Getting out to early

it beats getting out too late. and if you've made money, you've made money.

it also really beats getting in too late.

oh, snap!

I think most would agree that getting out too late is much worse than getting out to early. The consequences of the former can last a life time. As for the latter, well, we don't really have to talk about it, nothing to be embarrassed about, wait a bit and try again...

LOL, Reminds me one of playing $64,000 and walking away after winning $10

to take my personal case (although i sold in '04, not '03) more than doubling the money i used for my down payment in three years didn't exactly indicate a poor rate of return. beats being underwater.

although, of course, we all know homes are not meant to be investments, but should rather suit an individual's particular needs.

Well, in that specific case, you've had to endure a substandard apartment with poor maintenance along with management and tenant relation issues. Hardly worhy of a brag and a chortle.

those that got out around 2003 and rented instead of holding on might also have saved $ monthly, depending on when they bought.

if they sold and rented a rent stab since 2003/2004... kudos to them! as that system is more friendly towards those that want to have the option of a long-term rental.

substandard apartment with poor maintenance? according to whom, you? i'm forever grateful the washing machines ceased working, i'm much happier sending the laundry out. other than that i really haven't felt a lack of maintenance, or any tenant issue (other than being grateful that it reverted to RS).

and i bought a lovely, large country home as well.

enjoy your underwater condo, RS.

well, getting out too early can affect you for a lifetime as well, because if prices never come down enough to the point you can afford again then you are left living in a less-desireable place. Having a nice return on your equity is all well and good, but if it leaves you in a less desirable dwelling, what have you achieved, exactly? A primary residence is not a trading vehicle, it is a place to live.

I don't know about that. If you bought pre 2003 then the mortgage should have been relatively small. You're then dealing with rent above the common charge amount, and losing out on any tax deductibility of mortgage or common charge. And additionally mortgage rates are much lower than back in 2003/2004 so the owner would have had multiple opportunities to refinance and pay back with inflated dollars.

oh, this thread is about real estate? oops...

that is awesomely funny, sunday.

> And additionally mortgage rates are much lower than back in 2003/2004 so the owner would have had multiple opportunities to refinance and pay back with inflated dollars.

that's a very good point. the low rates were precisely in 2003 if i remember well.

read somewhere that during the past decade renters did better than buyers, wonder whether that's also the case in NYC cause prices here didn't come down as much as in other cities. it obviously depends on many factors though, but how did the median household fared would be interesting to see.

one of the many reasons it suddenly became so easy to sell. the earlier bubble mechanisms had run out of steam, so those in charge decided to up the game. i didn't like the way it looked, and i still don't. the market was so fueled precisely due to the measures RS wants to see ended. and it continues to be fueled thusly. so if you think you'll own for another 30 years it's one thing. but if you're not certain how long you'll own an apartment, sometimes it's prudent to sell when you see signs of a bubble before you reach the top.

particularly if the apartment has become hugely inconvenient because your daughter has started school far, far away from home.

Well NYC If I recall is hanging in at roughly 2004 prices maybe a drop higher today, So if you had postive HPA and then sold 2004, you had no benefit.

Also any money from the proceeds invested in a cd would have been taxable income, so tthe gov't would've reduced the results further.

wow, so you saw the RE bubble already in 2003?

"Well NYC If I recall is hanging in at roughly 2004 prices maybe a drop higher today, So if you had postive HPA and then sold 2004, you had no benefit."

Yes because there was no other possible way to make money over the last 6 years.

notadmin, recall that i bought in 1991, 1995/6. and in 2000/01. and i continued looking throughout the entire time period. i saw mortgage standards change in terms of income, amount that would be loaned at 10% down, declines in mortgage rates, etc.

i didn't understand the entirety of what was going on until i found out about piggy-back helocs and the like, but i wasn't comfortable with what i was seeing.

Yeah, me too, Sunday. I was gettin' hot.
So, is it true? Never on a Sunday?

Ask Sam Zell: http://www.businessweek.com/bwdaily/dnflash/content/nov2006/db20061120_378584.htm

Actually, if you sold in 2004 and invested in the s&p, you made about 1% a year assuming no transaction costs and no taxes which of course is very optimistic.

Not if you were as adept at spotting other bubbles. Are you investing in China right now?

Ask Harry Macklowe: http://www.nytimes.com/2009/02/07/business/07properties.html?_r=1

> Yes because there was no other possible way to make money over the last 6 years.

lol

> notadmin, recall that i bought in 1991, 1995/6. and in 2000/01.

oh, didn't know the years and that you traded so frequently, but i do remember you trading up. you were looking for townhouses in harlem, are you still? for a while i was thinking that with the crash UWS ones will end up going for peak of the bubble Harlem prices... bet i was too optimistic about that. :-)

i still believe it's better not to pull the trigger till 2012/13 but not so sure about that now. ultra low rates might stay for a very long period (pretty sure that higher rates will hammer prices).

> Actually, if you sold in 2004 and invested in the s&p, you made about 1% a year assuming no transaction costs and no taxes which of course is very optimistic.

but in the bond mkt she made a killing (in comparison at least to CD rates)

Big difference between cashing out of commercial real estate and selling one's home.

sam zell is among the best. even his hobby went bankrupt (LA tribune) but he barely had any skin on it!

what's up with old men and newspapers? buffett, zell and now slim have a thing for these kind of dinosaurs.

A primary residence is not a trading vehicle, it is a place to live.

above see a classic bubble fallacy

of course one doesnt trade homes

but to be other than extremely careful with what, for most people, is their only investment with serious leverage, and involves largest equity stake they have in anything, with attendant illiquidity and huge transaction cost both in and out; is nuts---and i mean careful with one's dollars--yea, make sure you like the architecture and the garden, but watch your dollars

and the idea that the equity will take care of itself as long as you can keep making the payment and remain living there for a long time is more fallacy--3/4 of bankruptcies in america are due to health issues. of them, 3/4 of the bankrupt sick people HAD health insurance--unemployment is rampant--the unexpected looms for all of us--have you already forgotten the numbers of people who, over the last few years, were ruined as bad luck forced that they sell RE in a market that was weak

nyc is immune to all this--yea right

> 3/4 of bankruptcies in america are due to health issues. of them, 3/4 of the bankrupt sick people HAD health insurance

i knew the 1st but not the 2nd. why is the insurance not covering more? the deductibles were too high, crappy coverage overall or lack of payment cause of pre-existent conditions?

> nyc is immune to all this--yea right

just read some of the "If You Can Demonstrate Market Movement With Comps: Upper West Side Edition (by West81st)"... and prices are higher than in 2005, so i'm not that sure about Manhattan not being unique anymore.

why rs? our lives have hardly been diminished, we made a profit, and i quite like the flexibility of renting. and i'm sure you'll accuse me of bragging, but our hhi is now many multiples of what it was in 2004, so we're hardly priced out regardless of what happens to rentals or sales. we could change at any time, and if interest rates rise, all the better. i'm choosing to underspend. i really don't miss the amount i would have received if i had stayed in until 2008, and as i was a firm believer we were in a bubble it hardly would have made me happy to continue to own during that time.

notadmin, we did move up, until the last move of course, but i like where we're at so no complaints. people disagree about the effect of rising interest rates, but i have to think they'd have one. what may be even more damaging is the state of our state's finances. just today i've read that the shortfall is now estimated to be a billion dollars, and the state is spending way more than it is taking in on an ongoing basis. it all just seems to be held together so tenuously to me.

well done AR! underspending in housing is very smart imho under most scenarios (if super high inflation were an almost certainty is the only exception i can think of). our goal is not to spend more than 5-10% of income in housing, and save like there's no tomorrow :-) wow, how anti-last decade this sounds.

Actually, come to think of it I think A.R. made the right decision. The debt to service ratio of the mortgage was clearly too high.

neither here nor there, but the '3/4 of bankruptcies are due to health issues' statistic has been thoroughly discredited.

and you've got it totally backwards - the classic bubble fallacy was that prices only go up, so the more leverage the better, and that you would make money on it by extracting home equity. in other words, the bubble problem was that people looked it as an investment, not as a place to live.

oh rs, just keep trying.

committing too much of one's salary to a mortgage is always dumb, regardless of HPA. It's about risk adjusted returns. Alpha!

> neither here nor there, but the '3/4 of bankruptcies are due to health issues' statistic has been thoroughly discredited.

do you remember how many of them really are due to health care issues? where is the error coming from? bet that even if a health care bill was only a portion of the issue people will tend to overstate it as a motive. it doesn't sound as bad as "an RV, trip to Cancun and a 2nd home, all on debt".

yes, and we turned around and bought a house. and the combined monthly outlay was the same.

very much on track, notadmin. 1st the wording of the survey was very questionable - for example, gambling was considered a health issue, and if you had a death in the family the year you filed it was considered to be a health issue. and they only asked if you had medical debt above a certain threshold - i think $1k. So you could have $2k of medical debt and $50k of CC debt, but it was always the health issue that was considered to be the cause. Of course anyone in bankruptcy will have been not paying any bills for quite some time, so of course they would have unpaid medical expenses. it was a terrible survey.

not to say it isn't a problem, and if i recall, a more realistic estimate is something like 20% or so that were truly caused by a health issue.

> not to say it isn't a problem, and if i recall, a more realistic estimate is something like 20% or so that were truly caused by a health issue.

which still is horrible, the last thing a sick person and caregivers need is the financial stress that comes from your family going bankrupt. would love for this to improve.

The amount of the sale price is relevant. If you sold a place for $1 million in 2004 or you sold that same place for $1 million in 2010, why is one alternative better?

what is a place to live?

Well if your point is that if you sell in 2004 then you have to pay rent for 6 years, I'm with you.

what if your rent is half your cost to own?

How does that work? I mean, obviously you'll have the maintenance and taxes, but that should be less than rent.

what if you decrease your total monthly costs from $6000 to $2750 for a better unit in a less desirable neighborhood (not unsafe, just less trendy by 100%)?

Well then that's great. What kind of unit though has monthly maintenance and taxes of $6,000 that could be comparable to a rental that is $2,750?

a not recently renovated Chelsea condo vs. a newly renovated high-floor unit at pcv. almost the same size, and the Chelsea place had space (columns in awkward places, too few closets, too big bathroom) issues.

I said total costs. that would include mortgage.

$6000 a month to own a one bedroom? Am I missing something? Someone was "too ready"

I'm factoring in that you sold the apartment for the same price in 2004 as in 2010, so not accounting for the mortgage.

I can't factor in quality of the apartments, I'm just saying, if you sold the apartment "too early" in 2004 for $1MM or sold it "too late" in 2010 for $1MM, and somewhere in the middle around 2007 or 2008 it was much higher, then why is too late worse than too early?

Riversider math?

Please contribute something to the discussion or don't post at all.

common charges were lower pre 04/03 , so were tax rates. We need more details on how a one bedroom resulted in $6,000 of carrying costs.

in 2004 on a condo carrying costs were 60-70 cents a square foot if memory serves.

without taxes.

is that one particular condo or all condos.

fool.

That isn't the point of this discussion.

tell us the point, hfs.

Hey please contribute something to the discussion or don't post at all.

i did.

you're hfs.

huntersburg, I'm not sure what you are referring to, but I'm having trouble understanding this. Taxes and common charges could no have been that high....And if the sale date was around 2004 then the purchase date was much earlier and one bedrooms simply did not go for that much. I saw one in 1998 for 700+ square feet with two terraces on the west side for under $300k. Unfortunately I did not recognize it as a good deal at the time.

Anyone else?

i'll provide all of my numbers when RS provides his rent/buy analysis for his poorly timed purchase on RSB. deal? the purchase date was 2001, you idiot, and it was a 1300 sf two bedroom two bathroom condo. i'm pretty sure you already knew that, but you're being your usual "cutesy" self.

youtube anyone?

not accounting for the mortgage? like i didn't have monthly mortgage payments, mostly interest? tell the bank that it shouldn't consider total monthly costs when underwriting mortgages, the sales price will be recouped upon resale. hey, maybe that's what they did.

well, no wonder some people think everyone should buy. i've seen some very poor rent/buy analyses, but that one tops the list.

Well in 1999 a one bedroom rented for around $2K a month plus or minus.
One can decide to add a small premium for a terrace, but to get to $6,000 defies logic.

which would be interesting, except it was a two bedroom, and i think you're wrong for chelsea. and it was 2001. details, don't let them get in the way of a good fantasy.

ok, so was the rent vs buy analysis positive? I don't care about the numbers. I imagine it wasn't and you plunged in.

actually comparable product wasn't available. chelsea loft rentals were not readily available. but nice stock in the rental market was much more limited than now. to rent a nice 2/2 in 2000-01 was not far from what we were paying, if at all, 1999 was when rentals began to skyrocket.

i have never said that a certain premium to own is not appropriate. i just won't buy without rent/buy being very much aligned when i believe we are still in the midst of a policy and credit-induced bubble. but maybe you don't think the fed's actions have affected prices at all?

In 03/04?
At best I felt queasy. I felt the market wasn't right and saw the long lines waiting to buy Condos. I did not participate and was glad a college professor had me read Kindelberger several years earlier and that there was a Minsky bubble in the works.

A policy and credit induced bubble? No, didn't come to that conclusion until 2006/2007.
There's a difference between seeing credit standards signifcantly loosen which was noticeable a decade earlier from being ready to declare a policy induced bubble.

no...

you are an anonymous internet poster with an unfortunate record of lying.

you must be joking, RS. at least half the bubble markets had begun tanking by then.

you really couldn't deduce that extremely lax underwriting standards and low interest rates along with stagnant incomes and enormously rising housing prices indicated a bubble? i know many didn't, but i certainly did.

i thought you were 100% certain that lowering down payment requirements (%) leads to horrible results.

06/07, i meant.

and i'm sorry, credit conditions were much more rigid in the 90s than going forward. much. you're just lying if you say otherwise.

Yep, it wasn't until 2005 that the lenders ran out of ammunition. They stopped focusing on lower mortgage rates and started focusing much more on lower mortgage payments. That's when it was 100% bubble. Before that it was just over-speculation.

In 2003 nobody was yet placing bets, and Greg Lippman hadn't yet come up with CDS ON mortgages. But I guess hind sight is 20/20. or was it something else?

you're so wrong. but maybe you have a youtube or source you can misrepresent to show that.

really, 2005 was the beginning of the problem in places such as florida and california?

i got a 10% down loan in 2000/2001. my broker volunteered that for the first time ever 10% down loans with pmi for amounts over $1mm were readily available. you have no f'ng clue what you're talking about. as usual.

> That's when it was 100% bubble. Before that it was just over-speculation.

what's the difference between bubble and over-speculation?

> nd i'm sorry, credit conditions were much more rigid in the 90s than going forward. much. you're just lying if you say otherwise.

downpayments were 20% minimum back then? do you remember the DTI banks were using as benchmark?

notadmin, downpayments could be 10% down but pmi requirements were extremely strict, most people needed 20% down. dti has generally been fairly consistent, 28/33% iirc, but proof of income became not necessary with 25% down (i don't recall when, but i think around 2000ish). and then not really necessary at all anywhere. and granted interest rates were higher when we first bought, but taxes and cc's were much lower then as well, and the original rule of thumb was that a mortgage should not be more than one and a half times your income.

good on you for underspending as well. save, save, save.

You can account for the mortgage, but I was trying in my example to equalize the selling price in 2004 and 2010 for this illustration. Again, sell at the same price, but one being "early" and one being "late".

you're so wrong.

I can't be wrong. I was offering up "opinion"

look at this AR! an American guy that doesn't put his $ in his home, yet millionaire. very refreshing!

http://www.latimes.com/business/la-fi-wedbush-20101116,0,6677554.story

That is a true (but clearly exaggerated) profile of much of the "wealthy". What got them wealthy was thrift(this guy counted the nails and the paper clips). The guys and gals in the leased cars, with two homes shopping at bergdorf and showing off their i-phone gadgets are more usually the working rich. There's a huge difference between rich and wealthy and if you are interested in knowing the difference, the guy who becomes poor after losing his job was not wealthy.

Run a graph of the S&P from November 2004 to November 2010. If you sold a place too early in 2004 and invested in the stock market, that money would have done nothing net over that time. If you sold it too late now in 2010 for the same price, and never got invested in the stock, why is too early better than too late?

Many who got out did so with getting back in later(market timers). They would most likely have gone with CD's or other short to medium term fixed income investments such as structured notes, and bank preferred stocks. Those CD's that are now rolling over into 1% rates, those structured notes have often performed below expectations and bank preferred stocks got hammered in the crisis. I know of more than a few people who wish they kept their residence.

Whatever, CDs or S&P, seems that too early and too late can be equivalent.

> the guy who becomes poor after losing his job was not wealthy.

exactly, that guy is yet another wage-slave trying to convince himself and others he's not

> Whatever, CDs or S&P, seems that too early and too late can be equivalent.

it's not when renting allows you to save more $ each month.

thx huntersburg for the simplistic telling analysis

the gobblegoop about leverage applies to all--and levered or not, flat performance is flat

and if one were in a diverse,balanced portfolio of fixed inc and stox and commods, there's been some reasonable return since 04

and rtn on RE since 04 has been, on avg, nil--esp if one incluedes the high transaction cost here in NYC, in and out

so emphatically no, those who sold in 04-05 and have not rebought, have done better on the whole

having sold in jan 02 and rented, fearing a sept 11 effect, i bought back in in late 04, nearly doubled by the time i sold in 8/07--got lucky

The key is leverage and not buying too much house. Taking on too much debt or buying more Condo than one needs creates "huge carry". The story on brick wasn't apples to apples as the writer gave up square footage, a prime location, a balcony, and most likely a host of amenities like the better appliances, door man etc. Similar savings might have been achieved by purchasing a smaller non-doorman coop/condo without a terrace.

no rs, no doorman in either location, i never used the balcony as the owners in the townhouse behind us used to hang out nude, and as the article states much better renovation here (better appliances, except the refrigerator which i replaced), much better space configuration here, better a/c system here, much more convenient location here. if you're going to read my stuff, at least pay attention. but why am i not surprised that you are misrepresenting what i wrote.

who says i have/had my money in CD's or an S&P index fund?

Gosh, you must have really overpaid

actually, no i didn't. i got a very good deal, below market, and i made a fair amount upon sale. but i didn't want to stay there any longer, for a number of reasons. initially i chose PCV because the location was convenient for us, the apartment was nice, and it was cheap. i grew to like renting, which is what the article explains. you have reading comprehension issues.

it's like talking to a deaf person.

gobblegoop?

stocks in the 4 years went nowhere, if real estate is flat how can that be such a preferred route?

You threw in commodities, yes, sure, gold is up as are other commodities. The interest on bonds is in line with the difference between renting and maintenance.

If you sold in 02, bought in 04 and sold in 07, you are doing a lot of market timing and in a lesser liquid asset.

> stocks in the 4 years went nowhere, if real estate is flat how can that be such a preferred route?

cause you save money MONTHLY thanks to renting being cheaper than owning.

You sold at the same price in 04 and 10.

also, if you sold in say '04 and were 4yrs into your mortgage, over the next 6 years you would have paid down about 10% of the principal (on a 30yr amortization schedule). Perhaps initial rent was slightly lower than mtge+maintenance-deductions, but rent went up sharply in '05, '06 and '07 before coming down in '08 and '09. Certainly your maintenance went up, but you also have had numerous opportunities to re-fi, so let's say all that evens out and you had a pretty flat cost to own. And of course, you've avoided transaction costs of selling, moving, rental broker fees, etc.