The New Homeowner Hallucination: "We'll Rent For A Year And Then Sell When The Market Comes Back
Started by HT1
over 16 years ago
Posts: 396
Member since: Mar 2009
Discussion about
Mark Hanson of the Field Check Group continues to write great analyses of the housing market. Mark remains extremely bearish, and he attributes the recent pick-up in sales velocity to seller capitulation rather than renewed buyer demand. Mark thinks the next segment of the market to crash will be the mid- to high-end, where many smug homeowners are now telling themselves they'll just rent their... [more]
Mark Hanson of the Field Check Group continues to write great analyses of the housing market. Mark remains extremely bearish, and he attributes the recent pick-up in sales velocity to seller capitulation rather than renewed buyer demand.
Mark thinks the next segment of the market to crash will be the mid- to high-end, where many smug homeowners are now telling themselves they'll just rent their houses for a year while they wait for the market to "come back." Needless to say, Mark thinks these folks are dreaming.
The mid-to-high end housing markets are on the ropes and taking a barrage of body and face blows. Entire communities are being re-priced lower, literally overnight. Sales transactions have increased over the past couple of months because sellers are finally capitulating.
Most of the properties being sold are from:
a) those with lots of equity who know they better sell now or they will lose their opportunity
b) those that know they will be able to steal the new house that they buy so it’s a wash
c) short sales being approved more often
d) foreclosure resales.
Prices coming down to a point where the market clears is key to finding the ultimate bottom of the market, but it before a bottom is celebrated the market has to enter a very dark place.
Remember, in early 2008 -- as prices were only about a third the way off of the highs -- falling prices was viewed by the pundits as a great thing and needed in order for the market to heal. But in reality long before a bottom can occur, the falling prices create a negative-equity loan default and foreclosure domino effect that does the real damage.
This overnight house price re-valuation freefall is exactly what we saw in 2007 and 2008. It’s simple -- as values fall, more go into an incurable negative equity position, which lead to increased loan defaults, foreclosures, supply and lower prices. Then this fall in prices lead to even greater amount of negative, loan defaults, foreclosures and lower prices - rinse and repeat. Prices then keep falling until supply and demand fundamentals neutralize. This is what we saw at the low end this year as a result of artificially low rates, foreclosure moratoria, mortgage mod initiatives and finally seasonal factors after prices were down 55% at the median.
And now, Hanson argues, the same price collapse is coming to the mid- and high-end of the market--where owners are now deciding that prices are about to "come back."
Check out the anecdote below:
Because of the epidemic negative equity across the mid-to-high end, a large percentage of high-leverage exotic loans still in place, and the belief amongst the upper-crust (or severely over-leveraged depending upon how you want to look at it) [that the market will come back] many are resorting to renting vs. selling. In every case, the homeowner or Realtor managing the lease says “we want to wait a year or two until the market comes back”.
Why in the world would there be such an overwhelming sense of hope among the mid-to-high end homeowners that the prices of expensive homes would come roaring back? If not for interest only loans, Pay Option ARMs, stated income and 100% HELOCs the mid-to-high end would have never got there in the first place.
Two years ago, a household income of $100k a year could legitimately buy an $800k home with almost nothing down and afford the payments using a Pay Option ARM. Now to buy the same house, you need $160k down and an income of $200k a year. The $800k home went from the majority being able to afford it, to only a few. Remember, in the upper price bands most have to sell a home for the down payment and debt-to-income ratios required for a new loan.
Even in San Francisco City , long thought to be safe-haven for house prices, owners are resorting to renting. A savvy money manager and real estate investor I know sent me this note yesterday I thought was worthy of sharing. He has been scouting properties for an associate moving to town from NYC.
“Mark, I walked through a beautiful home in Pac Heights yesterday. Was listed at $6M about a month and a half ago. Price has been cut three times now and it currently listed at $4.95M. The amazing part is that the owner is now trying to rent it for one year (and I quote the agent) “and then sell it when the market comes back.”
When I asked her what made her think the market would come back when rates were going higher, availability of credit was down, incomes were down, unemployment was up and willingness and availability of people to spend was down, she had no answer.
Even more amazing was that we looked at four places in a similar price range and almost all of them had a similar strategy…”rent it out for a year and then sell when things get better”…
All these high-end people think they’ll just keep burning through capital and that everything will self-correct in 12-months and then go right back to the idiotic pricing levels that they themselves were crazy enough to pay.
Are people really this clueless???? (that was rhetorical so no need to answer…)… J
... Looking at median household incomes in every mid-to-high end area in [California], I come up with the same conclusion…the mid-to-high housing bands are still 33% to 50% overvalued on average.
Bottom Line - I don’t remember ever seeing such a massive supply of quality SFR’s for rent in CA. Rents are falling fast. Why in the world would someone want to put down $500k cash and make payments greater than that of rent in order to buy in a falling market? Prices have much further to go on the downside.
Unload that McMansion while you still can.
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Response by Riversider
over 16 years ago
Posts: 13572
Member since: Apr 2009
Owners that were banking on their home as investment akin to a stock are most at risk for selling. Personally know of many who bought more home than necessary on the expectation of it appreciating in value and the expectation of selling of selling at profit. Take away the profit expectation and a good chunk of buyers would've purchased more modestly.
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Response by Rhino86
over 16 years ago
Posts: 4925
Member since: Sep 2006
Is Geithner doing this? Kind of scary that he is holding on to this kind of false hope. I don't see any spectacular 2010 recovery for Larchmont, NY. To boot, he is not covering the payments with the rental price. Its like $7,500 a month for a house he paid over $1.5mm for, that has annual taxes of like $27k.
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Response by lowery
over 16 years ago
Posts: 1415
Member since: Mar 2008
This "rent it out for a while til the market comes back" happened in Forest Hills in the post-1988 RE crash, with the owners moving into (rented) houses in Long Island when their families outgrew their coops. The market did not come back quickly, but it didn't necessarily lead to a mass dumping of coops into the resale market at lower prices. Probably some deliberate defaulting, slow bleeding of families cutting their losses and selling the Qns coops to get on with it, but the rental market did not suffer too badly in Forest Hills, at least. Not a pretty picture - a very long period in the trough.
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Response by Rhino86
over 16 years ago
Posts: 4925
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I have a friend doing it up in Cambridge MA. I think that she thinks right now there are no buyers at any price... Which is of course false. There is always a buyer at a price. I tried to tell her this. Why she thinks the buyer at a price is going to be higher in 2010 that 2009, I don't know.
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Response by josefsz
over 16 years ago
Posts: 77
Member since: Oct 2008
I know at least 5 or 6 people in Brooklyn that are putting off selling now because they are sure that in a year or two things will be better. Haha. How many people do you know who are doing the same? This can't end well... for them at least!
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Response by Rhino86
over 16 years ago
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I am not sure what peoples frame of reference is for a real estate downturn that reverses and rises inside of a year or two. Never happens.
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Response by cccharley
over 16 years ago
Posts: 903
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This will lower rents overall because it will add to rental inventory. Their delusions may cease next year
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Response by Rhino86
over 16 years ago
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Its not just individuals. These condo developments are going to have to start renting out more of the units soon.
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Response by sniper
over 16 years ago
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i looked at a brand-spanking new home last week. it was a tear-down and was surrounded by much lesser homes. it was great house. guess what the broker said to me: "the owner wants to rent it out for a year or two and then sell it when the market comes back." do they get weekly talking points distributed to them?
the funny thing is, my philosophy that i am sticking to is the exact opposite. rent their house for a year or two and then buy WHEN IT COMES DOWN MORE.
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Response by Riversider
over 16 years ago
Posts: 13572
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Hearing all these stories of people selling now for fear of the market going down more will represent huge pent up demand 2-3 years from now....
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Response by Rhino86
over 16 years ago
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They aren't selling, they are renting out. Huge pent up supply. Read carefully.
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Response by sniper
over 16 years ago
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it is like another shadow inventory
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Response by Riversider
over 16 years ago
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They aren't selling, they are renting out. Huge pent up supply. Read carefully
My experience is that a good portion of those that rent out usually sell within the year. Once the decision to rent out is taken, it becomes less emotional. You start thinking of the property as equity that you can't touch, focus on a tenant that can do damage and stress over having the unit unoccupied. Many of these units will be sold, and two three years hence the original owners will tire of rent increases and not having control over their living situation. The whole thing becomes circular....
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Response by Rhino86
over 16 years ago
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Yeah, that's why they call it a cycle. We're nowhere near the fear lows. It doesnt feel like fear selling is driving this market yet.
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Response by nyc10023
over 16 years ago
Posts: 7614
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In the Geithner situation, he's probably not selling unless he gets his "price" because there is a fair chance that he may be fired and then he'd need someplace to live.
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Response by Rhino86
over 16 years ago
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Fear selling would be accompanied by a spike in volume. This is controlled selling by those who need to or want to...to optimists who think 25% down is a bargain, as they have been brainwashed by the 2004-2007 experience and believe prices will 'bounce back' quickly, like in the next two or three years.
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Response by Riversider
over 16 years ago
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Doubt the rental market is a viable in Larchmont. Not every market/segment lends itself to it. Perhaps a Westchester real estate broker can chime in....
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Response by anonymous
over 16 years ago
Geithner won't be fired from Treasury because the President wants to keep his options open for getting rid of Bernanke from the Fed.
Also, 25% down is not a bargain but a significant drop. 25% down erases a prior rise of 33%.
And LarchMont definitely is not a rental town, which goes again to prove that renting can't be equated with buying over the long term for the better houseing market. Yes maybe for post-college rentals or lesser areas, but not for better areas, upper middle class, places where schooling is an issue.
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Response by The_President
over 16 years ago
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"and he attributes the recent pick-up in sales velocity to seller capitulation rather than renewed buyer demand."
That is not true. There has been a recent uptick in sales in most parts of the contry as first time buyers take advantage of low interest rates and the $8,0000 tax credit. So I think the uptik in sales is more of a product of buyer demand than sellers throwing in the towel.
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Response by The_President
over 16 years ago
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"i looked at a brand-spanking new home last week. it was a tear-down..."
Huh? How can a house be both brand new and a tear down?
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Response by The_President
over 16 years ago
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As long as the owner has positive cash flow, I don't see why they should not rent their house out. First off, by selling now, I don't think they are really going to benefit themself as the bulk of the price declines have already cocurred, especially in the bubble markets like Phoenix and Vegas where prices are already down 50%+. If they were going to sell, they should have done so 2 years ago. Now is too late. And second, not everyone has an urgent need to sell. We all know that their are plenty of sellers out there who list to "test the market." These sellers will almost never lower their prices since they are merely listing to see if they can make out like a bandit.
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Response by The_President
over 16 years ago
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oh, and for the record, let me just say tha this Mark guy from Citi is late to the ball game with this article. He should have written it and mailed it to the homeowners in CA and FL 2 years ago. All he is doing now is looking out the window and telling everyone that the sky is blue. Thank you Captain Obvivous.
and the long term trends may be in the homeowners' favor. If the "experts" are right, then hyperinflation is not that far away. And if the US dollar loses a lot of its value, then that place that's been listed for $500k for the last 8 months will easily sell for $1 million in one day.
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Response by Rhino86
over 16 years ago
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Alpo, you are really letting your stupid flag fly even higher under this new name. The last time inflation was out of control in the US was the early 80s. It killed the value of real estate. Inflation drives high interest rates, which is a much more powerful effect than a little rental price inflation.
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Response by The_President
over 16 years ago
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from 1976-1979, the prices of NYC co-ops tripled. And the main reason RE values got hurt in NYC during the 80s was because the city was a horrible place to live and everyoen fled to the burbs. Certainly you know this by now. And in the burbs, home prices appreciated and peaked in 1988.
A survey of the conventional homeowner housing market in New York City, Westchester County, Long Island, Connecticut and New Jersey indicates that 1983 was a strong sales year, with prices generally increasing. It also shows that expected stability in mortage-interest rates, coupled with a strong demand and a diminishing supply of listings, should cause prices to continue to increase this year.
Why are the prices of new apartments so high in Manhattan? What could justify such figures for sales and rentals?
''It's land, land, land,'' said Lewis Winnick, an analyst at the Ford Foundation. He explained that Manhattan property on which apartments can be developed is made scarce first by high demand and second by restrictive zoning, land use, rent regulation and other policies of the city.
Area suburbs report that many homeowners are buying second and third houses as investments and tax shelters. Among the factors encouraging this practice, they say, are lower interest rates, a rise in house prices, lenders' greater willingness to provide mortgages on houses not occupied by owners and a growing awareness of the tax benefits of such investments.
The New York Times will introduce an expanded and redesigned Real Estate section on Sunday, March 28. It will include added news and features for consumers along with continued coverage of commercial real estate. A.M. Rosenthal, executive editor of The Times, announced the change. He said new weekly columns...
YOU'VE found the house you want, but you cannot afford it. The down payment may be prohibitive, or perhaps the monthly payments are too high.
Bankers, brokers, Congress and home builders are all working on new financing techiques to help you, and one idea gaining some interest around the country is shared ownership of a property: You find the house you want to live in and an investor helps you with the down payment, the monthly payments or both. In return, the investor gets tax benefits and a share of the appreciated value of the home at resale.
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Response by w67thstreet
over 16 years ago
Posts: 9003
Member since: Dec 2008
A little Econ lesson Alpie.... higher inflation leads to higher IR on mortgages which directly affects affordability for purchases (assuming you need a mortgage, a pretty safe assumption, no?). And as you have so frequently pointed out, there are lots of people/developers who bought at 1970-2001 prices w/ little or no mortgage and are therefore competing for renters against one another.... even though some people may need to charge more to be above their 2003-2009 purchases to be CF +, the rental mkt doesn't give a ratz azz cause you're competing with the 90 yo lady whose monthlies are $1000 and cat food costs $.90 can.....
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Response by The_President
over 16 years ago
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"The last time inflation was out of control in the US was the early 80s. It killed the value of real estate."
The NY Times articles I posted above say otherwise. The 80s were a great time to own RE.
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Response by Riversider
over 16 years ago
Posts: 13572
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OFHEO DATA-
1970's -pretty good
1980'S -not so good
1990's -pretty good
2005+ -not so good
appreciation rates in real estate. One source that I used in a blog post in February of this year showed the following historical appreciation rates in real estate in the United States:
52% appreciation and Rhino says that property values got killed in the 80s. Can someone tell me why I even waste time debating him?
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Response by sniper
over 16 years ago
Posts: 1069
Member since: Dec 2008
you are right. don't waste your time...in fact, go away for six months...a year or two.
no one here is worthy of debating you. you should find another site where your genius and wit will be appreciated.
45% nominal is about 4%(nominal) a year over a ten year period. Seems like a loosing proposition. A better conclusion might be that home prices do well in periods of declining(nominal/real) rates.
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Response by Rhino86
over 16 years ago
Posts: 4925
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Did I say they got killed in the 80s? I actually said the inflation drove interest rates up and that the early 80s were an excellent entry point. Get it straight, Alpo...inflation drives rates up and real estate down. The great 80s you refer to were resultant of the inflation abating and interest rates falling. You are so fucking stupid.
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Response by The_President
over 16 years ago
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does calling me curse words make you feel good and all fuzzy inside?
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Response by columbiacounty
over 16 years ago
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since when is "stupid" a curse word?
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Response by The_President
over 16 years ago
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are you blind? Did you not see the word that is directly before "stupid" in Rhino's last post?
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Response by columbiacounty
over 16 years ago
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he called you stupid---the adjective was merely for emphasis--which, in your case, is certainly called for and appropriate.
Two sides to this.
The owner who expects the market to increase and will rent out the home for 1-2 years before selling to buy another place.
And the not yet buyer who will wait for prices to decrease and will in the interim rent.
The equilibrium is ownership on both sides, it is just a matter of pricing. Renting is not a long-term desirable option for income earning American families. It does not make a smidgeon of sense to advocate renting for anything longer than a short-term period. Home ownership is desirable in the U.S.
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Response by columbiacounty
over 16 years ago
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i'll bit. why?
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Response by Rhino86
over 16 years ago
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As long as your idea of short term is however long it takes to make prices attractive again relative to renting. In Manhattan, the relationship has been out of whack since 2003-2004 and may be another 2-3 year for it to be attractive again.
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Response by BA_DA_BOOM
over 16 years ago
Posts: 86
Member since: Jan 2007
I bought a property at the peak of 1988 UK boom.
In 1991, I would have been lucky to sell it for 50%.
I sold it in 1999 for 84% of my purchase price.
I had a hard time keeping up the mortgage payments during the 1992 reccession. I moved out in 1994, to work in London, and rented it out for the odd year, here and there. Eventually, as the economy got better it, because just another bill and by 1999 it really did hurt at all (floating interest rates had also fallen).
I remember reading in 1990 that Citigroup predicted than UK house prices would take 10 years to recover, they were wrong! it took longer!!
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Response by sniper
over 16 years ago
Posts: 1069
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"Home ownership is more desirable in the U.S."
that sure is how it was/is marketed. that doesn't mean it is a prudent financial decision. a lot of people liked to think of paying a mortgage as forced savings - when you hit a slump or crash that theory becomes the wrong one.
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Response by Poster
over 16 years ago
Posts: 26
Member since: Jun 2009
Yes, the idea of short term is about 1-2 years, potentially longer if the person knows his or her circumstances would change within a few years, e.g. move cities, have children, etc. Right now, it could make sense for an individual to speculate that prices will decline, and most indicators point toward that. But there is no such thing as "however long it takes to make prices attractive again relative to renting." There is no equivalence between owning and renting, just an imperfect substitution. It does make sense to consider the carrying costs relative to income and assets, and make a factor for any normalized long-term change in price.
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Response by Poster
over 16 years ago
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Sniper, for the wage earner, middle class and on up, yes I agree that there are short-term reasons to be a renter. And for the poor, the circumstances are different, you are correct that ownership isn't among the primary priorities.
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Response by columbiacounty
over 16 years ago
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are you a computer program or do you just sound like one?
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Response by columbiacounty
over 16 years ago
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or yet another paid (on a good day of which there are now few) shill for the RE biz?
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Response by Poster
over 16 years ago
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Are you referring to me?
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Response by Rhino86
over 16 years ago
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The best reason to buy is appreciation. The best guide to appreciation is valuation. One of the best metrics for valuation is cap rate. The higher the discount rate at which you can 'prepay an expense' as Steve loves to put it, the better. Buy when interest rates and cap rates are high. Never accept 'negative leverage' - cap rate < mortgage rate.
Poster, appreciate the summary of popular misconceptions.
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Response by Poster
over 16 years ago
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There simply is no "cap rate" in owner-occupied housing.
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Response by columbiacounty
over 16 years ago
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I am poster....I am right...I am poster....I am right...I am poster....I am a stinking rotten broker...I am poster....
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Response by Poster
over 16 years ago
Posts: 26
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When I encounter a crazy on the street I walk away. When I hear a conspiracy theorist in Union Square or Herald Square, I get amused but then I move on to normal life. Online I guess the best way to deal with a crazy person or a conspiracy theorist is just to ignore.
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Response by Rhino86
over 16 years ago
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When someone tells me valuation is not a concept for owner-occupied housing, I say sticking rotten broker.
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Response by columbiacounty
over 16 years ago
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I am poster....I am set to ignore...I am poster...I am set to ignore...I am poster...I have been discovered....it is true that i am a stinking rotten broker...I am poster...I am poster...
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Response by Rhino86
over 16 years ago
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"It does make sense to consider the carrying costs relative to income and assets, and make a factor for any normalized long-term change in price."
This is total fluff....100% meaningless bullshit.
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Response by Rhino86
over 16 years ago
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Go ahead, tell me valuation can't be measured again...This is like S&M for financial geeks. Fucking tell me again there is no way to measure the value of a Manhattan apartments. Harder!
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Response by Poster
over 16 years ago
Posts: 26
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I'm not sure what your issue is with brokers. I'm not a broker nor is anyone in my family. But given that many hundreds of thousands of real estate transactions occur annually, and the participants in those real estate transactions seek representation to facilitate their transactions, it would not be hard to fathom that there should be a brokerage industry. So you don't like something that is a necessary element of the market, might as well be in fantasy land.
As for cap rates. Cap rates are not valuation. A cap rate is a simple ratio, or the inverse thereof. Nevertheless, it applies for real estate property investments on income producing property, but can't be applied to owner occupied housing - the inputs simply aren't there.
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Response by Rhino86
over 16 years ago
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"There is no equivalence between owning and renting, just an imperfect substitution. It does make sense to consider the carrying costs relative to income and assets, and make a factor for any normalized long-term change in price."
Translation: I am a broker. Buy as much apartment as you can afford. Ignore valuation. I am a broker.
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Response by Riversider
over 16 years ago
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Cap rate analyses is more relevant for investment properties
Rent vs buy for owner occupied residences....
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Response by columbiacounty
over 16 years ago
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I am poster...everyone is an idiot except me...I am poster...wait...I am a liar...I am a dirty rotten stinking broker with nothing to do...I am poster...I am poster....
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Response by Poster
over 16 years ago
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1 - The "value" of a Manhattan owner-occupied apartment is the clearing price for the apartment.
2 - I've said that people should consider their ownership in perspective of their income. That has to be done responsibly and there may be short-term situations where the cost relative to income is out of line in which case a short-term solution is to rent.
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Response by Rhino86
over 16 years ago
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Cap rate is a form of rent vs. buy...Its called buying an apartment for cash and renting it to yourself for free..The answer is, I just made an X% cash return renting to myself. It works better with leverage, however, only when cap rate > mortgage rate. Otherwise its negative leverage. The best buying opportunities over time have been when leverage is positive. It shouldn't hurt anyones head to apply such an analysis to an owner occupied purchase.
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Response by Rhino86
over 16 years ago
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1 - The "value" of a Manhattan owner-occupied apartment is the clearing price for the apartment.
Translation (1): A worthless truism
Translation (2): Do no thinking for yourself, accept market price and proceed to GO.
2 - I've said that people should consider their ownership in perspective of their income. That has to be done responsibly and there may be short-term situations where the cost relative to income is out of line in which case a short-term solution is to rent.
Translation: Buy as soon as you can afford it. Do no further thinking.
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Response by columbiacounty
over 16 years ago
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poster: you are a turd...you began by saying that buying is better than renting. that is so over the top and particularly galling given the hundreds of thousands of people who have been suckered into losing their life savings because they believed turds like you.
nyc is and has been a city of renters...and up until recently was doing quite well.
i am not saying that renting is better...my beef is with blanket statements such as yours. there is a reason that both exist.
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Response by Poster
over 16 years ago
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I appreciate that you stopped cursing for long enough to explain yourself. We'll have to disagree on the premise of renting to yourself for free and on the belief that the rental is equivalent to the ownership. It may be an imperfect substitute for a short-term (couple years) but it is not a long-term substitute in my opinion.
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Response by Poster
over 16 years ago
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Well listen, I'm not trying to convince you. I'm gathering that you are currently a renter, which is fine. I'll wager that within a couple years, presuming you aren't moving to a different locale or having a major change in your family situation, that you'll own or be in the market to own, and maybe at that point you'll reflect on your period of renting as a short-term transitionary convenience for you that you have moved on from.
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Response by columbiacounty
over 16 years ago
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wrong again stupid...I am a long term owner...my point about you is your pompous assertion of "truth" about an area that is highly dependent on many individual factors. i am not advocating for anything but choice and the elimination of pomposity such as yours.
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Response by sniper
over 16 years ago
Posts: 1069
Member since: Dec 2008
poster - dogma is a very unattractive costume
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Response by Rhino86
over 16 years ago
Posts: 4925
Member since: Sep 2006
The rent/buy math has favoring renting since 2004. Lo and behold, all purchases since then are breakeven or down. Whether you do it pre-tax, after-tax or otherwise, prices have been bubblishous since 2004...and many of the purchases made have been disastrous. I wouldn't call five years short term, given the average purchase hold is seven. The math still favors renting..and that may hold true for another two years or more. So this concept of renting as short-term stop gap is ridiculous...and dangerous. The bubble was made from this type of bullshit.
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Response by Poster
over 16 years ago
Posts: 26
Member since: Jun 2009
I agree that prices have increased, and they have gone up very high relative to income, in part due to the premium expectations (i.e willing to pay more for better) of middle class on up NYers who saw their incomes rising until about 18 months ago. I've also said that it may make perfect sense to rent for a transitionary period and I've also said that most indicators point to lower prices in short-term forward periods.
But there is no "bullshit" in sensibly making a natural ownership decision in perspective of your income levels.
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Response by Poster
over 16 years ago
Posts: 26
Member since: Jun 2009
And let me ask you, I speculated that you were a renter today. 1 - are you, or are you a pre-2004 owner(to set your time period which is is fair), and 2 - if you are a renter, are you contemplating that you will be an owner in the future and would remain an owner for a long-term period, or no?
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Response by Rhino86
over 16 years ago
Posts: 4925
Member since: Sep 2006
Since valuation of owner occupied real estate is not a concept you recognize, then I have no interest in striking up further discussion.
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Response by Poster
over 16 years ago
Posts: 26
Member since: Jun 2009
Not surprising that after name calling, lots of cursing, and generally a poisonous attitude towards discussions that you'd pick up and walk away when all of your prior bad behaviour tactics didn't get your point across.
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Response by Rhino86
over 16 years ago
Posts: 4925
Member since: Sep 2006
Well seriously, if I told you I would buy when I find the valuation attractive...It wouldn't mean anything to you. You are of no value to me. You're just a guy who thinks you take the market price and buy when you can afford it. What good are you to me?
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Response by Poster
over 16 years ago
Posts: 26
Member since: Jun 2009
Well I admit, I didn't come here to add value to you Rhino86. But if that is the measure by which someone can offer points of view on this site, then who did you come here to add value to? No need to answer, I'll let you keep to your word of not striking up further discussion.
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Response by The_President
over 16 years ago
Posts: 2412
Member since: Jun 2009
Welcome to SE Poster. Just a little background info about Rhino: whenever he runs out of ammo during a debate, he resorts to cursuing his opponent out. Also, Rhino has said that he will likely not be buying in Manhattan, but rather Connecticut. So why he is on the SE NYC forum and the SE Hamptons forum all day long is beyond me. He must have no life.
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Response by Rhino86
over 16 years ago
Posts: 4925
Member since: Sep 2006
Lot of people have actually complimented me on my posts, links etc. I view this site as a forum for real estate valuation discussions...So yeah you are tits on a bull here as far as I am concerned. Can you really imagine that 'value is equal to price' and 'buy what you can afford' is value here or anywhere else?
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Response by Poster
over 16 years ago
Posts: 26
Member since: Jun 2009
Thank you for the perspective Mr. President.
Key to what you say though, rather that this is a discussion on the merits in contrast to cursing and name calling, is that Rhino is a buyer and so I'm guessing he is now a renter but he views this renting period as short-term and transitory.
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Response by Rhino86
over 16 years ago
Posts: 4925
Member since: Sep 2006
A Jersey dope by another name is still a Jersey dope. NYC living is an ongoing consideration...as I might imagine it would be for anyone over the long term. Also, that any debate has been lost to you, by anyone here is funny. You are widely regarded here as a buffoon.
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Response by anonymous
over 16 years ago
Rhino, call him a homosexual now. Do it. Do it now.
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Response by Poster
over 16 years ago
Posts: 26
Member since: Jun 2009
What the heck does sexuality have to do with a real estate purchase?
I've given my point of view and support. Rhino86 has taken his ball away a couple times in succession now, I'm sure that if he changes his mind about engaging me later he can be explicit about his interest in having the discussion rather than posting but saying he's not interested in posting.
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Response by sniper
over 16 years ago
Posts: 1069
Member since: Dec 2008
poster - i am not sure if you are new here but i will warn you - making allegiances with alpine is like making the mistake of the new kid at school who is friendly to the first kid who is nice to him and then finds out he is the biggest loser in school. be careful.
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Response by Poster
over 16 years ago
Posts: 26
Member since: Jun 2009
Sniper, thank you too, I'm not sure who I made an allegiance with. Frankly, allegiances or personal attacks on the other hand (e.g. Rhino86 or the other first one who attacked me) are not my interest.
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Response by The_President
over 16 years ago
Posts: 2412
Member since: Jun 2009
well don't become friends with sniper. He's moving to JERSEY. Be sure to roll up the wondows in the Lincon Tunnel. It can get pretty dirty in there...
what exactly are some waiting for when they say they will sell when the market comes back? Forget EVER seeing the price levels witnessed 2yrs ago. It was not 2yrs ago, major brokers you've seen them on TV professing that now (then) was the time to purchase. Or NYC is different and perhaps immune to the slide taking place in Fla. or Nv. or Calif. Dont ever expect to see credit offered in the terms which brought us to this. Expect 10-20% down, full documentation on loan apps. and expect the over all market to purge the 20-30% over valuations to adjust downward.
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Response by Rhino86
over 16 years ago
Posts: 4925
Member since: Sep 2006
You lost poster-boy when you said 'valuations'. Renting is just what people do when they are accumulating enough money to buy...Buy at whatever the prevailing market price is, regardless of what it is...Simply based upon what they can afford. That is what people should do. This is what he adds here.
If he is not a broker, he must be a real estate attorney.
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Response by 30yrs_RE_20_in_REO
over 16 years ago
Posts: 9878
Member since: Mar 2009
"This "rent it out for a while til the market comes back" happened in Forest Hills in the post-1988 RE crash, with the owners moving into (rented) houses in Long Island when their families outgrew their coops. The market did not come back quickly, but it didn't necessarily lead to a mass dumping of coops into the resale market at lower prices. Probably some deliberate defaulting, slow bleeding of families cutting their losses and selling the Qns coops to get on with it, but the rental market did not suffer too badly in Forest Hills, at least. Not a pretty picture - a very long period in the trough."
I bought a number of Coops in Forrest Hills in this time period. A few facts:
1)the "rent it out for a year" would have needed to be "rent it out for 8 years" to work. (and how many Coops allow that?)
2) one of the reasons it didn't lead to a "mass dumping" was because the Coop buyer maket pretty much TOTALLY EVAPORATED there. We couldn't even find brokers to try to sell our units because the brokers had given upon the idea of people buying Coops in Forrest Hills, and that was because no one had any interest in buying Coops.
3) The units which actually did sell, sold at massively lower prices off peak.
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Response by Poster
over 16 years ago
Posts: 26
Member since: Jun 2009
I thought you weren't engaging me in conversation. I generally find that the style of debate that takes apart an individual rather than his argument is a losing proposition, and certainly you've done plenty of name calling, cursing, creating false guilt by association, and other ad hominem techniques. And when your actual argument points and logic were subject to question, you decided to walk away (though not for long, you couldn't resist) rather than defend them. So really, you can call me a real estate attorney, or a broker, as if those are insults. But your poor character and temperment trump all.
For the record, and I'll make this as broad as possible. I am not, and no one in my immediate family is or has any association with the real estate industry - that being brokerage, lending, developing, multi-unit property ownership, construction or building supply.
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Response by 30yrs_RE_20_in_REO
over 16 years ago
Posts: 9878
Member since: Mar 2009
One thing about the "rent it for a year and then sell" (which I won't even go deeply into, because the RE market - at least in Manhattan - has NEVER turned back around in one year) is that something VERY different is going to occur this time over prior times: firstly, the mix of apartments bought within the last X years has WAY, WAY, WAY shifted towards the larger and higher end than ever before (well, not pre-WW II, but I don't think any of us are talking about that). Last go round, we have a lot of Coop conversion with whatever mix of units already existed, and new condos with lots of studios and 1 BRs.
This time around, we've got lots and lots of larger (2 br, 3 br, 4 br), high amenity/high "luxury", high RE Tax, high CC units. And bought at VERY high prices. It was one thing when someone had a studio which was costing them $1600 a month to carry and could rent it out for $1200 and eat $400 a month shortfall. But I'm not so sure there are a large number of people who can shell out $15,000 to $50,000 a month carrying while receiving 60% of that number in rent and eat the rest. Even if the WANT to, they just can't, because it would represent >50% of their income.
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Response by Rhino86
over 16 years ago
Posts: 4925
Member since: Sep 2006
30 yrs...I like your take and your history in the market is many many years beyond mine. So what is your prediction...bottom levels and timing?
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Response by 30yrs_RE_20_in_REO
over 16 years ago
Posts: 9878
Member since: Mar 2009
I've been saying for a few years that i thought that whenever the market turns around it would drop 50% from whatever the top levels were. I cant say I've seen anything which has made me change my mind yet. OTOH, I still see some things which could make things blow up worse. Timing is always a tougher call. Normally I'd say 2.5 years. But depending on what the Gov't does to try and stop the inevitable, it could take longer. But mu guess is the more the gov't tries to make it not happen, the longer it will end up taking and the worse it will end up in the end. Part of this is that the market ALWAYS overshoots the top and the bottom. If things were allowed to crash immediately, we'd go down 50% and people would start buying pretty quickly. but the longer thing stake to hit the bottom, the lonmger people's memory will be "Real Estate always goes down" in the same way they convinced themselves "Real Estate always goes up" because of the length of time that it was.
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Owners that were banking on their home as investment akin to a stock are most at risk for selling. Personally know of many who bought more home than necessary on the expectation of it appreciating in value and the expectation of selling of selling at profit. Take away the profit expectation and a good chunk of buyers would've purchased more modestly.
Is Geithner doing this? Kind of scary that he is holding on to this kind of false hope. I don't see any spectacular 2010 recovery for Larchmont, NY. To boot, he is not covering the payments with the rental price. Its like $7,500 a month for a house he paid over $1.5mm for, that has annual taxes of like $27k.
This "rent it out for a while til the market comes back" happened in Forest Hills in the post-1988 RE crash, with the owners moving into (rented) houses in Long Island when their families outgrew their coops. The market did not come back quickly, but it didn't necessarily lead to a mass dumping of coops into the resale market at lower prices. Probably some deliberate defaulting, slow bleeding of families cutting their losses and selling the Qns coops to get on with it, but the rental market did not suffer too badly in Forest Hills, at least. Not a pretty picture - a very long period in the trough.
I have a friend doing it up in Cambridge MA. I think that she thinks right now there are no buyers at any price... Which is of course false. There is always a buyer at a price. I tried to tell her this. Why she thinks the buyer at a price is going to be higher in 2010 that 2009, I don't know.
I know at least 5 or 6 people in Brooklyn that are putting off selling now because they are sure that in a year or two things will be better. Haha. How many people do you know who are doing the same? This can't end well... for them at least!
I am not sure what peoples frame of reference is for a real estate downturn that reverses and rises inside of a year or two. Never happens.
This will lower rents overall because it will add to rental inventory. Their delusions may cease next year
Its not just individuals. These condo developments are going to have to start renting out more of the units soon.
i looked at a brand-spanking new home last week. it was a tear-down and was surrounded by much lesser homes. it was great house. guess what the broker said to me: "the owner wants to rent it out for a year or two and then sell it when the market comes back." do they get weekly talking points distributed to them?
the funny thing is, my philosophy that i am sticking to is the exact opposite. rent their house for a year or two and then buy WHEN IT COMES DOWN MORE.
Hearing all these stories of people selling now for fear of the market going down more will represent huge pent up demand 2-3 years from now....
They aren't selling, they are renting out. Huge pent up supply. Read carefully.
it is like another shadow inventory
They aren't selling, they are renting out. Huge pent up supply. Read carefully
My experience is that a good portion of those that rent out usually sell within the year. Once the decision to rent out is taken, it becomes less emotional. You start thinking of the property as equity that you can't touch, focus on a tenant that can do damage and stress over having the unit unoccupied. Many of these units will be sold, and two three years hence the original owners will tire of rent increases and not having control over their living situation. The whole thing becomes circular....
Yeah, that's why they call it a cycle. We're nowhere near the fear lows. It doesnt feel like fear selling is driving this market yet.
In the Geithner situation, he's probably not selling unless he gets his "price" because there is a fair chance that he may be fired and then he'd need someplace to live.
Fear selling would be accompanied by a spike in volume. This is controlled selling by those who need to or want to...to optimists who think 25% down is a bargain, as they have been brainwashed by the 2004-2007 experience and believe prices will 'bounce back' quickly, like in the next two or three years.
Doubt the rental market is a viable in Larchmont. Not every market/segment lends itself to it. Perhaps a Westchester real estate broker can chime in....
Geithner won't be fired from Treasury because the President wants to keep his options open for getting rid of Bernanke from the Fed.
Also, 25% down is not a bargain but a significant drop. 25% down erases a prior rise of 33%.
And LarchMont definitely is not a rental town, which goes again to prove that renting can't be equated with buying over the long term for the better houseing market. Yes maybe for post-college rentals or lesser areas, but not for better areas, upper middle class, places where schooling is an issue.
"and he attributes the recent pick-up in sales velocity to seller capitulation rather than renewed buyer demand."
That is not true. There has been a recent uptick in sales in most parts of the contry as first time buyers take advantage of low interest rates and the $8,0000 tax credit. So I think the uptik in sales is more of a product of buyer demand than sellers throwing in the towel.
"i looked at a brand-spanking new home last week. it was a tear-down..."
Huh? How can a house be both brand new and a tear down?
As long as the owner has positive cash flow, I don't see why they should not rent their house out. First off, by selling now, I don't think they are really going to benefit themself as the bulk of the price declines have already cocurred, especially in the bubble markets like Phoenix and Vegas where prices are already down 50%+. If they were going to sell, they should have done so 2 years ago. Now is too late. And second, not everyone has an urgent need to sell. We all know that their are plenty of sellers out there who list to "test the market." These sellers will almost never lower their prices since they are merely listing to see if they can make out like a bandit.
oh, and for the record, let me just say tha this Mark guy from Citi is late to the ball game with this article. He should have written it and mailed it to the homeowners in CA and FL 2 years ago. All he is doing now is looking out the window and telling everyone that the sky is blue. Thank you Captain Obvivous.
http://www.youtube.com/watch?v=1kXOg23pGeA
and the long term trends may be in the homeowners' favor. If the "experts" are right, then hyperinflation is not that far away. And if the US dollar loses a lot of its value, then that place that's been listed for $500k for the last 8 months will easily sell for $1 million in one day.
Alpo, you are really letting your stupid flag fly even higher under this new name. The last time inflation was out of control in the US was the early 80s. It killed the value of real estate. Inflation drives high interest rates, which is a much more powerful effect than a little rental price inflation.
from 1976-1979, the prices of NYC co-ops tripled. And the main reason RE values got hurt in NYC during the 80s was because the city was a horrible place to live and everyoen fled to the burbs. Certainly you know this by now. And in the burbs, home prices appreciated and peaked in 1988.
http://mysite.verizon.net/vzeqrguz/housingbubble/
http://mysite.verizon.net/vzeqrguz/housingbubble/new_york.html
Prices started to modestly increase in 1983, but then took off in 84.
RESALE-HOME PRICES: UP AND RISING
By MICHAEL DECOURCY HINDS
Published: January 22, 1984
http://query.nytimes.com/gst/fullpage.html?res=9405E7DF1F38F931A15752C0A962948260
A survey of the conventional homeowner housing market in New York City, Westchester County, Long Island, Connecticut and New Jersey indicates that 1983 was a strong sales year, with prices generally increasing. It also shows that expected stability in mortage-interest rates, coupled with a strong demand and a diminishing supply of listings, should cause prices to continue to increase this year.
APARTMENTS: WHY PRICES ARE SO HIGH
By MATTHEW L. WALD
Published: January 29, 1984
http://query.nytimes.com/gst/fullpage.html?res=9B00EEDA163BF93AA15752C0A962948260
Why are the prices of new apartments so high in Manhattan? What could justify such figures for sales and rentals?
''It's land, land, land,'' said Lewis Winnick, an analyst at the Ford Foundation. He explained that Manhattan property on which apartments can be developed is made scarce first by high demand and second by restrictive zoning, land use, rent regulation and other policies of the city.
THE HOUSE THAT'S NOT YOUR HOME
By ANDREE BROOKS
Published: February 5, 1984
http://query.nytimes.com/gst/fullpage.html?res=9B02E0DE143BF936A35751C0A962948260
Area suburbs report that many homeowners are buying second and third houses as investments and tax shelters. Among the factors encouraging this practice, they say, are lower interest rates, a rise in house prices, lenders' greater willingness to provide mortgages on houses not occupied by owners and a growing awareness of the tax benefits of such investments.
1982 - Real Estate Buzz Begins
EXPANDED REAL ESTATE SECTION IS PLANNED FOR SUNDAY TIMES
March 17, 1982, Wednesday(NYT); Metropolitan Desk
Late City Final Edition, Section D, Page 22, Column 1, 328 words
http://select.nytimes.com/gst/abstract.html?res=FA0813F8385F0C748DDDAA0894DA484D81
The New York Times will introduce an expanded and redesigned Real Estate section on Sunday, March 28. It will include added news and features for consumers along with continued coverage of commercial real estate. A.M. Rosenthal, executive editor of The Times, announced the change. He said new weekly columns...
Talking Partnerships; SHARING A MORTGAGE ON A HOME
By DIANE HENRY
Published: May 16, 1982
http://query.nytimes.com/gst/fullpage.html?res=9F01E3D81538F935A25756C0A964948260
YOU'VE found the house you want, but you cannot afford it. The down payment may be prohibitive, or perhaps the monthly payments are too high.
Bankers, brokers, Congress and home builders are all working on new financing techiques to help you, and one idea gaining some interest around the country is shared ownership of a property: You find the house you want to live in and an investor helps you with the down payment, the monthly payments or both. In return, the investor gets tax benefits and a share of the appreciated value of the home at resale.
A little Econ lesson Alpie.... higher inflation leads to higher IR on mortgages which directly affects affordability for purchases (assuming you need a mortgage, a pretty safe assumption, no?). And as you have so frequently pointed out, there are lots of people/developers who bought at 1970-2001 prices w/ little or no mortgage and are therefore competing for renters against one another.... even though some people may need to charge more to be above their 2003-2009 purchases to be CF +, the rental mkt doesn't give a ratz azz cause you're competing with the 90 yo lady whose monthlies are $1000 and cat food costs $.90 can.....
"The last time inflation was out of control in the US was the early 80s. It killed the value of real estate."
The NY Times articles I posted above say otherwise. The 80s were a great time to own RE.
OFHEO DATA-
1970's -pretty good
1980'S -not so good
1990's -pretty good
2005+ -not so good
http://www.clevelandfed.org/research/trends/2008/0308/05ecoact-1.gif
did you even look at your own link? There is a giant spike in the 1980s. How can you miss that?
inflation adjusted...
http://mysite.verizon.net/vzeqrguz/housingbubble/new_york.html
inflation adjusted
http://mysite.verizon.net/vzeqrguz/housingbubble/
Historical Appreciation Rates
There are some large data mining companies that produce confounding reports about http://blog.manausa.com/2009/05/08/real-estate-appreciation/
appreciation rates in real estate. One source that I used in a blog post in February of this year showed the following historical appreciation rates in real estate in the United States:
* 1970’s: +142%
* 1980’s: +52%
* 1990’s: +45%
* 2000-2009: + 47%
* 984% in 39 years!
52% appreciation and Rhino says that property values got killed in the 80s. Can someone tell me why I even waste time debating him?
you are right. don't waste your time...in fact, go away for six months...a year or two.
no one here is worthy of debating you. you should find another site where your genius and wit will be appreciated.
mortage rates
http://www.myequitypro.com/wp-content/uploads/2009/04/mortgagerates1975-20091.jpg
inflation rates
http://www.kitco.com/ind/Barisheff/images/nov182008_1.jpg
45% nominal is about 4%(nominal) a year over a ten year period. Seems like a loosing proposition. A better conclusion might be that home prices do well in periods of declining(nominal/real) rates.
Did I say they got killed in the 80s? I actually said the inflation drove interest rates up and that the early 80s were an excellent entry point. Get it straight, Alpo...inflation drives rates up and real estate down. The great 80s you refer to were resultant of the inflation abating and interest rates falling. You are so fucking stupid.
does calling me curse words make you feel good and all fuzzy inside?
since when is "stupid" a curse word?
are you blind? Did you not see the word that is directly before "stupid" in Rhino's last post?
he called you stupid---the adjective was merely for emphasis--which, in your case, is certainly called for and appropriate.
http://www.youtube.com/watch?v=gHiymsS_aZQ
Two sides to this.
The owner who expects the market to increase and will rent out the home for 1-2 years before selling to buy another place.
And the not yet buyer who will wait for prices to decrease and will in the interim rent.
The equilibrium is ownership on both sides, it is just a matter of pricing. Renting is not a long-term desirable option for income earning American families. It does not make a smidgeon of sense to advocate renting for anything longer than a short-term period. Home ownership is desirable in the U.S.
i'll bit. why?
As long as your idea of short term is however long it takes to make prices attractive again relative to renting. In Manhattan, the relationship has been out of whack since 2003-2004 and may be another 2-3 year for it to be attractive again.
I bought a property at the peak of 1988 UK boom.
In 1991, I would have been lucky to sell it for 50%.
I sold it in 1999 for 84% of my purchase price.
I had a hard time keeping up the mortgage payments during the 1992 reccession. I moved out in 1994, to work in London, and rented it out for the odd year, here and there. Eventually, as the economy got better it, because just another bill and by 1999 it really did hurt at all (floating interest rates had also fallen).
I remember reading in 1990 that Citigroup predicted than UK house prices would take 10 years to recover, they were wrong! it took longer!!
"Home ownership is more desirable in the U.S."
that sure is how it was/is marketed. that doesn't mean it is a prudent financial decision. a lot of people liked to think of paying a mortgage as forced savings - when you hit a slump or crash that theory becomes the wrong one.
Yes, the idea of short term is about 1-2 years, potentially longer if the person knows his or her circumstances would change within a few years, e.g. move cities, have children, etc. Right now, it could make sense for an individual to speculate that prices will decline, and most indicators point toward that. But there is no such thing as "however long it takes to make prices attractive again relative to renting." There is no equivalence between owning and renting, just an imperfect substitution. It does make sense to consider the carrying costs relative to income and assets, and make a factor for any normalized long-term change in price.
Sniper, for the wage earner, middle class and on up, yes I agree that there are short-term reasons to be a renter. And for the poor, the circumstances are different, you are correct that ownership isn't among the primary priorities.
are you a computer program or do you just sound like one?
or yet another paid (on a good day of which there are now few) shill for the RE biz?
Are you referring to me?
The best reason to buy is appreciation. The best guide to appreciation is valuation. One of the best metrics for valuation is cap rate. The higher the discount rate at which you can 'prepay an expense' as Steve loves to put it, the better. Buy when interest rates and cap rates are high. Never accept 'negative leverage' - cap rate < mortgage rate.
Poster, appreciate the summary of popular misconceptions.
There simply is no "cap rate" in owner-occupied housing.
I am poster....I am right...I am poster....I am right...I am poster....I am a stinking rotten broker...I am poster....
When I encounter a crazy on the street I walk away. When I hear a conspiracy theorist in Union Square or Herald Square, I get amused but then I move on to normal life. Online I guess the best way to deal with a crazy person or a conspiracy theorist is just to ignore.
When someone tells me valuation is not a concept for owner-occupied housing, I say sticking rotten broker.
I am poster....I am set to ignore...I am poster...I am set to ignore...I am poster...I have been discovered....it is true that i am a stinking rotten broker...I am poster...I am poster...
"It does make sense to consider the carrying costs relative to income and assets, and make a factor for any normalized long-term change in price."
This is total fluff....100% meaningless bullshit.
Go ahead, tell me valuation can't be measured again...This is like S&M for financial geeks. Fucking tell me again there is no way to measure the value of a Manhattan apartments. Harder!
I'm not sure what your issue is with brokers. I'm not a broker nor is anyone in my family. But given that many hundreds of thousands of real estate transactions occur annually, and the participants in those real estate transactions seek representation to facilitate their transactions, it would not be hard to fathom that there should be a brokerage industry. So you don't like something that is a necessary element of the market, might as well be in fantasy land.
As for cap rates. Cap rates are not valuation. A cap rate is a simple ratio, or the inverse thereof. Nevertheless, it applies for real estate property investments on income producing property, but can't be applied to owner occupied housing - the inputs simply aren't there.
"There is no equivalence between owning and renting, just an imperfect substitution. It does make sense to consider the carrying costs relative to income and assets, and make a factor for any normalized long-term change in price."
Translation: I am a broker. Buy as much apartment as you can afford. Ignore valuation. I am a broker.
Cap rate analyses is more relevant for investment properties
Rent vs buy for owner occupied residences....
I am poster...everyone is an idiot except me...I am poster...wait...I am a liar...I am a dirty rotten stinking broker with nothing to do...I am poster...I am poster....
1 - The "value" of a Manhattan owner-occupied apartment is the clearing price for the apartment.
2 - I've said that people should consider their ownership in perspective of their income. That has to be done responsibly and there may be short-term situations where the cost relative to income is out of line in which case a short-term solution is to rent.
Cap rate is a form of rent vs. buy...Its called buying an apartment for cash and renting it to yourself for free..The answer is, I just made an X% cash return renting to myself. It works better with leverage, however, only when cap rate > mortgage rate. Otherwise its negative leverage. The best buying opportunities over time have been when leverage is positive. It shouldn't hurt anyones head to apply such an analysis to an owner occupied purchase.
1 - The "value" of a Manhattan owner-occupied apartment is the clearing price for the apartment.
Translation (1): A worthless truism
Translation (2): Do no thinking for yourself, accept market price and proceed to GO.
2 - I've said that people should consider their ownership in perspective of their income. That has to be done responsibly and there may be short-term situations where the cost relative to income is out of line in which case a short-term solution is to rent.
Translation: Buy as soon as you can afford it. Do no further thinking.
poster: you are a turd...you began by saying that buying is better than renting. that is so over the top and particularly galling given the hundreds of thousands of people who have been suckered into losing their life savings because they believed turds like you.
nyc is and has been a city of renters...and up until recently was doing quite well.
i am not saying that renting is better...my beef is with blanket statements such as yours. there is a reason that both exist.
I appreciate that you stopped cursing for long enough to explain yourself. We'll have to disagree on the premise of renting to yourself for free and on the belief that the rental is equivalent to the ownership. It may be an imperfect substitute for a short-term (couple years) but it is not a long-term substitute in my opinion.
Well listen, I'm not trying to convince you. I'm gathering that you are currently a renter, which is fine. I'll wager that within a couple years, presuming you aren't moving to a different locale or having a major change in your family situation, that you'll own or be in the market to own, and maybe at that point you'll reflect on your period of renting as a short-term transitionary convenience for you that you have moved on from.
wrong again stupid...I am a long term owner...my point about you is your pompous assertion of "truth" about an area that is highly dependent on many individual factors. i am not advocating for anything but choice and the elimination of pomposity such as yours.
poster - dogma is a very unattractive costume
The rent/buy math has favoring renting since 2004. Lo and behold, all purchases since then are breakeven or down. Whether you do it pre-tax, after-tax or otherwise, prices have been bubblishous since 2004...and many of the purchases made have been disastrous. I wouldn't call five years short term, given the average purchase hold is seven. The math still favors renting..and that may hold true for another two years or more. So this concept of renting as short-term stop gap is ridiculous...and dangerous. The bubble was made from this type of bullshit.
I agree that prices have increased, and they have gone up very high relative to income, in part due to the premium expectations (i.e willing to pay more for better) of middle class on up NYers who saw their incomes rising until about 18 months ago. I've also said that it may make perfect sense to rent for a transitionary period and I've also said that most indicators point to lower prices in short-term forward periods.
But there is no "bullshit" in sensibly making a natural ownership decision in perspective of your income levels.
And let me ask you, I speculated that you were a renter today. 1 - are you, or are you a pre-2004 owner(to set your time period which is is fair), and 2 - if you are a renter, are you contemplating that you will be an owner in the future and would remain an owner for a long-term period, or no?
Since valuation of owner occupied real estate is not a concept you recognize, then I have no interest in striking up further discussion.
Not surprising that after name calling, lots of cursing, and generally a poisonous attitude towards discussions that you'd pick up and walk away when all of your prior bad behaviour tactics didn't get your point across.
Well seriously, if I told you I would buy when I find the valuation attractive...It wouldn't mean anything to you. You are of no value to me. You're just a guy who thinks you take the market price and buy when you can afford it. What good are you to me?
Well I admit, I didn't come here to add value to you Rhino86. But if that is the measure by which someone can offer points of view on this site, then who did you come here to add value to? No need to answer, I'll let you keep to your word of not striking up further discussion.
Welcome to SE Poster. Just a little background info about Rhino: whenever he runs out of ammo during a debate, he resorts to cursuing his opponent out. Also, Rhino has said that he will likely not be buying in Manhattan, but rather Connecticut. So why he is on the SE NYC forum and the SE Hamptons forum all day long is beyond me. He must have no life.
Lot of people have actually complimented me on my posts, links etc. I view this site as a forum for real estate valuation discussions...So yeah you are tits on a bull here as far as I am concerned. Can you really imagine that 'value is equal to price' and 'buy what you can afford' is value here or anywhere else?
Thank you for the perspective Mr. President.
Key to what you say though, rather that this is a discussion on the merits in contrast to cursing and name calling, is that Rhino is a buyer and so I'm guessing he is now a renter but he views this renting period as short-term and transitory.
A Jersey dope by another name is still a Jersey dope. NYC living is an ongoing consideration...as I might imagine it would be for anyone over the long term. Also, that any debate has been lost to you, by anyone here is funny. You are widely regarded here as a buffoon.
Rhino, call him a homosexual now. Do it. Do it now.
What the heck does sexuality have to do with a real estate purchase?
I've given my point of view and support. Rhino86 has taken his ball away a couple times in succession now, I'm sure that if he changes his mind about engaging me later he can be explicit about his interest in having the discussion rather than posting but saying he's not interested in posting.
poster - i am not sure if you are new here but i will warn you - making allegiances with alpine is like making the mistake of the new kid at school who is friendly to the first kid who is nice to him and then finds out he is the biggest loser in school. be careful.
Sniper, thank you too, I'm not sure who I made an allegiance with. Frankly, allegiances or personal attacks on the other hand (e.g. Rhino86 or the other first one who attacked me) are not my interest.
well don't become friends with sniper. He's moving to JERSEY. Be sure to roll up the wondows in the Lincon Tunnel. It can get pretty dirty in there...
http://www.youtube.com/watch?v=XOGWbzUM-y8
what exactly are some waiting for when they say they will sell when the market comes back? Forget EVER seeing the price levels witnessed 2yrs ago. It was not 2yrs ago, major brokers you've seen them on TV professing that now (then) was the time to purchase. Or NYC is different and perhaps immune to the slide taking place in Fla. or Nv. or Calif. Dont ever expect to see credit offered in the terms which brought us to this. Expect 10-20% down, full documentation on loan apps. and expect the over all market to purge the 20-30% over valuations to adjust downward.
You lost poster-boy when you said 'valuations'. Renting is just what people do when they are accumulating enough money to buy...Buy at whatever the prevailing market price is, regardless of what it is...Simply based upon what they can afford. That is what people should do. This is what he adds here.
If he is not a broker, he must be a real estate attorney.
"This "rent it out for a while til the market comes back" happened in Forest Hills in the post-1988 RE crash, with the owners moving into (rented) houses in Long Island when their families outgrew their coops. The market did not come back quickly, but it didn't necessarily lead to a mass dumping of coops into the resale market at lower prices. Probably some deliberate defaulting, slow bleeding of families cutting their losses and selling the Qns coops to get on with it, but the rental market did not suffer too badly in Forest Hills, at least. Not a pretty picture - a very long period in the trough."
I bought a number of Coops in Forrest Hills in this time period. A few facts:
1)the "rent it out for a year" would have needed to be "rent it out for 8 years" to work. (and how many Coops allow that?)
2) one of the reasons it didn't lead to a "mass dumping" was because the Coop buyer maket pretty much TOTALLY EVAPORATED there. We couldn't even find brokers to try to sell our units because the brokers had given upon the idea of people buying Coops in Forrest Hills, and that was because no one had any interest in buying Coops.
3) The units which actually did sell, sold at massively lower prices off peak.
I thought you weren't engaging me in conversation. I generally find that the style of debate that takes apart an individual rather than his argument is a losing proposition, and certainly you've done plenty of name calling, cursing, creating false guilt by association, and other ad hominem techniques. And when your actual argument points and logic were subject to question, you decided to walk away (though not for long, you couldn't resist) rather than defend them. So really, you can call me a real estate attorney, or a broker, as if those are insults. But your poor character and temperment trump all.
For the record, and I'll make this as broad as possible. I am not, and no one in my immediate family is or has any association with the real estate industry - that being brokerage, lending, developing, multi-unit property ownership, construction or building supply.
One thing about the "rent it for a year and then sell" (which I won't even go deeply into, because the RE market - at least in Manhattan - has NEVER turned back around in one year) is that something VERY different is going to occur this time over prior times: firstly, the mix of apartments bought within the last X years has WAY, WAY, WAY shifted towards the larger and higher end than ever before (well, not pre-WW II, but I don't think any of us are talking about that). Last go round, we have a lot of Coop conversion with whatever mix of units already existed, and new condos with lots of studios and 1 BRs.
This time around, we've got lots and lots of larger (2 br, 3 br, 4 br), high amenity/high "luxury", high RE Tax, high CC units. And bought at VERY high prices. It was one thing when someone had a studio which was costing them $1600 a month to carry and could rent it out for $1200 and eat $400 a month shortfall. But I'm not so sure there are a large number of people who can shell out $15,000 to $50,000 a month carrying while receiving 60% of that number in rent and eat the rest. Even if the WANT to, they just can't, because it would represent >50% of their income.
30 yrs...I like your take and your history in the market is many many years beyond mine. So what is your prediction...bottom levels and timing?
I've been saying for a few years that i thought that whenever the market turns around it would drop 50% from whatever the top levels were. I cant say I've seen anything which has made me change my mind yet. OTOH, I still see some things which could make things blow up worse. Timing is always a tougher call. Normally I'd say 2.5 years. But depending on what the Gov't does to try and stop the inevitable, it could take longer. But mu guess is the more the gov't tries to make it not happen, the longer it will end up taking and the worse it will end up in the end. Part of this is that the market ALWAYS overshoots the top and the bottom. If things were allowed to crash immediately, we'd go down 50% and people would start buying pretty quickly. but the longer thing stake to hit the bottom, the lonmger people's memory will be "Real Estate always goes down" in the same way they convinced themselves "Real Estate always goes up" because of the length of time that it was.