What can I buy with 250k cash dp?

> Earn about 250-270K/yr.

Is it possible that with income taxes and having to rent market rate you are worse off than if you were earning say, $174k/year and have a decent rent stab? (earning just below the income test $175k)

IMO the issue about rent vs buy ratios is that rents of nice apartments might keep on going down, depending on how wall street is doing (no prop trading by 2012 is not bullish).

I think you have to factor how long you will be in a home. Sure a 2006 price would be down lets say 10%, but if you are staying in that home for a long time and with the assumption that we stabalize and creep up slowly, then what is the difference?

It seems most answers here are based on someone flipping there home every 3-5 years, which I have said in the past is just crazy. Yes i know people do it, but you can never make any money in a normal market and most likely will lose. At that point you might as well rent.

However if you are looking to buy a place to live in for a long time, sort of how people used to buy a home, then worrying about a 3-5 year real estate market trend does not matter.

Sure prices could slide 5-10% from here, but unless you want to be the eternal pessimist and assume it never rises again, over the long term you will be ahead.

Everyone has these nightmare situations where they say wall street is dead and the banks will not make money, but since they always find a way, I am not really concerned about that. Plus there are many more higher paying jobs in the new york city area then in most places, so it is not just the bankers who are buying homes.

I will assume ZZZ is not a banker and he seems to have a good income. My wife and I neither of us bankers do about the same. As long as people such as ourselves are buying the market also will stay stable.

Sure we could go into another recession and then of course prices will decrease, but we could also continue to have growth and then the market will continue to increase in value.

> I will assume ZZZ is not a banker and he seems to have a good income. My wife and I neither of us bankers do about the same. As long as people such as ourselves are buying the market also will stay stable.

WHAT!??!?!?! the market collapses if either the top falls or/and if it runs out of fools acting as 1st time homebuyers that earn much less than you do. Where is this "if we keep on buying, we can hold prices" coming from?

zzz, I disagree with your assessment that a $1.2M condo rents for $6000. I think with little effort, you should be able to find one that rents for $5000. With significant effort, you'll find something for $4500. With great effort (i.e., take your rental search effort as seriously as you would a purchase) and a little luck, you might find it for $4000.

While buying vs. renting may come out a wash at $6000 financially if you hold long-term, the picture shifts at realistic rents.

Mikev is implicitly assuming that supply is fixed -- "they aren't making any more of it" -- so only demand matters. So is ZZZ when he asks whether renting is cheaper than buying **for him** instead of whether which is more profitable **for a landlord/investor/builder/renovator** on the other side of the transaction. But supply is NOT fixed, except in the short run. It's easy to make more--just evict a tenant and sell his/her apartment.

If investors can make money by increasing supply, they are going to do it -- regardless of whether buyers are feeling flush and confident or fearful and poor. And supply will keep going up until it brings prices down to the point where there is more profit to be made by reducing supply (i.e., by removing units from the owner-occupied market in order to rent them out permanently or convert them to offices).

Fundamentals are pulling the market down. No investor would buy at current prices with the plan of renting out forever; almost every current landlord would make more money by selling instead of renting out forever. That's the baseline, and it is pretty clear.

As CC and all the bulls point out, markets rarely reflect fundamentals alone. Momentum matters, often more. When prices are going up, people include future price rises in their calculation of current value, which, of course, makes them willing to pay more and increases demand, tending to make prices go up. So does faith: when people believe, as an article of faith, that prices will go up over time, they include future price rises in their calculation of current value, which, of course, makes them willing to pay more. Bubbles happen when banks become willing to lend more because they think that prices are going to go up, which means the bank won't lose even if the borrower can't make the monthly payments, and, of course, easy loans make buyers able and willing to pay more, thus increasing demand even more. High demand pulls prices up until supply can catch up.

Downward momentum and fear work in exactly the same way to pull markets down, below fundamentals.

This stuff -- animal spirits -- is not hard to discern at any given moment, but it is essentially impossible to predict which way it'll be going years in the future.

If you are deciding WHEN to buy -- animal spirits matter a lot. If sellers and buyers are feeling good, prices will go up or fall slower this fall; if they are not, they will fall faster. Ditto the business cycle and the stock market: layoffs can force people to sell; stock prices up or better jobs will increase demand and the resistance of sellers. Supply isn't going to change much in the next 6 months, so you can ignore it. Inventory and demand matter more.

If you are deciding WHETHER to buy, it's animal spirits that you should ignore. As a buyer, your largest expense is the money you'll lose/make if you need to cash out. The average American moves every 5 years and NYC homeowners are no different (renters stay put longer in NYC). Some of that is flipping, of course, but much more is jobs, divorce, disease, schools, more or fewer children than expected, disability, retiring, etc -- mostly stuff that is very hard to predict in advance. While you can predict that you'll want to sell at some point, maybe even unexpectedly, there is no way to know in which direction momentum/animal spirits will be pushing at that time. Sometimes momentum pushes up, and sometimes down. Ten years out? Who knows?

But we know this right now: Manhattan prices are still bubble prices. They don't make sense unless you assume future price increases to justify current prices, the circular thinking that marks a bubble.

And you can safely predict this: Bubbles don't last forever. If prices stay above costs, banks will go back to lending and investors will build, renovate, evict tenants, convert office buildings, make new neighborhoods fashionable. Supply go up. Eventually, it will go up enough that either will prices go down or costs will go up to the point that increasing supply is no longer profitable. That's the fundamental baseline. Markets have powerful forces pressing prices toward marginal costs.

If you buy, the fundamentals tell you to build a strong likelihood of future price drop into your calculations, unless you expect rents and building costs to rise a lot and fast. If rents do NOT drop and inflation remains low, demand does NOT drop and people do NOT become more pessimistic about the future, the price drop will be dramatic -- a third or a half.

If you bet against dropping prices, you are counting on irrational exuberance, market failure, dramatic rent increases, rapidly rising building costs, massive and permanent government subsidies, a sudden increase in rent stabilization protections, or unexpected growth in NYC jobs unmatched by building.

Or you are so wealthy that you can view buying as a pure consumption--you don't care if you have to sell for 1/2 current prices -- AND you have enough money for your next downpayment even if this one is lost. Pay your money and place your bet.

zzzzz
IF you read any of the discussion threads I posted links to, you'd see the Bowery example was a terrible one to stick with as you would have read the advertised square footage of the unit exceeds the footprint of the building!

And you can safely predict this: Bubbles don't last forever. If prices stay above costs, banks will go back to lending and investors will build, renovate, evict tenants, convert office buildings, make new neighborhoods fashionable. Supply go up. Eventually, it will go up enough that either will prices go down or costs will go up to the point that increasing supply is no longer profitable. That's the fundamental baseline. Markets have powerful forces pressing prices toward marginal costs.

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When it comes to replacement costs, remember that during any bubble costs are not static. They are just beginning to come down. Costs (labor and materials, also land) were all artificially inflated. So don't use bubble prices for neither of them.