precipitously as, for instance, purchase prices of houses in Las Vegas. There has been lots of discussion on streeteasy about rent-to-buy ratios. I don't think there is a magical ratio at which the herd switches from renting to buying or vice-versa. I think instead it's a psychological turning point, the deltas. People panic about how much rents go up, and they project those increases out for the next few decades. So they buy. People see condo and coop prices decline and panic - mustn't buy, because I'll lose money! I was also wondering if you were making a generalization about new construction, because of the word "bubble." For instance, are you expecting that developers will rush to get in on the new riches to be made from renting studios for $4,000 a month, so too many of them break ground on lux highrises, and then the rents plunge?

> I agree with you, but when you call this escalation in rents a "bubble" it sounds like you're predicting a sudden pop followed by a precipitous decline. Rents decline, but not as precipitously as, for instance, purchase prices of houses in Las Vegas.

It could "pop" and a sharp decline ensues, we just don't know. When prices, regardless of what it is, escalates to the point where the fundamentals (income) don't support the increase, then it is always possible for the bubble to "pop."

> For instance, are you expecting that developers will rush to get in on the new riches to be made from renting studios for $4,000 a month, so too many of them break ground on lux highrises, and then the rents plunge?

I don't see it here in the city YET but you have developers scooping up cheap houses all around the country trying to cash in on this "rent increase." I personally know a few folks forming such "investor group." If the carry is positive, sure beats having that dough sit in the bank right ?

So the bubble you are describing is actually an asset bubble - you are referring to the investor pools who want to buy rental properties because it looks so great right now with rents climbing. I do understand that. And it's an especially risky enterprise if they plan to buy NYC coops, where boards could decide to disallow sublets, for instance. I know anecdotal "I know someone who says that" stories are frowned upon here, but guess what? I have heard of investor groups in NYC calling brokers expressing an interest in purchasing coops to invest in as rental properties. The math looks good to them. Tsk, tsk, tsk. There's a reason those coops don't command such great prices. They're not meant to be investment rental properties.