Most predictions are prices are going to fall 10%-17%, why would anyone buy.

I am buying now because..

- Interest rate raising (offset ratio of 2-7% from the drop).
- Not particularly interested in short term decline / appreciation.
- Looking for a home not an investment property.

Regardless if you are not looking at the short time decline or as an investment... it is still an investment. You may still have to sell in 2-3 years for some unknown / unfortunate reason.

If you are looking for a cookie cutter 1br in a white brick postwar building, take your time. I am looking to upgrade to a house in a very specific area, there just isn't that much out there. If I find what I am looking for at a price I can afford, I will buy it.
The answer depends on your situation and the rarity of what you are looking for. It is not such a bad market for a buyer, because the lack of competition makes it possible to get your extra 10% off today if you are ready to buy.
If I had more cash, I would wait for the rates to go back up, but we'll need to borrow so any extra 5-10% off the price will be negated by higher interest rates.

what do you mean "most predictions" say that prices are goign to fall? Quanitity means nothing. It's quality that matters. And Robert Shiller, aka Dr. Doom, has just said the following in Reuters:

“The prominent fact that we are seeing with this data is that home prices are just zipping up,” Shiller said.

“It is entirely possible that even with the bad news we are getting, home prices could start a major increase,” he said.

> Regardless if you are not looking at the short time decline or as an investment... it is still an
> investment.

Actually, owner-occupied RE just isn't.

Though I do agree with the meaning though... you might not care about the +/- but ignoring it isn't too smart.

I do agree that it is an investment. I struggle with the same question for quite some time. The rate of decline it seems like it is about 1% a month on average.

I will be living in the unit and have cash saved up enough for another unit once / when the market bottoms out. I just dont feel comfortable dumping most of my cash holdings in to a single unit.

To be honest, I am buying now because I found a unit that I like and would most likely keep it for quite some time (10+ years). My logic is that anything that I plan to purchase at low rate would be for a long term, and short term when the price declines further and rates are higher.

If you are looking on the shorter term, the ratio of projected interest rate vs price decline, your monthly payment would be about the same.

"I do agree that it is an investment."

Unfortunately, the definition of the word "investment" doesn't agree.

> I just dont feel comfortable dumping most of my cash holdings in to a single unit.

Why is the alternative two units? How about a better asset class?
Two manhattan apartments is a diversified portfolio only in that its not as bad as just one apartment. But its stil not particularly good.

"If you are looking on the shorter term, the ratio of projected interest rate vs price decline, your monthly payment would be about the same. "

Not with rents this low. Still very cheap to rent vs. carrying a mortgage.

If its not an investment, what is it?

What would be a better asset class in your opinion, when you are already in securities?

The rents are cheap now but I dont see it declining further after spring. Regardless I dont plan to buy a second unit until at least a year from now.

> If its not an investment, what is it?

Its your home.

The car you drive to work isn't an investment either... its just... your car.

> What would be a better asset class in your opinion, when you are already in securities?

Bonds, cash, more securities. There are so many to choose from - are you fully diversified worldwide?

> The rents are cheap now but I dont see it declining further after spring.

You might want to look at some of the data. This isn't really supported.

> Regardless I dont plan to buy a second unit until at least a year from now.
The timing won't make it any more or less a diversified portfolio.

> And Robert Shiller, aka Dr. Doom, has just said the following in Reuters:

Ignore alpo. This is the guy who denied that there was a crash just a few months ago. He has no understanding of data. And he lives in New Jersey, so he doesn't know anything about NYC.

Second, Shiller is NOT Dr. Doom. Dr. Doom is roubini.

And Shiller has specifically separated Manhattan from the rest of the country. We're TWO YEARS behing the national crash. Meaning we probably have another couple years to go.

Keep in mind that after the '87 crash and recession, it took RE in Manhattan FOUR YEARS to bottom.

I was reading about Roubini the other day
http://news.yahoo.com/s/nm/20091008/bs_nm/us_usa_housing_roubini

Car does not equate to a home as definition of investment. Home differs because of its ability to retain most of its value over time when on constant market range but a car does not.

Bonds / securities / commodities / cash / random currency trades / the usual emerging markets / utilities & infrastructure in US etc etc.

What data do you speak of in terms of rental decline?
Aside from diversity, I was referring to second unit purchase next year for decline in price.

I am actually trying to reduce my cash holdings. Hopefully by end of next or early year after.

Dr. Doom was on the Kudlow report yesterday as well, very hesitant to say this market is getting its act together. Very hesitant. If anything, he's saying positive and negative news at the same time.

-strike- Dr. Doom (was referring to earlier post). It was Schiller.

"Car does not equate to a home as definition of investment. Home differs because of its ability to retain most of its value over time when on constant market range but a car does not. "

This isn't a very logical statement. A duck is certainly different from a cow, but that doesn't make either a car.

Neither the car nor the owner-occupied home is an investment. Retaining value doesn't make something an investment.

> What data do you speak of in terms of rental decline?

The actual data on rents (consistently down) and the addition rental inventory coming (including unsold condos).

Mind you, the car WOULD be an investment if you used it to start a business driving folks around.

"why would anyone buy"

If their holding period was going to be very long term and the deal currently made sense to them.

"and the deal currently made sense to them."

Thats a huge if.

I'd play craps every day if the odds were in my favor, too.

I'd buy now if I wanted to live in it now.

Stoxx down very big today.,New Home sales DOWN BIG..Consumer Confidence down

Read the Headlines ..Dont make any offers

> I'd buy now if I wanted to live in it now.

I'd rent now if I wanted to live in it now.

Oh wait, I did. My last lease was for a rent 23% below the rent from 13-14 months before (I had actually visited and had the floorplan with pricing saved). Plus a free month.

And what if the perfect place you wanted to live was for sale and not for rent? I might buy.

You'd "settle" for a less desirable rental. Some of us don't intend to settle.

I'd sell my current house for 150% more than I paid, and guess what? The gains exceed my entire cost of home ownership over the last 15 years.

Huh, I guess my rent was zero. Beat that. What have you paid in rent for the last 15 years? More or less than zero?

We bought this summer because we were trade-up buyers, and had been waiting a long time for the 25% correction that would let us buy a bigger place (we went from a studio purchased in 2003 to a conv-2).

We found a place we loved (yay, sunlight!). Realized that we were running the risk that prices MIGHT drop another 10 percent over the next year or two but we really didn't think so (and we were finacing, so we face interest rate risk).

Regard being forced to sell our primary residence in the next two - three years as extremly unlikely. We would sell an investment property first.

I think housing is consumption, not investment, but as for alternatives -- what asset class do you feel good about at this point, exactly? Cash at a less than a 1 percent return? Stocks bouncing around 10,000 without much top-line earnings growth? Gold at $1,000 an ounce?

At least I can make toast in my kitchen.

ali r.
{downtown broker}

> And what if the perfect place you wanted to live was for sale and not for rent? I might buy.
> You'd "settle" for a less desirable rental. Some of us don't intend to settle.

What if the perfect place were only available for rental? Are you settling because you only want to buy?

> Some of us don't intend to settle.

I'm actually less likely to settle BECAUSE I am renting. I only need to worry if I can make payments for a year, and then its easy to trade down.

Buyers need to be more careful, and settle MORE. When they don't... look what happens.
They can't make their payments.

End of the day, fact is, you can get a BETTER apartment for the same $ if you rent.

So who is actually settling here?

AND if you dont mind spending the extra money (up to 50% more monthly) then go ahead!!! Pretty pricey to make toast if you ask me. There is NO comparison between renting and buying right now based in financial analysis. The NON-financial stuff has to be SUPER COMPELLING such that you are willing to pay 50% more. Hey - if front-porch does not mind then its their perogative. Am just saying - i would not do it. Rather spend the 50% more on lovely vacations, kids, wife's handbags and shoes.

> I'd sell my current house for 150% more than I paid, and guess what? The gains exceed my entire cost
> of home ownership over the last 15 years.
> Huh, I guess my rent was zero. Beat that. What have you paid in rent for the last 15 years? More or
> less than zero?

Probably less than the interest on your deposit. Got to love rent stabilization!

Of course, I upgraded since then, my rent is much higher now.

How much have you lost in that time? 20-25% leveraged.... how much is that?

> I think housing is consumption, not investment

Exactly.

> what asset class do you feel good about at this point, exactly? Cash at a less than a 1 percent
> return? Stocks bouncing around 10,000 without much top-line earnings growth? Gold at $1,000 an ounce?

Still a fan of smart asset allocation. There are multiple flavors, but you get your US stock, foreign stock, US bond, foreign bond allocations. I pepper with energy etfs, RE etfs, and some TIPS.

And, yes, I don't feel fantastic about stocks today, but thats sort of a poor question to ask.

I was allocated into them heavily at dow 6 and 7k. I even picked up a bunch of SSOs (all have doubled or more since).

I've been taking some gains and shifting back to the same original allocation.

And, in the end, that most asset classes look so-so still doesn't make lousy "investements" anything other than lousy investments.

Roulette isn't any smarter an option, either.

"AND if you dont mind spending the extra money (up to 50% more monthly) then go ahead!!! Pretty pricey to make toast if you ask me. There is NO comparison between renting and buying right now based in financial analysis. The NON-financial stuff has to be SUPER COMPELLING such that you are willing to pay 50% more. Hey - if front-porch does not mind then its their perogative. Am just saying - i would not do it. Rather spend the 50% more on lovely vacations, kids, wife's handbags and shoes."

Exactly. I love spending the same $$$ and getting twice as much.

It certainly 'aint the renters who are forced to settle... its the buyers who have to pay twice as much for the same thing.

"What if the perfect place were only available for rental?"

I'm looking at both sales and rentals. Sometimes both in one unit, such as a loft on Wooster recently. Virtually everything I am looking at is either one of a kind or one of a small number of similar units in a building. If I find the "perfect" place and pass on it, it may never come up for sale again in my lifetime.

I don't need to worry about making payments, thanks for your concern. I think prices are generally trending down, and may rent for a year or two, but longer term I am a buyer.

I am not buying as an investment. I have investments. I am buying as a place to live. Price appreciation over time would be nice but not necessary.

If the townhouse on Charles loses a digit I might be a buyer sooner rather than later.

Personally, I don't think I have a "perfect" apartment. My life isn't defined by where I sleep. This is Manhattan after all, if you're awake, go outside. Thats why we're here. Otherwise, I'd move to Kansas. There are plenty of apartments of all types for my taste. I've never walked into something and said I need *this* when there are plenty more where that came from.

But I'm certainly happy to have twice the views, twice the size, twice the amenities, pick your poison..... getting twice as much for the same $$$ works extremely well for me.

> I am buying as a place to live.

I'll buy or rent as a place to live.

I'll pick whatever option DOESN'T cost me double.

"I only need to worry if I can make payments for a year".

Well, in that case, you should rent. I don't need to worry about monthly payments or reducing vacations etc in order to buy. It is not an either/or situation. In your case, renting is the prudent thing to do until you are able to buy without affecting your lifestyle.

"I only need to worry if I can make payments for a year".

Well, in that case, you should rent. I don't need to worry about monthly payments or reducing vacations etc in order to buy. It is not an either/or situation. In your case, renting is the prudent thing to do until you are able to buy without affecting your lifestyle.

We're buying (or trying to) because:
1 - Inventory for what we're looking for (4 bedroom downtown) has shrunk considerably since spring. Yes overall inventory is up, but not for what we're looking for.
2 - Low interest rates
3 - There are fewer distressed or "serious" sellers in the price range we're looking at. All our recent offers have been rejected, even though they're about 20% or so off peak 2008 prices. There were lots of distressed sellers in early spring, but we waited too long and missed the boat.

4 - My family and I are sick of living in a small rental.

I hope the market falls again. But right now there is no evidence of a real, current decline.

> But right now there is no evidence of a real, current decline.

If you don't think the medians dropping is "real, current" evidence, what would be? Median psf dropped again in the last quarterlies.

I'd buy only if the price I am getting prices in the 17% possible loss of value and if it is something really special that I may not be able to get later on. Now, I am looking in Harlem, so it looks like I am willing to take a huge risk in the short and medium term. I will be able to hold on to the property for at least a decade in any way and I´m not getting a mortgage. I would think twice I I need to get in debt and rely on staying employed...

"Well, in that case, you should rent. I don't need to worry about monthly payments or reducing vacations etc in order to buy. It is not an either/or situation. In your case, renting is the prudent thing to do until you are able to buy without affecting your lifestyle. "

Its great that you don't have to worry about it, but I don't know if that makes it any better an idea.

I could double my rent and not worry about making the payments... that doesn't mean I should pay twice as much for the same place.

Great if you don't mind overpaying.... but its still overpaying. (or undergettting)

Let's address this 'renters get the same thing cheaper than buyers' theme:

You can't rent long-term in a co-op.

You can be in a rental building, and some of them are pretty fabulous. You can rent in a condo, and maybe that's cheaper than buying in a condo and therefore sensible, but in either case, you're still living in a condo.

But if you want to live in my building, or any of a host of other "nice" buildings long-term, you have to buy.

ali r.
{downtown broker}

"But if you want to live in my building, or any of a host of other "nice" buildings long-term, you have to buy. "

If you want to live in my building - a pretty awesome one - or several others like it....
you have to rent.

In the end, I'll take the 50% discount.

And if you want to play the semantics game...

You can rent in almost any building you can buy in (though, yes, some limitation). You can't buy in most rental buildings.

But, in reality, you missed what I said earlier. Obviously they're not the exact same choices. But I have not yet come across some magical thing I wanted in an apartment that I couldn't find in a rental. Saying "you can't be in a co-op" is self fulfilling and not very useful. I've had no problem finding nice prewars to rent, or whatever else I want.

And I love the flexibility, and I love the 50% discount.

I just bought; closed a couple of weeks ago. Why did I buy? I found my dream apartment, which I am unlikely ever to have to upgrade from (it's big, in a great school district, and close to great neighborhood amenities), in a neighborhood where comparable inventory is still low. I won a three- or four-way bidding war to get the place (so assume it was well-priced even for this market). My husband and I are having a great time deciding how exactly we're going to renovate the place. My time horizon is a decade plus, and might even be a lifetime. Who here, if you found your "forever" place and could (finally!) afford it, wouldn't buy it even in this market?

That said -- not sure I would have been willing to buy a place I was planning on moving out of in 3-5 years.

I don't understand this buying is 50% more expensive than renting business. I am actively looking to buy, and I am finding that with a reasonable downpayment (20-25%) and conservative tax break figured out, my cost is similar to lower to current rents (which are bound to jump when employment picks up.)
Sure there are people who are delusional, but there are also asking prices that are within 10% of current rental cost. Once you figure a bit of negotiation and the benefit of fixing your housing costs, it's not quite the leap you are talking about. You seem to be stuck in 2007 right along with the unreasonable sellers. The listings that go in contract now are mostly 20-30% below peak, some are even more discounted.

"You seem to be stuck in 2007 right along with the unreasonable sellers."

Funny, 'tis you who seems to be stuck with the folks who refuse to look at the data.

"The listings that go in contract now are mostly 20-30% below peak"

Did you miss the rent drops? 20% all over the place.

Do the math.. .if the ratio is slanted toward renting, and both drop 20%, guess what happens to the ratio...
*nothing*.

> current rents (which are bound to jump when employment picks up.)

Talk about delusions.

Also, did you really just try and ignore the cost of having to put down 25%?

"Who here, if you found your "forever" place and could (finally!) afford it, wouldn't buy it even in this market?"

If its overpriced... me.

"That said -- not sure I would have been willing to buy a place I was planning on moving out of in 3-5 years."

Well, there is the rub as well.... I don't even know what my forever place would be. My needs change all the time.

"How much have you lost in that time? 20-25% leveraged.... how much is that? "

Huh? Is English your 2nd language? My home has gone up 150% and my equity investment over 500%. Ownership has not only cost me nothing it has paid all my living expenses.

Tell me again how you have had free rent for 15 years?

"But I'm certainly happy to have twice the views, twice the size, twice the amenities, pick your poison..... "

I can guarantee you are not going to have 2x anything of what I end up owning...

Look, you may not believe this, but there are plenty of people who are not worried about scraping up enough cash to pay the rent for a year. We can buy or rent, depending on what we see and like. Most of us won't throw money away on absurd prices but don't have to worry about scraping up nickel deposits on coke bottles to pay the rent.

You can rarely if ever get the same level of luxury in a rental that you can by buying. Find me a rental with a built-in undercounter icemaker.

If you want to live in a Holiday Inn type rental all your life, fine by me. But just because you don't value a nice living space highly does not make it wrong that others do.

I rented for a lot of years after college. First was a couple years in a east midtown less than special 50s/60s co-op. But then I found an apartment on one of Manhattan's best best blocks in a 150 year old owner-occupied (read: well maintained) brownstone and was there for a good long time. I couldn't have lived there if I were an owner, I would have needed $10 million (yes I would have gotten a lower floor and bigger space) instead of $2000 a month.

But I outgrew that at some point. Rentals just really aren't that special. They don't have nice kitchens, don't have nice baths. In a great location where you can't buy - who cares.

I did live in a condo briefly, so between my first co-op after college and the condo, I know how doormen are supposed to be, how the buldings are supposed to be maintained. Rentals ... the doormen are always nice and never give a shit. Their paycheck is coming from someone who isn't the tenant. The buildings are fine but the elevator in a owner condo will get fixed before the elevator in a rental.

To the guy who is renting an apartment for $3600 in midtown. Consider not too many people want 2 bedrooms in midtown. Most midtown renters are 25. Consider the history of your building - check it out. Even if they've fixed everything, keep in mind every so often they decide to be cheap and let things fall apart, so you might be ok for 2 or 5 years, but after? In my experience, the buildings with quality owners don't do that.

So the guy who got the apartment for $3600, I believe markets are efficient, but ok, I'll bite that you got a bargain. You got an apartment that for a couple years should be $4000-$4500 and you got it for a good deal less. But I'm sorry to tell you, there's no one out there buying that apartment for $1 million, today or 2 years ago.

That's the thing, I do look at the data very carefully, not as a tourist but as someone who wants to buy for the long term.
I looked at Stevejhx's challenge with his super cheap Clinton shitbox rental, and he could find a cheaper place that would be fairly equivalent ie 2br/2baths, room for 2 cats. Sure, he'd have to put down a downpayment. He also wouldn't have to move every 4 years chased by higher rents, to end up in Inwood when he's 60. To me, someone who wants to stay "forever" in Manhattan, which really means about 30 years or so, is nuts to decide to keep renting. He stays 2 years in his rental, spends $86,000, buys for 12% less than today but with interest rates at 6% barely breaks even.

Modern makes some very good points and fits the profiles of my 3 current contracts. They wanted something very specific, would not dream of living in Clinton and the purchase won't cramp their lifestyle in the least. Hey if you have the money, get what you want...life is short.

I hear you 10222, I went ice cold on this market 2 years ago after seeing the mess in Jersey/NYS first hand. Called off my own search, thanked the creator my last offer was not accepted, and got back into the rental game to make a few shekels.

@maly I am 46 and currently live in Washington Heights; ouch. That said it would severely affect my lifestyle to own the space I need (in Manhattan), looking to bust out to the burbs in 2010. Wifey wants a kid...I'm screwed(have two in college).lol.

I bought about 2 months ago and I couldn't be happier, here's why:

- It's mine (most people discount the psychological impact this has on your life, but let me tell you it's much bigger than you think)
- Low interest rate of 4.75 + First time home buyers tax credit of 8k
- 25% off the original 2008 asking price which came to about 750psf for prime Manhattan 1k SF 2br
- Very low common charges & taxes in full service building with pool, doorman, parking lot (Under 1k for both maint + tax, I was paying 2600 in rent before this place for a much worse area and less space)
- The best school district in the city and I'm located three blocks away
- I now walk to work in less than 5 minutes (no more daily subway, I used to have a 45+ minute commute)

I think the point I'm trying to make is if the apartment fits your needs I wouldn't get so caught up in trying to catch the bottom of this bubble burst (it's never going to happen). Just find something what works for you (in your price range) and go for it. If I listened to most of the bears on these boards and passed up on this place, I would have been seriously pissed right now since I don't see anything currently listed that comes even close to it in terms of building quality, location, & ppsf.

Not to mention I could really care less if I take another haircut on the short term value, I'm not going anywhere for at least 5 years. Even if it goes down another 10% over the next year or two, what does that matter? I would have been tossing that same amount of money into rent, which is about as good as flushing it down the toilet...

RECraze - had you waited another couple of years you could have bought a much better apartment for the same price. That said - enjoy your home - I'm glad your happy.

Jazz - Problem is i'd just tossing more money into rent while I continue to wait (if that day ever comes). :(

I could see 725 ppsf, heck I could even see one day someone gets lucky and nabs a quality 700 ppsf, but even I (and believe me I was a big time bear for a LONG time) have a heck of a hard time believing anyone will be getting a prime area true 2 BR condo in a full service building for less than that in the next couple of years.

I'm sure there are exceptions like this 74th street cheapo at only 510 ppsf (that is if you don't mind paying maintenance of $6275 a month). http://www.streeteasy.com/nyc/sale/373126-condop-343-east-74th-street-upper-east-side-new-york

Or this condo at only 708 ppsf (plus I'm sure they got it for less at closing). http://www.streeteasy.com/nyc/sale/400202-condo-350-east-72nd-street-lenox-hill-new-york But don't discount they are now paying 3200 in combined monthlies, yikes!

Either way I'm more than happy with the money I save at only $550 Maint. :)

We'll chat again in 730 days! ;)

To those who are trying to follow these discussions, let me tell you why you can't:

There's a shipwreck and almost everyone drowns except a physicist, and engineer and an economist who wash up on a deserted island. By the third day they they are starving, and a can of baked beans washes up on shore. The start to argue about how to get the can open. The physicist says "Let's throw it in the fire, using the principle of thermal expansion the can will explode and we will eat the beans". The engineer says "No, the beans will end up all over the place. I will fashion a tool from these sticks and rocks which we will open then can with". The economist says "I'm hungry now. I don't want to wait for you to build that tool...... Assume a can opener!!!!"

What's my point? Everyone has to make a lot of assumptions to construct their economic "model" of whether it will be better to buy or rent. If you assume prices are going to stabilize soon, and start going up - even at a modest amount - and that rents are also going to go up, you will come to a very different answer than if you assume prices are going down another 15% to 20% and rents will stay at their current levels forever. The great sales trainer Zig Ziglar says "Every buyer makes the 'buy decision' for the exact same reason. Do you know what that one reason is?"..................

"THEIR REASON!!!!!!!!!"

In other words, everyone buys for their own reason, not yours. What it's telling salespeople to do is pay attention to what the person in front of you's needs are, not what you like. Since he uses automobile analogies, he would say "If there is a couple with two kids in front of you, don't go rattling off how fast the car goes zero to sixty and how well it goes around corners; talk about the air bags ans crash safety numbers."

So, an awful lot of this discussion may look like economics, but it's really people making assumptions to skew things towards what their own personal choice is. It has been said that with the right set of assumptions, you can prove anything. My best professor at Cornell (actually probably the best teacher I ever had, period) was my statistics prof. For the final final I had in his graduate level stats class (Masters level, not PH.D.) his final exam was one problem: he gave a set of data and a thesis. The problem was: "Both prove and disprove the stated thesis using methods you have learned in this class". After reading it aloud, he told us "If you can do that, then you rally understand what statistics is all about".

30yrs - ""If you can do that, then you really understand what statistics is all about".
This sentence is awesome.

30yrs: but some assumptions are better than others ;-)

"Look, you may not believe this, but there are plenty of people who are not worried about scraping up enough cash to pay the rent for a year. We can buy or rent, depending on what we see and like. Most of us won't throw money away on absurd prices but don't have to worry about scraping up nickel deposits on coke bottles to pay the rent."

Wow, somebody is pissy. When you have to resort to insults...

I can buy or own what I want and not sweat the payments either. I've probably already got more money than I'll ever spend.

It still doesn't making wasting money ok. It still doesn't making paying twice what you need to for something ok.

Being smart with money is how I got the money in the first place...

"How much have you lost in that time? 20-25% leveraged.... how much is that? "

Huh? Is English your 2nd language? My home has gone up 150% and my equity investment over 500%. "

I see... you bought the magical apartmet that went up 150% while the city overall went down 25%.

I can't argue with delusion!

Good to hear you are smart with money, you are in the minority in the USA. I guess I misinterpreted your comment that you worry about paying the rent for a year. Not sure why you worry if you are in good shape.

I am still waiting for you to find me a rental with a built-in undercounter ice maker.

Why Buy now?

1) Mortgage rates are incredibly low and still have some tax deductibility. This is a great time to be a borrower.

2) Inflation is going to be a big problem. Unfortunately, in my view it is going to be a bad inflation largely driven by a weaker dollar. That means inflation will affect food and energy prices but that wages and salaries will be flat. The prices of life's necessities will be going up but incomes will not. American's will have less disposable income and will a face deterioration in their quality of life.
Own real assets.

3) Borrowing money now and locking in these low interest rates is a good idea because rates are very low and you will be paying back nominal pricipal in inflated dollars. The reverse is also true. You do not want to be lending money at today's interest rates. You especially do not want to be lending money to the government by buying US Treasuiries at today's rates.

4) Home prices will likely be lower in the future for the reasons mentioned in 1,2 and 3 but I am less sure about this. In any case I need a place to live. I do not need to mark to market my housing decision on a daily or weekly or even a monthly basis. The cheap borrowing costs show up in the bank account every month and the tax advantage of mortgage debt shows up every year on April 15th.

The government is continuing to offer substantial subsidies to home owners through cheap, tax advantaged 30-year fixed rate debt financing. Policy makers are also begging for a nasty bought of inflation. The Fed's zero interest rate policy, quantitative easing, an unprecedented expansion of the Fed's balance sheet and an unprecendented fiscal stimulus that has this year's budget deficit at $2TN all lead to inflation.

To boil it down. If housing is shelter and simply a place to live and I have a long horizon, why do I care if prices fall near term? Because I might save a few percent and get to tell friends at the cocktail party that "I caught the bottom"? Who cares?? To me the tax advantaged cost of long term debt financing wins. Cash on the barrel head wins. The vagaries and future path of home prices is a guessing game. Nobody knows. And don't let them tell you they do because they don't. If you buy today you will know exactly what that 4.5% mortgage costs. Every month for the next 30 years. And I don't know for sure but I will make a guess that over the course of the next 30 years one will have substantial opportunity to reinvest that borrowed money at rates of return far in excess of 4.5%.

"Good to hear you are smart with money, you are in the minority in the USA. I guess I misinterpreted your comment that you worry about paying the rent for a year. Not sure why you worry if you are in good shape."

That was only when you talked about renters settling in general, I wasn't talking about myself. Not saying its SMART, but I definitely know folks who splurge on a rental they could not afford to buy, and probably will only be able to do for a short time. You actually get more flexibility.

> I am still waiting for you to find me a rental with a built-in undercounter ice maker.

I couldn't find you a sale with that either. I'm a big home improvement show watcher, and I've never ever seen anybody even ask for one of those. I'm sure some guy in a condo somewhere installed a flux capacitor, too. My fridge makes my ice automatically, why would I want it in my counter?

But I'm happy to have pool (wet and dry), golf simulator, test kitchen (they give demonstrations), multiple lounges and decks. And I have a washer/dryer in my unit. No amenity I've wanted that I don't have (well, anything legal). And, all essentially free relative to what I'd be buying at the same price.

jake " why do I care if prices fall near term?"
You care because if you wait another year you'll be able to buy a better place for the same price you're willing to pay today - so for the next 30 years everyday you'd come home to a better apartment. That's why you wait. One more year of renting for 30 years of better owning.

"My fridge makes my ice automatically, why would I want it in my counter?"

Because a dedicated ice maker makes clear ice and fridges make cloudy ice. Huge difference in how cocktails look. Has something to do with speed of freezing (faster makes it clear I think).

I don't need a pool, prefer to play golf outdoors at my club then indoors at a pretend club, prefer to test new restaurants not recipes, and want my own private deck not one shared with a bunch of other people, where at peak times you might not even get a chair. So I am not moving in with you anytime soon!

"That means inflation will affect food and energy prices but that wages and salaries will be flat."

If you're right Jake seems to me residential real estate (a big consumer of disposable personal income) would come under downward price pressure. Wonder what the historical data would show for a period like 1968-1980? (long period of stagflation similar to what I think we may be facing)

"Because a dedicated ice maker makes clear ice and fridges make cloudy ice. Huge difference in how cocktails look. Has something to do with speed of freezing (faster makes it clear I think)."

Well, congrats then!

"I don't need a pool, prefer to play golf outdoors at my club then indoors at a pretend club, prefer to test new restaurants not recipes, and want my own private deck not one shared with a bunch of other people, where at peak times you might not even get a chair. So I am not moving in with you anytime soon!"

I'll personally take any of 'em over the magical ice maker... and, thats part of the point, we all have choices.

But I love getting them essentially free! (and I'm not going to the club for golf in dec, and I don't always have time for a miami flight just to take a few swings).

nyc10022 - I know the zipcode means midtown east, at least I think it does - but what building there has an indoor golf range? One of those distressed condos?

I actually left 10022... I have to change the screen name. And there are a couple of rental buildings with the gold thingy. Always planned as rentals, not distressed condos.

Also, I forgot... Sauna. Massage rooms!

and 10022 actually crept into the UES. I used to try to say I *didn't* live on the UES, and people disagreed with me. ;-) Above 59th...

I live somewhere else now.

sorry, just trying to see if my screen name changes

weird, I changed it in profile, and it still says the old one.

This should work...

"In other words, everyone buys for their own reason, not yours."

Ha, 30yrs, if people really understood this, there wouldn't be a quarter of the arguments that pop up on this board.

"Because a dedicated ice maker makes clear ice and fridges make cloudy ice. Huge difference in how cocktails look. Has something to do with speed of freezing (faster makes it clear I think)."

Not necessarily: put a good quality inline filter in the feed to your automatic ice maker and they will come out clear depending on your fridge (but a lot will).

"30yrs - ""If you can do that, then you really understand what statistics is all about".
This sentence is awesome."

Thx. But this is why I get a little perturbed when people tell me I need to brush up on my statistics: I've got a Bachelor of Science in Engineering and a Professional Master of Engineering from Cornell in Operations research with a fairly heavy concentration in statistics: I'd like to see the CV of people telling me I need to brush up on stats when they say that to me.(and I didn't get my degree by failing that final).

30yrs, i adore statistics. and demographics. and, to a lesser extent, economics.

http://www.bea.gov/newsreleases/national/gdp/2009/pdf/gdp3q09_adv.pdf

the whole thing is worth a read. but the following kind of caught my attention. i'm sure others would find other sections interesting, depending on what they'd like to "find" in the data.

Personal current taxes increased $4.8 billion in the third quarter, in contrast to a decrease of
$119.1 billion in the second. The quarterly pattern of taxes reflected a much smaller decrease in federal withheld income taxes in the third quarter, based on the quarterly pattern of wages and salaries and a leveling off of the effects on withholding rates from the Making Work Pay Credit provision of the American Recovery and Reinvestment Act of 2009. (For more information, see the Technical Note.)

Disposable personal income decreased $20.4 billion (0.7 percent) in the third quarter, in contrast
to an increase of $138.2 billion (5.2 percent) in the second. Real disposable personal income decreased
3.4 percent, in contrast to an increase of 3.8 percent.

The change in real private inventories added 0.94 percentage point to the third-quarter change in
real GDP after subtracting 1.42 percentage points from the second-quarter change. Private businesses
decreased inventories $130.8 billion in the third quarter, following decreases of $160.2 billion in the
second quarter and $113.9 billion in the first.

and, of course, my favorite. what the government won't do to goose the numbers.

Motor vehicle output added 1.66 percentage points to the third-quarter change in real GDP after
adding 0.19 percentage point to the second-quarter change. Final sales of computers subtracted 0.11
percentage point from the third-quarter change in real GDP after subtracting 0.04 percentage point from
the second-quarter change.

Real personal consumption expenditures increased 3.4 percent in the third quarter, in contrast to
a decrease of 0.9 percent in the second. Durable goods increased 22.3 percent, in contrast to a decrease
of 5.6 percent. The third-quarter increase largely reflected motor vehicle purchases under the Consumer
Assistance to Recycle and Save Act of 2009 (popularly called, “Cash for Clunkers” Program).
Nondurable goods increased 2.0 percent in the third quarter, in contrast to a decrease of 1.9 percent in
the second. Services increased 1.2 percent, compared with an increase of 0.2 percent.

I am buying. My PITI after 10% down will be the same as my current apt rent and I move from 1500 to 3600 sq ft 7 blocks from where I live now, still 5 min work commute.
There are reasons people will buy -- they like the place, rates are ridiculously low and they plan to stay in the place for a while

jd, i don't disagree with you. but you got a really good deal. others are also getting good deals that insulate them, at least partially, from some potential future downturn, should it happen and i believe it will. and the buy and hold, hold and hold some more model should, unless the world comes close to ending, prove OK (in the long run).

what pisses me off, however, is this push to get the first-time buyer to stretch to buy, after all that we've f'n learned (or not) over the past 8-10 years.. with fannie, freddie and fha still guaranteeing conforming loans, the younger buyer is still getting swept into what will inevitably be a declining market. good luck to the buyer of an alcove studio coop unit at $450k who has any thoughts (unless money is no object, of course) of being able to sell and trade up for room for a family in the next 5 or so years.

Cornell, why didn't you say so? I was there often as I have siblings who received bachelor's, masters and ph.d degrees in operations research from Cornell, good school for that at the time.

I was accepted for grad school at another part of Cornell (also accepted to Penn, Columbia, NYU, Harvard) but decided I had done enough time freezing my ass off in upstate NY.

Best book about statistics ever written was "How to Lie with Statistics".

recraze what neighboorhood did u buy in? what do u consider prime?

"2) Inflation is going to be a big problem. Unfortunately, in my view it is going to be a bad inflation largely driven by a weaker dollar. That means inflation will affect food and energy prices but that wages and salaries will be flat. The prices of life's necessities will be going up but incomes will not. American's will have less disposable income and will a face deterioration in their quality of life.
Own real assets."

This is a terrible reason to buy US real estate. In fact, if you predicted this, you should be shorting real estate. This means that your debt load will escalate over time in relation to your income, and rents will decline making your property more expensive as compared to alternatives. Your trade is totally inconsistent with your view.

With respect to the inflation arguments...check out the experience in Japan and think that through. The odds of a rapid inflation (which the Fed could easily fight with tools it has) are much lower than a deflation (which is harder to fight). The historical precedent for the most relevant historical example of our current predicament is persistently low inflation.

That's not to say that, say, Manhattan real estate might be desirable while FL/CA/NV/AZ could continue to be disastrous. If you believe that Wall Street is back to stay (and it does seem so) then it could remain well bid even if the rest of the country goes to hell.

Buying based on the availability of cheap financing is also unwise. This is the same argument you could have made for buying a house with a subprime mortgage if you predicted subprime was going away. Sure you got the cheap financing, but when the program went away, you learned that the price you paid for the house had capitalized the value of the availability of it, so you were now upside-down.

All that said...we'll probably buy in the spring once our lease is up...

"You can rarely if ever get the same level of luxury in a rental that you can by buying. Find me a rental with a built-in undercounter icemaker."

I don't know how rare it is, but I do know that it exists. We pay far below market rent for a very large, unrenovated downtown loft. Our landlord will allow us to make any changes we wish, and offered us a lease long enough to see our kids through high school.

We've put in quite a few luxury amenities since we've lived here (without having the hassle of having to worry about resale value, which means we can be as esoteric as we'd like. Undercounter ice maker? We much preferred a steam oven.) Given the cost of our personal renovations, if we were to move out tomorrow, we'll have paid ~110% of market rent for the time that we've lived here. If we see our lease through? We're hugely ahead.

If we were to buy something comparable, our monthly costs would quadruple.

Admittedly you don't find these kinds of apartments (or landlords) every day, But I can assure you, they exist. That said, if we hadn't found this place (or something like it), we'd be seriously looking at buying for many of the same reasons listed in this thread.

Yorick, the only long leases I have seen have been in commercial loft buildings. Is your space a legal living space? Is it a mixed residential;/commercial building? Commercial rents are way under residential rents. I am looking at some commercial space in NoHo right now for office use, rents are cheap compared to residential space.

Hey, whatever happened to people selling their long-term loft leases with "fixture fees" to pay for their improvements? eg $600/month rent for 10 years, 3,000sf with a $150k fixture fee. I haven't seen one of those for sale in years.

It's legal living space in a mixed use building.

Our landlord is financially set for life, and lives in the building. These two conditions mean that his requirements for a tenant are somewhat different than the average landlord who, one would assume, prioritizes maximum profits above all else.

Just sold our coop on UWS and moved to rental in W'burg, looking to buy something cool. Meanwhile, the new nabe is so much fun, it's started the adventure bug biting. Both freelancers, kids grown, and cash burning a hole in our pockets... maybe we should take off for parts unknown instead of sinking profits into NY real estate right away? We have a year to figure it out.

Lofty - have a feeling you used to be TrinityParent, now enjoying the unencumbered lifestyle. Why not travel for a year?

Lofty, how's the rental market in WB? Is it still overpriced? I would like to rent there but lots of places are at Manhattan-like prices.

We are leaning towards not buying. Commercial real estate market, unemployment and massive foreclosures all coming down the pike we think is going to be a bad residential real estate market for a few years. We'd like to buy for the long term, but thats not possible to plan for in NYC- an overcrowded, overpriced island that doesn't like cars. Move to an outer borough and your job moves to jersey, you have triplets, they decide to build a stadium/train station/"affordable housing" right next door... you're screwed. NYC doesn't do long term well which is another reason to think there will be less buyers willing to take a gamble on a long term investment.

Modern: nobody cares about your credentials or the perfect space you're living in/plan to buy/"will never worry about paying for" etc. GUAFB.

@Lofty....Hit the road!

"Hey, whatever happened to people selling their long-term loft leases with "fixture fees" to pay for their improvements? eg $600/month rent for 10 years, 3,000sf with a $150k fixture fee. I haven't seen one of those for sale in years."

You mean since.... like.... 1996?

http://www.nytimes.com/1996/01/21/nyregion/neighborhood-report-lower-manhattan-loft-board-s-rule-change-hits-tenants-where.html