RENT or BUY.....CLEAR GRAPH

Has the graph shown in the nyt article sway your opinion either way....your Feedback?

thats not the valid url. You gave the text over the link, not the link itself.

somwherelse: Thanks for pointing that out:

Here is the link

www.nytimes.com/interactive/business/buy-rent-calculator.html

Ummmm...you can change the variables all you want to make the graph show whatever you want. Especially under "advanced." you are looking at the default version.

Ok so I plugged in some numbers. I left the (today) low rate of 5.5%
I assumed a home value of $1.5mm and put 30% down (banks aren't going for 20%)
I put in 1.5% taxes which came out to 20K. It's not high when you take into account there is nowhere to plug in common charges and it is zero. So 20K divided by 12 =$1666 per month, definitely on the low side for this size apartment.
I compared it to $7500 per month rent, which is 200 times sales price, my mantra for months and definitely below the current 20times and 25times what is being asked today.

And it comes out I am not better off buying unless I hold it for 12 years!

Now I am CONVINCED not to buy anything that is more than 200 times(16.6x rent roll) the monthly attainable rent.!

Someone should turn this into an I-app.
Could you see everyone at open houses plugging in the numbers and telling brokers, sorry, either reduce your price 30% or I'll have to continue renting. :)

You should rents going up at the same rate as home prices - they always move in tandem over the long term. But if you raise BOTH by the same amount, it makes buying look better.

But having looked to buy and rent the same type of apartment in the exact same neighborhoods, I had fresh data, and came to the conclusion renting is better than buying over the 7 or 10 years (at most) I have left in NYC. I had to put in higher than 5% price and rent appreciation to get otherwise.

The price to rent ratio in Manhattan is very out of whack (though I am still not convinced by Steve's data.)

You really need to play around with the advanced settings to get a realistic picture from this tool. How many people buying a $1.5 million apartment have a marginal tax rate of only 20%, for instance? And for that $1.5 million apartment, it assumes a yearly homeowner's insurance rate of over $8000 -- which is 4-6x what it would actually be for a coop, even with an expensive insurer like Chubb. The closing costs to buy are also estimated very high -- it does not cost one $60,000k to close on a $1.5 million coop -- more like $20k.

miette, you also have to think of the uncertainty of the tax benefit for wealthier buyers existing at all in the future.

i agree with you on many levels. the calculator is only so effective. however, with the numbers i've been running, assuming fairly healthy returns on housing and equally increasing costs of renting, the numbers are still not close for the vast majority of properties. dean baker had a good analysis today, i'll post it later. 15X is the historical rate, roughly. not steve's 12, but certainly not the 20 that others have been claiming.

home ownership, being illiquid, is a very risky area to make a bet on future returns. yes, if the calculations are wrong by 2% a year in your favor things may be better, but that's a leap of faith many people should not be taking, as they really need to make sure they have money to retire.

"You should rents going up at the same rate as home prices - they always move in tandem over the long term."

Meaning prices have even more to fall, no?

(whoops, you really walked into that one)

swe, isn't that because of the unions? i could have sworn you said so.

Hm. Computing my rent and a comparable apartment in a comparable neighborhood, it would take 27 years for buying to make sense.

Yep, prices are still too high.

For Your Information:

http://www.nytimes.com/2010/04/21/business/economy/21leonhardt.html?partner=rss&emc=rss

Yes, saw that Fayek. Read the entire thing. Perhaps you missed this part?

"Yet there are still significant pockets where renting looks promising %u2014 including parts of Manhattan, the New York suburbs and Orange County, Calif."

Maybe in Inwood the rent/buy comparison works favorably, but for now prices are still. too. high. Even according to the rent/buy chart calculations.

evnyc:

Evnyc:

Yes, saw that Fayek. Read the entire thing. Perhaps you missed this part?

"Yet there are still significant pockets where renting looks promising %u2014 including parts of Manhattan, the New York suburbs and Orange County, Calif."

I did not miss anything....And read the entire article....you should also know that,

"Some Parts Of Manhattan" May never be affordable to some people!

Flmao. 200x rent = purchase price. Now take rent - (10% old rent), solve for x. Yep, lemming buyers.

Now add in the biggest recession since 1920, bursting of biggest NYC re bubble, lowest historical interest rates about to stop being so and historicaly high home 'ownsership' participation by folks who should never have been (as evidenced by the highest foreclosure rates in us history). And frame that against your lemming heads.

Serioulsy what are you smoking?

'Now add in the biggest recession since 1920'

i think, just maybe, going out on a limb here, that you might want to re-think this statement

He did say recession so that does not include depressions.
I still think the 70's was worse, but....this recession ain't over yet.

You've got it backwards - recession most definitely includes depression. depression, however, does not include recession. besides, 1920 is considered, by some, to have been a depression (there is no consensus definition for the term depression).

all squares are rectangles, not all rectangles are squares - same idea.

> I think, just maybe, going out on a limb here, that you might want to re-think this statement

I think, just maybe, going out on a limb here, printer might want to check his facts for once

Economic Policy Institute - "the current recession is the longest and deepest economic downturn since the Great Depression." That was in July, so even if things improved, its a done deal.

since the Great Depression

and remind me SWE, when are the dates of the GD?

This ought to be good, I'll get some popcorn.

> and remind me SWE, when are the dates of the GD?

started in 1929...

so 1929 is before 1920? that's it. wasn't meant to be a whole big thing, but you just had to butt yourself in, taking the other side, even on such an obviously false fact. next time read, think and breathe before you type.

somewherelse,

Do you ever get tired?

Do you ever just walk away from an argument because it isn't worth winning?

Have you ever conceded defeat?

Is anyone else ever right?

"Some Parts Of Manhattan" May never be affordable to some people!"
Snark much, Fayek?

My point was that according to the graph, to buy a similar-sized apartment in the same area doesn't make sense for 27 years at today's prices. So I can afford Manhattan just fine, thanks - but I prefer not to get ripped off making huge purchases.

evnyc:

Each to its own.....Have a wonderful weekend!

:)

"so 1929 is before 1920? that's it. wasn't meant to be a whole big thing, but you just had to butt yourself in, taking the other side, even on such an obviously false fact. next time read, think and breathe before you type."

wait, you're arguing the typo? THATS what you're doing? Holy moses.

Seemed pretty clear to me that 1920' meant the 20s'.

But, if you are arguing the typo, yes, you win.

I actually gave you the benefit of the doubt and thought you were arguing something meaningful, on how the great recession wasn't actually a great recession.

Are you finally admitting it was a huge recession?

When did I say it hasn't been a significant recession? Talk about strawmen.

SWE
Is it really worth the keystrokes to argue?

Printer
"all squares are rectangles, not all rectangles are squares - same idea"

When discussing whether rectangles look worse long side left to right or top to bottom, what use is bringing up or including squares?

Thx u swe. :) tis but a missed lette

yes, undoubtedly you were too busy walking on water

w67 forgive him, he know not what he spew

> Thx u swe. :) tis but a missed lette

So, months and months of posting, and printer finally gets something right...

he catches a typo.

;-)

"When did I say it hasn't been a significant recession? Talk about strawmen."

Is printer talking about strawmen? Really? (see next post)

about 12 months ago
ignore this person
report abuse oh, naive Carnegie - posting modestly positive commentary on the market. Let me clarify the orthodoxies of SE that you must subscribe to:
1) Wall Street will NEVER come back. The best we can hope for is that employment levels will perhaps bottom at 50% of 2008 levels, and those who do remain will be lucky if they receive so much as their base salaries, perhaps a trinket 10% bonus. The fact that those who are actually on the street and know how profitable their divisions have been this year pales in comparison to the conjecture of those on this board.
2) There is no such thing as positive news - ANY earnings news, or gov't statistics are either completely fabricated, or so full of loopholes and seasonal factors as to render them meaningless. Unless the news is negative - then it is directional correct, but of course the magnitudes are drastically understated by the same factors as above.
3) NYC is maybe 6 months away from rampant crime, homelessness, and general Blade-Runner like conditions.
4) Tax deductions are illusory - your actual tax bill may be less after you deduct your mtge interest, but I assure you that is not really the case.
5) It may appear that certain properties are indeed closing, but that is just broker-spin. If you adjust for the buyers whose IQs are below 40, have just come into huge windfalls, and are under the demonic control of said brokers, there are zero sales happening.
6) NYC is in no way, shape or form different from any other market in the United States. The overall wealth, co-op financing rules, vacancy rates, long-term crime trends, demographic changes and appeal to foreigners have no impact on our market whatsoever. We are all no-doc, 100% leverage, neg-am flippers.
7) Only on the very day that Columbia, Steve, NYC10022, etc. sign contract will the market have reached its absolute nadir. Prices will remain at that level for approximately the 2 months it takes for their contracts to close, and promptly soar 20%.

Can you show me where in there I say that this recession has, or would be, mild? I don't see any references whatsoever to that fact. How in the world could a recession which resulted in 10% unemployment be anything less than severe? Just b/c I was clearly correct in my assessment of how Wall Street was recovering? You are really making things up now.

I tried the calculator and it seemed to me that the maintenance costs monthly in owning are grossly underestimated and would have to adjust taxes re: same.

This is not at all helpful for people looking to buy. What is the purpose of this?

"evnyc:

Each to its own.....Have a wonderful weekend!"

Huh. Now I'm an "it." Nice, Fayek. You have a lovely weekend too. I'd like to point out that according to the graphing chart YOU POSTED, prices are still too high. Good luck selling that and have a great weekend yourself!

It could be worse, evnyc. I was called a *she* the other day. The horror.

Hi Fayek, I'm glad you're back as I missed you. So tell me, I forget. Have you bought yet yourself & when? Were you able to afford "Some Parts Of Manhattan", or were you forced to accept "Other Parts Of Manhattan", or did you have to be branded with the indignation of "Some Parts Of Places Other Than Manhattan"? Or are you waiting until you can afford "Some Parts of Manhattan"?

I am one of those who can afford "All Parts of Manhattan" but choose to rent from both a financial perspective and a lifestyle perspective. I prefer to switch places every few years, and I prefer to spend my money wiser.

What's your story?

"and I prefer to spend my money wiser"

In fact, I'll be spending my money on an English coach tomorrow. You know, so that I can sound smarter online to impress my SE friends. She'll be telling me that I should have said "more wisely", not "wiser". She really is a wise-ass. Irregardless.

inonada, the horror! Renting, as a wise alternative to buying - say it ain't so.

Irregardless, I respect your wise-ass decision. ;)

irregardless of gender issues, what i'd like to see the wisealicious fayek do is present five manhattan listings with recent rental comps that show it's smartasticaler to buy.

My reason for posting the Rent or Own graph:

was for those of you who are weighing their options - wanting to make a decision that works best for them!

Every individual has reasons for making a decision on RENTING or BUYING.....For me Owning my apartment wins over renting and here are my reasons!

I like living in one place for 10 years or more - therebye renting is not a viable option for me - it would be too inconvenient for me to move - due to owner needing the place for his or her own use - which is very common for the my family size apartment in the community where I live.

People make decisions based on their finances and jobs - family size - marriage or divorce!

buying is not eveyones only option and I can fully well understand why people rent.

with all due respect to all of your choices I did not post this information to sway your opinion either way...It was just an interesting article and graph I decided too share.

yeah... but we just saw the collapse of the biggest RE bubble in nyc... so is "owning" now a better decision? regardleesssssssslynessly of not having to move in 10 yrs, not getting a divorce, better returns on financial instruments or just bc crack is whack? I mean, you seem to assume ALL of us dont' understand there are trade-offs...... in a "NORMAL" mkt... sister, I gotta tell ya, $1000psf for a ho hum C6 on UWS ain't it...

try again.... oh yeah and you are a broker, which means it's alwayz a good time to buy... rentals are for loser brokers... what get 1x rent... vs. 6% of 250x rent... yeah, I see your allegiance

A month or two ago I said it was a good time to sign a two year lease, and although I think prices are up a bit in the past 45-60 days, I still believe that. Apartments for sale I think have actually strengthened, making buying now less attractive, but I believe they'll be down in a couple years, whereas I believe rents will be up more in a couple years as there are more fixed costs for operating a rental - taxes, maintenance, etc.

w67thstreet

If you look at all my active listings you can see that they are all rentals for now......! Your point about me being a broker and therebye advocating that people buy because it would result in a greater profit for me..... does not apply.

Fayek. Do you own a nice watch? Do you aspire to fly first class? do you like a new car versus old? Do you like 4 seasons to hojo? Do you like bouley to mcd?

If you answered yes to any if the above, you can be bought. Don't kid yourself, I certainly don't.

I apparently cannot be bought.

will you guys knock it off and stay on the point. Mundy