Buying now

jifjif - your 2nd Pro is pretty weak :(

Yes it is weak. VERY WEAK.

BUT I think the apartment it self is very nicely done, great street / neighborhood, decent layout.

Low interest rates? please consider that your interest rate, i hope on a fixed interest mortgage, is only ONE of the factors to consider.
Do you know that prices raised from 1989 to 2007 by 300% in most areas? any clue how much they dropped at the end of the eighties?
do you know the P/R ratio, price over rent return is now after taxes a meager 3%, vs 8% in the early 90's; that real estate taxes will go up?

Everyone on here is so negative I say go for it jif jif! I'm negotiating on something now too. We're at 100K less than asking and I can get a 4.5% fixed rate mortgage. If you are buying a "home" and not thinking of it as an investment thats what matters. Remember once upon a time when people bought apts to make their own? There is a risk of more downside definitley, but there are no guarantees in life --if you love the place

Go for it!

Good luck

yep...go for it...and then you can join the whiners here about why did it drop, what happened to my equity, etc. suck it up...keep renting and see where we are in 12 months.

So I would add this - typically, real estate prices stabilize only after transactions do. I don't think we'll see a bottom for prices until transactions start picking up again (e.g. up off of their 50% YoY decline last quarter). If I were you, I would wait until you see at least an uptick in transactions before purchasing anything (if you are concerned about the value of your home, which may, as the other poster noted, not be a big deal to you).

What area are you considering buying in?

http://downtowny.blogspot.com

yada yada yada...don't buy now.

Time horizon is key. How long do you plan to live in this place? If at least 7-10 years, then your pros have some merit. If you'll outgrow it or get sick of it faster, it's just a glorified rental - and a much more expensive/risky one.

One other point on interest rates. If you think they're going up at some point in the future, what do you think that will do to prices?

the answer is here: just read the threads on s easy....and 1) either dont buy, or 2) seek medical help

but...if despite everything, you do buy, please keep the whining to yourself. because, honestly, you have no one else to blame at this point.

No need to self censor jifjif
I'm sure the discussions that come out of your final decision will be a whole lot more interesting than the stuff columbia normally posts, Berkshires vs Hamptons notwithstanding - that was actually quite interesting.

I continually find it amazing how so many people need to continually try to convince people not to buy when they have no idea of the person's circumstances nor how this market will ever play out. Conversely - jif jif - if you are hinging such a huge decision on the opinions of random anonymous posters on message board, you have problems.

in your opinion, what is the liklihood that current prices will go up vs. go down? and by how much? in my opinion, they will go down at least another 30% therefore, in my opinion, buying now will lock you into a minimum 30% loss. so, with that opinion, i cannot understand how anyone's personal or professional circumstances would make it prudent to make a purchase at this time.

Thanks folks. I have had some good advices from random anonymous posters here. I almost bought last year but thanks to reality check from people here.

Yes the prices will come down, I am guessing what I ever I pay now, it will drop 10-15% over next 1-2 yrs which I am ok with. Not sure about additional 30% drop.

not my business but curious...if you believe 15% drop is reasonable, why not wait? what price range are you in?

joepa...sure, no one knows the future exactly,...but if you read on here about developments in crisis, inventory overhang, zillions of apartments still listed near peak prices...you will see that this market is illiquid, sticky, not functioning and prone to get risk of price gaps, in a downward direction...so there is assymetrical risk to buying now, zero upside and great possible downside...

just my .02 worth. I think enough "time" has passed that more than one seller may hit "any" bid. Lets say the general negative consensus for a particular building is 30% lower than current prices. If you love it, bid 30% down, no problem. Probably 19 out 0f 20 will ignore you. However, if you have found the ideal apt, and run into the right seller, you may get a great deal. In short, I have no problem with someone buying today, as long as they are buying at "tomorrows guestimated price".

Agreed patient09.I was going to post something like this: Do not consider buying today unless you are prepared to low-ball massively, look for sellers in distress, make every contract provision buyer-friendly, etc....This is not a market for buyer bashful types.

but that can be very frustrating and not work if you need a place to live. why not hang out in a nice, expensive (but still cheap compared to potential capital loss)rental for a year and see what happens. that was kind of my point in asking about OP's price point. obviously, at $1 million, he/she is "accepting" a loss of $150 K which I think many of us think will be higher. take half of that and put into a nice rental. i honestly don't understand why people don't do this.

My problem with these opinions is that you are taking a generalized approach "the market will go down 30%" and applying it to a specific situation. I am not questioning the overall conclusion (I have no idea what is going to happen with the market), but you have no idea what apartments this person is looking at, where these apartments are located at, what the current price of those apartments may be compared to comps, what his alternative investment strategy may be, what his credit situation is, what his long time goals are, how long it will take for this alleged 30% correction, etc. -- nothing! It's like telling someone not to have a child now because child care costs will go down 30%.

i am not aware of rental alternative for children.

yes, i think columbiacounty is saying, "abort"

joepa, I fully agree with you. I told columbiacounty yesterday as well that he/she is constantly posting oversimplified answers. One size fits all. No grey shades, everything is black or white.

I have no idea when, how, how long, if ever a bottom may form. I do believe that extremely low sales will occur throughout the continuum, in the beginning, middle and end. Additionally, specific supply that meets a particular buyers demands will come and go throughout this period. Therefore, I think it makes sense to continually try to identify specific properties that appeal to you during this window of distress. The buyers key once properties are identified is to simply bid "your" price and hope for the best. If a buyer makes a purchase at their perceived levels of distressed pricing, it doesn't matter which part of the cycle this happens in.

cc - you speak as if you have a crystal ball. can you opine on where the stock market will be by 4th quarter?

jifjif - every purchase is different. if you are buying a fund that seeks to track manhattan real estate, maybe it will go down 20%, maybe not. if you are looking to buy a home, you may find a desperate seller and get the deal of the century. i for one do not think that being sick of renting is a weak reason - it is the key reason for many people choosing to buy.

cc - keeping with the analogy. I guess the rental equivalent to children would be advising someone to get a dog instead.

Where are the clinics you go to to abort an apartment purchase? Are there protestors in front?

Didn't the Leave No Apartment Behind act deal with this?

I would buy when interest rates are sky high > 10%. Cause that means the price will be insanely low and no one will want to own. If interest rates are so low, there are definitely people buying. If you buy when interest rates are high, you could pay cash, or refinance later.

Thanks again folks.

OTNYC, I think the difference between NY and other cities is that price comps do not always match with particular place (same street, same floor, similar layout, similar view, but different apartment). Thanks for the advice. It may not be the deal of the century but I think its rare that I find a place I can see my self in with out spending over $2mil+.

craberry, the interesting issue is that no one is buying when the rates are low. The path, just my personal opinion, is that the interest rate will steady for 3-4 month and will start to inch up. I would personally prefer really low with high interest but considering that the max I will stay at this place would be 5 years, I really dont see the reason to go in at high rate. Its a fine balance and I still need to do some more calculations on 5 year projections with 10-15% decline in next 1-2 years and stabilization of current buying price at 3-4 years and potentially 2-7% up in 5 years. Again, these are based on rough numbers.

:)

Actually, my next question is..

Would you buy if the buyer gave the same price as per 2005?

Along the lines of what Patient09 is saying, if you find something you like you have every right to bid low. Keep in mind the current average market list to contract is -13%. Sellers know they are on shaky ground, and although it may not be advertised, my guess is many will look very hard at any offer.

i'm still struggling to understand the numbers. lets say you find a place for $ 2 million that you like. lets assume monthly maintenance of $2,500. lets assume 1.5 after tax % opportunity cost on your $2 million. so the monthly cost is $4,500. you say that you think there is a chance that you may have overpaid by 15% -- lets say you only overpay by 10% + lets add 5% for transaction costs on your eventual sale. so it's cost you $300 K + $4,500 per month.

by the way, if interest rates do go up during this period, not only will it become more difficult for you to sell because non all cash buyers will have higher carrying costs but your opportunity cost of $1.5% could easily go up as well.

lets assume a 5 year holding which adds 5 K a month to your carrying cost. so under this scenario you would break even on a rental at $9,500 per month plus retain complete liquidity and flexibility.

from what i've seen at that price, you can get the equivalent of a $2.5 to $3.0 million apartment at today's prices, so its not like you'll be living in a dump.

you are 100% right. I don't have a crystal ball -- I am just considering the odds here. i'll go out on a limb and say that i cannot see any circumstances where prices rise significantly so i don't see how you can lose under the above assumptions.

there is a HUGE flaw in the low interest rate argument. the flaw is this: when interest rates rise, prices will fall. so if you buy now, with low interest rates, you pay a higher price for the apartment. it is terribly simplistic to simply assert that low interest rates make it a good time to buy.

oh, one more thing:

if the MAXIMUM that you could stay in the apartment is 5 years then there is no way you should buy. what will you do if the apartment's value has declined 30% from here in 5 years--sell and take a 30% loss, or be stuck in an apartment you have outgrown? the obvious answer is to rent while the market continues to decline.

jifjif, there have been numerous examples in other threads of apts., especially in the more distressed luxury segment, selling at or below 2004 prices. And those went into contract 3-4 months ago. An additional 20%-25% down would bring you down to 2002-2003 prices, which is where many parts of the US are already trading right now. So, no, I wouldn't pay a 2005 price unless that 2005 comp was a great deal then and there.

prices will not necessarily fall in a high interest rate environment. high interest rates are likely the result of inflation, which by definition means increased prices.

interest rates are artificially low due to government intervention. presumably we can agree that the historical fed funds rate is not zero? where is the money going to come from to do anything as we continue to lose jobs everywhere? the sooner we wake up to the facts, the sooner we can adjust to the new reality...apartment values roughly tripled in the last ten ...incomes didn't. and now incomes are going down. why won't real estate follow?

buying and thereby assuming debt (leveraging up) in a deflationary environment is not a smart move.

De-leveraging is still job # 1

no...a nice lobby is far more important.

What about buying, living in for 5 years (hopefully be able to save money), and then buy something else, while renting the first apartment until prices stabilize to be able to sell? Of course, this would assume the rent is enough to cover most if not all of the after tax monthly cost of the apartment. It this something one should consider at this point?

Look, no one knows. If you intend to be in the place a while, prices have come down for some units.

New condos are a big question mark. They aren't making any more pretty prewars though. Who the hell knows. Do what you want.

Right. I would strongly consider to buy if I find the right place (with heavy negotiation). It may not be a question of investment at this point but where you are comfortable living, etc. If you are considering it for investment, you may want to look elsewhere... during the first 5 years or so most of your mortgage payment would go towards m-interest anyway...

boy oh boy...i wish i had something to sell you...not for investment, but for living and losing 40% when you finally move out.

apt. values did not triple in the last 10 years columbia. Quit pulling facts out of your rear.

"there is a HUGE flaw in the low interest rate argument. the flaw is this: when interest rates rise, prices will fall. so if you buy now, with low interest rates, you pay a higher price for the apartment. it is terribly simplistic to simply assert that low interest rates make it a good time to buy."

I corrected your statment below:

there is a HUGE flaw in the low interest rate argument. the flaw is this: **if** interest rates rise, prices will fall. so if you buy now, with low interest rates, you pay a higher price for the apartment. it is terribly simplistic to simply assert that low interest rates make it a good time to buy.

so...how much of an increase would you estimate from 1998 to peak 2008? 2 1/2, 2 3/4's?

cc, please disclose what you do for a living.

make things work.

prices doubled over the last 10 years.

alpine, some prices doubled, some quadrupled. if you had told me in 1996 that condo properties would sell for over $1.5M in Harlem I would have laughed.

Morningside Heights, the East Village, LES, Hell's Kitchen, parts of UWS proper, Murray Hill and Kips Bay, Chelsea (particularly non-prime), Yorkville, Gramercy (non-prime), all increased far more than double.

i'm talking '98 to peak i.e. if you could have sold at the very top. lets split the difference and call it 2 1/2 although AR makes valid point above. here's the rub...except for a very few at the top incomes have not gone up that much and at this point in the downturn we have no idea about how much incomes are going to go down except for the certain knowledge that they are going down.

CC - where do you wish you owned an apartment and sold it to me? so I know not to buy and expect a 40% loss...

but, nonetheless, based on your opinion, I would expect to lower your current asking price by 20-30%, so does that mitigate my loss? I can manage with risking 10%, if I live where I want.

and getting a tax credit of 8k...

and hopefully get the tax credit as well...

go for it buddy...do some rough, tough negotiating. get your big reduction --and then rent it out, and keep going. whoops, you're stuck 3 yrs ago. the wrong idea at the wrong time is the wrong idea.

> apt. values did not triple in the last 10 years columbia. Quit pulling facts out of your rear.

Funny, because quite a few folks on this board argued they did just a couple months ago... and I believe had some data to go with it.

Actually, you are wrong. I remember common wisdom being a decent 2 bedroom was $500k in 1998 (a friend bought at the time). $1 mil certainly wasn't getting you that last year...

nyc10022... the $500K in 1998 would've bought a CPW, 60's or 70's unit, last year a $1MM would have bought 99th st wea with work needed... you need to adhere to Shiller. In mid 1990, I bgt at $300psf (prime) in 2008 it was trading at $1500.00psf.... same unit....

Yeah, I knew it was more than 2x, just couldn't remember the exact stats.

Once again, alpine would rather just make up numbers than admit the truth.

Actually, Alpine, Columbia may be closer than you give credit for. Purchased on UES in 1997 for $159k, sold last summer for $660k. Yes, I upgraded the kitchen, did the closets, but not a ton more than that that to be honest.

that's not true nyc10022. There are tons of 2 bedrooms/1 bathrooms for under $900k. sniper just sold one recently for $850k. You can also get a 2 bedroom/2 bathroom at Lincoln Towers for about $950k.

of course and as discussed above many areas more than tripled. its funny when we built up here in 2001, our builder laughed and said something to the effect that you never know someday, homes in Columbia County may actually sell for $1 million. before the crash, i.e. roughly a year ago, i can't tell you the number of places that sold for over $2.5 million with raw land going for routinely between $600K and $800 K. no longer for sure

"that's not true nyc10022. There are tons of 2 bedrooms/1 bathrooms for under $900k. sniper just sold one recently for $850k. You can also get a 2 bedroom/2 bathroom at Lincoln Towers for about $950k."

Not the ones we're talking about... but try again.

WOW, I still can't believe alpine tried to put in LINCOLN TOWERS as a fair comparison. Or 2/1s. I'm still laughing about it.

Man, is alpine still in denial....

Then perhaps you need to define "decent" 2 bedroom. "Decent" is a VERY broad term. Oh, and I grew up in a 2 bed/ bath apt. and it was very "decent." I'm sorry the apt. is not up to your standards Your Majesty.

*2 bed/ 1 bath apt.*

CC is a little aggressive for my taste, but his assertation that the market has tripled since 1999 is fairly accurate. You can pull up the data yourself by going to www.millersamuel.com/data...you will see the growth of the market from 1989-1999 is fairly reasonable, and then it explodes from 1999-present (more than triples in many areas). The correlation of this move is very high to the explosion in Wall Street pay over the last 10 yrs. Given that Wall Street will never again see compensation like the last 10 years, and that NYC real estate market hasnt corrected yet, its pretty likely we have a ways to go on the downside.

fyi- can confirm about prices tripling...friends bought in 2000 and sold last month for 3x what they bought for...co-op, non-doorman building...upper east side...below 96th

so triple or only up 275%? what difference. the question is what happens to markets that expand at this rate without underlying support from incomes?

Where I owned (co-op village on the LES) prices did NOT triple in the last 10 years or come anywhere close to it. I can ssure you that the $300k 2 bedrooms in 2000 are not going for $900k today nor have they ever.

Purchased - September 1996 for 125K (Co-op, Midtow East, 750 sq),
Sold - March 2008 for 570K
do the math

What do you think you would do if you were actually good at what you did and worked in Wall Street making millions in the last several years? Someone asserted to me the other day that they imagined the bigger firms would dismantle and that the best people would go off and create their own companies bringing us back into the Wall Street of the 30s and 40s with shops that specialized in different financial service niches. Do you think any truly talented people will just stop making the millions? Do you think the truly untalented people will stop making the millions? I'm just curious as to everyones thoughts on this... I don't know what's going to happen and I'm certainly not asserting this as my own

You buy now, you're suffering from borderline retardation. End of story.

my theory---some talented people will make percentages of what they used to make (i.e. 5-20 million goes down 50%); some smaller percent of less talented people will do something similar (luck, who you know, etc.); the bulk of them will be lucky to achieve 20-40%.

alpine, you keep starting the price at 2000. NOOOOOO. Greenspan started the party in 1996, and coop village had very restrictive flip taxes that kept the ascent slower at the onset. but your persistence in the face of overwhelming contrary evidence is almost admirable.

I was going to remark on that, aboutready. Now that LICC, Petrfitz and all that posse are MIA, and SteveF just posts his crazy stuff but then retreats without "debating", Alpine is really standing up for the delusional crowd. Keep up the good work, Alpine, David Lereah would be proud!

Rents are low right now and there is no risk in renting. When you can own the same apartment for less than you can rent it (by a lot), THAT'S the time to buy. Not now, and not for a while. That's my professional advice.

I think its one of the most common misconceptions around that the time to buy is when rates are low...Its quite quite quite the opposite. Look at rates in the 1990s.

from NYT today:

"Two years later, in 1998, his father, a geriatrician, suggested he buy a place. So he did, with his father’s help — a 750-square-foot two-bedroom condominium for $87,000 in Prospect Heights. Mr. Ellis’s plan was to sell the condo and buy a smaller place for himself in the city. Last spring, he listed the unit with a friend, Jeff Gardner, an agent at the Corcoran Group, and requested that Mr. Gardner find him a new home.

The condo sold in the fall for $455,000."

I rest my case.

1 bed 500 sqf 2004-2005 price. Full reno.

I am a poor kid and thats what I can afford.
I note that comps in that area are selling at 2002-2003 prices with no reno. Adding reno will bring the prices to 2004-2005 level.

One thing is that more you wait, more people are not willing to let go of any decent apartments.
Most of the units that are out on the market right now lack quality.
I guess I am asking quality vs quantity on value.