Housing prices start to plummet

#99 = bitter renter

I'm a renter and I don't understand why people want the housing market to go down. Let's face it we blew it by not buying in '97, '98, etc. The failure of the housing market would affect New York's economy in many ways. Let's hope that it continues to do well.

I'm a renter and don't really care either way - it is FAR cheaper for me to rent right now than buy (pay 2400/month on what would probably sell for 800k) - if the buyers want to pay 100% more than the property is worth based on rents in the city let them make that bad investment. I'll keep on renting and making lots of $$ with the $ I don't have to put in a down payment.

#104:

The issue is are you REALLY making money with the 'extra' you're not spending? Really? If so, what kind of after tax rate of return?

The truth is that people SAY what you do, but wind up spending a portion (or all) of those 'supposed invested savings' that they claim they're making on stupid stuff, and thirty years later, they have MUCH less than they thought they would (or nothing at all) - and they STILL have no equity in real estate!

That's why home buying is an important part of many people's lives because, if nothing else, paying your mortgage is a FORCED SAVINGS PLAN.

105, exactly. Is the stock market really safe right now as an alternate investment?

at least if you invest in the stock market and it goes down 10% you only lose 10% - say you invest 100k and it goes down 10% you now have 90k. If you use 100k as a down payment on a million dollar apartment and the RE market goes down 10% you now have 0 equity. Yes, the stock market is a much better alternative right now.

In general, buying is a good investment. Right now though, none of us really knows the scope and magnitude of the subprime crisis and ALL its implications. There is uncertainty about buying right now, which we see on these boards. The fact that people feel so iffy tells us something about the market. These discussion boards weren't so heated in say, 2004, when everyone pretty much thought real estate was a great investment that always goes up. Historically, it goes up and down in the short term and only up in the long term.

yes -- my stock provides nice cozy shelter from the elements. Plus there is no chance it can EVER be worth nothing! My Enron and WorldCom shares are on fire!

tying up all of your money in one investment such as Enron, WorldCom or Manhattan Real Estate is a bad investment. And you won't be underwater in the stock market if you don't leverage. The example above in 107 is very good, but i think prices will go down even more. If you put down 100k on a 1MM apartment and market goes down 20% you are now actually UNDER WATER by 100k. If the stock market goes down 20% you still have 80k and you've only lost 20k as opposed to 200k in real estate.

110 -- only if you sell. remember you still HAVE A HARD ASSET.

Try asking Enron for your % of the company someday -- maybe they can pay you out in staplers and paper shredders . . .

I think a lot of renters wish they had entered the market a long time ago, now
all they can hope for is a severely depressed Manhattan market (which I don't
see). It reminds me of the bumper stickers on autos in Alaska after the Trans-
Alaska pipeline was completed:

"Please God give me one more pipeline, I promise not to piss it all away this time!"

change the words, pipeline=hot Manhattan market & piss=rent

I see a lot of people who just bought who are very very worried on this site. Positive thinking won't make the market go up.

Doesn't it really depend on how much you overpaid for your co-op/condo. Paying $900k for a one bedroom condo is crazy but in the overheated market it made sense. NOW...well it's a different story.

You always need a place to live. If you don't want to be in NYC for a long time, then don't buy. If you love it here, you should buy. I came here thinking I'd only be here for 3 years maybe... now its 10 years later and plan to stay for 5-10 more.

#115 is right on. The era of flippers (2004-2006 RIP) is over. Settle in, buy in a good neighborhood, enjoy your place and you will be fine. The 5+ year horizon is good . . .

#110, your statement is contrary to your point. "tying up all of your money in one investment such as Enron, WorldCom or Manhattan Real Estate is a bad investment." The key to wealth is diversification... so having too many stocks and not enough real estate is also bad.

I'm nervous about how much I should spend on an apartment. I have about $1.5 is assets but I currently am not working. I've been looking for a studio in the $325 price but maybe I can spend more. Totally confused!!

It really should also depend on how much you have in cash. 1.5 mil in assets can mean you have a few painting and nice car that you feel is worth 1.40 mil and 10 thou in cash.

107 and 110, you have to be kidding, you're holding out leverage as a negative of RE. what if the market rises 20%? then you've made 200k rather than 20k. in reality the market (well at least my place) is up about 50% in the past 4 years, so my 200k investment leveraged is now roughly 600k. thats a 30+% IRR, oh and its tax free.

and as another poster pointed out, in the event of a downturn, its only a problem if you have to sell.

Look everyone and their granmother knows the housing market in NYC is going down. Anyone who doesn't know this is plain old dumb

Or plain old smart

104, if you're paying 2400 a month on a place that would sell for 800k, good for you, but thats some cheap rent. a lot of people are paying 2400 for a place that worth more like 500k or less.

Ha, ha #109:-)

Agree with #115 an 116. People will only do badly if they're looking to sell. If you're buying for the long haul - 10, 15 years, etc - you'll do fine.

you might not lose a ton of money if you sell in 15 years (but who knows?) - however, very very very doubtful you will come out as well as if you'd rented and invested that downpayment $ in the stock market.

Well depends how much your down payment is and depends what you invest in. The stock market can be a scary place. Does someone more financially astute feel like running a simulator on that?

This site is helpful. I think you can only assume max 1-2% appreciation over 15 years b/c honestly prices are going down at a rate of 10%/yr in real estate.

http://beta.housemath.us/

site shows little black arrows will continue to point down for a long time

no, little black arrows pointing UP for a long time, bitter renter....

no, little black arrows pointing DOWN for a very long time delusional/scared person who bought at top of market/broker

more likely this person is short some housing stocks or something.

As someone who thought about buying, but decided against it, I just don't see how prices can continue to rise. As others in this thread have pointed out, prices are completely out of line with rents and as others pointed out you use a ton of leverage when you buy and the housing market across the country is clearly going down. Why would you buy? These crazy assertions of "if you're here for a few years it makes sense to buy" - maybe that makes sense if prices are rising, but if you're only going to be here for 5 years - even if prices don't fall, your closing costs/mansion tax/flip tax/condo fees/taxes will eat up any kind of benefit you would have from buying. If prices go down you are just screwed out of hundreds of thousands of dollars if you need to sell at any point in the next 10 years and if later still screwed out of the $ you could have earned on your down payment/over priced mortgage payments. Just my two cents.

if you feel that way then don't buy.

#134 here - I am not buying - though I did very extensive research before I came to that conclusion. After my research I thought I must have been crazy to think about buying, but I didn't know b/c I was bombarded with the message "buying is better than renting always" and didn't really think about it or run the numbers. It is very scary what could happen - even in the non-subprime areas of NYC. If owners who bought a million dollar apt and it is now only worth 700k and they're underwater paying a 900k mortgage - they will walk away. We are going to see this even in the higher end apartments if prices fall 20-30% (they're up 300% in 10 years so this is not unrealistic at all).

I don't think http://beta.housemath.us/ is accurate. It states "your home will be appreciating, you will be getting income tax deductions, though you will also owe capital gains taxes on any appreciation". Most people will roll the earnings into another home or take the earnings tax free.

I think walking away would severely damage your credit rating... owners will hold on as long as they can. As long as there are jobs in NYC and people coming, demand should still be strong.

Buying takes some vision and a longer term outlook. That's why so many people remain on the fence. Don't buy a craphole that nobody will want and you won't need to sell it for a 20-30% decline. Just like u shouldn't buy crappy stocks, you shouldn't buy crappy properties either, just because they are cheaper.

prices go kaboom!