In Manhattan, the list price of a two-bedroom home was $1.6 million, up 2%, and the annualized rent for the same sized home was $41,000, down 8%. Think it's time to finally stop writing checks to your landlord and buy a home instead? If you live in Manhattan, think again. Even with sales prices down from the peak, renting, not buying, in the borough is still the wise way to go, according to a... [more]
In Manhattan, the list price of a two-bedroom home was $1.6 million, up 2%, and the annualized rent for the same sized home was $41,000, down 8%.
Think it's time to finally stop writing checks to your landlord and buy a home instead?
If you live in Manhattan, think again.
Even with sales prices down from the peak, renting, not buying, in the borough is still the wise way to go, according to a study to be released today by real estate firm Trulia.
Not only did the borough top the list of U.S. markets where it's cheaper to rent than to buy, its rent vs. buy index - a measure of which is more affordable - jumped 27% in the spring compared with the winter.
"The quarter over quarter change was significant," said Heather Fernandez, vice president of marketing for Trulia.
The story was far different in other major U.S. cities. In eight out of 10, buying was more affordable than renting as rents rose, home prices fell and mortgage rates remained low.
To arrive at a price-to-rent ratio, Trulia looks at the median list price of two-bedroom homes in condos and townhouses, but excludes co-ops and single family homes.
It divides the median list price by the annualized rent of a comparable property to arrive at the index. If the number is 21 or above, it is wiser to rent.
In Manhattan - where the list price of a two-bedroom home was $1.6 million, up 2%, and the annualized rent for the same sized home was $41,000, down 8% - the index was 39.
But Gary Malin, president of real estate brokerage firm Citi Habitats, said he is seeing a different pattern emerging.
Manhattan rents are rising and landlord concessions are vanishing, according to data compiled by Citi Habitats. At the same time, sales prices have been stagnant.
As a result, if you are in a position to buy, now may be just the right time, he said. If the economy improves and sales prices climb, renters could be missing out on an opportunity.
"Lots of my rental clients are becoming sales clients," Malin said.
Read more: http://www.nydailynews.com/money/2011/04/28/2011-04-28_cheaper_to_rent_than_buy_in_manhattan.html#ixzz1KpLyViHX[less]
Response by NYCMatt
over 14 years ago
Posts: 7523
Member since: May 2009
"Think it's time to finally stop writing checks to your landlord and buy a home instead?"
You're right.
It's SO much better to be writing $42,000 in checks each year to a landlord -- where you're guaranteed to NEVER see the money ever again ... than to write those same checks to a bank towards a mortgage on a property you are slowly earning title to.
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Response by w67thstreet
over 14 years ago
Posts: 9003
Member since: Dec 2008
$1mm bubble studio bought at 2007 VS. $1mm 3bdrm on cpw at $500psf in 2012 after 5 yrs of rents, Who's got more 'equity'?
Stfu matt.
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Response by bjw2103
over 14 years ago
Posts: 6236
Member since: Jul 2007
Matt, what do you think happens to all the interest you pay on a mortgage? Does it circle back into your checking account?
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Response by racerdavenyc
over 14 years ago
Posts: 45
Member since: May 2009
Nice one bjw2103 - same question for all the money in equity - as if it's not a sunk cost of money that could have been invested elsewhere.
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Response by bjw2103
over 14 years ago
Posts: 6236
Member since: Jul 2007
Well, the down payment immediately goes into your equity obviously, but yes, especially if you're buying an investment property, there's major opportunity cost there. I expect Mattie will retort something about mortgage interest deduction of course, but I'm not expecting to convince him of anything.
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Response by marco_m
over 14 years ago
Posts: 2481
Member since: Dec 2008
at the end of the day, someone is gonna be the owner
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Response by NYCMatt
over 14 years ago
Posts: 7523
Member since: May 2009
"Matt, what do you think happens to all the interest you pay on a mortgage? Does it circle back into your checking account?"
Of course it doesn't.
But at the end of the day ... eventually ... I will OWN the apartment free and clear.
The renter will NEVER own his apartment.
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Response by Topper
over 14 years ago
Posts: 1335
Member since: May 2008
The question comes down to whether you could earn more on your home equity in a diversified portfolio of stocks, bonds, etc.?
The price-to-rent ratio in New York can only be justified if you believe that rents will increase over the long term at a very brisk pace.
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Response by aboutready
over 14 years ago
Posts: 16354
Member since: Oct 2007
and you'll forever pay monthly costs that may very well be greater than renting a nicer apartment in a different city. if you wish to commit to leaving manhattan in a body bag, that's one thing, but if you are likely to be decamping for something different the advantages are not at all apparent, especially now.
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Response by NYCMatt
over 14 years ago
Posts: 7523
Member since: May 2009
"The question comes down to whether you could earn more on your home equity in a diversified portfolio of stocks, bonds, etc.?"
No, that's not the question.
We're not talking about *investment* dollars, we're talking about *housing* dollars.
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Response by NYCMatt
over 14 years ago
Posts: 7523
Member since: May 2009
"The question comes down to whether you could earn more on your home equity in a diversified portfolio of stocks, bonds, etc.?"
No, that's not the question.
We're not talking about *investment* dollars, we're talking about *housing* dollars.
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Response by gluk108
over 14 years ago
Posts: 3
Member since: Jun 2006
I am not sure if $1.6 million and $41,000 rent are apples to apples. For $1.6 million, you can probably get a 1,300 to 1,500 sf apartment in a nice new building in a top neighborhood. $41,000 per year rent (~3,400 per month) might get you an 800 sf 1 bedroom in the same building. Add the monthly carrying costs of owning, and you are still talking about a better place.
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Response by NYCMatt
over 14 years ago
Posts: 7523
Member since: May 2009
And at the end of the day, the renter is still throwing his money away.
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Response by NYC10007
over 14 years ago
Posts: 432
Member since: Nov 2009
Has no one seriously asked where a $1.6 million 2BR apartment is renting for $3,400/month?
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Response by bjw2103
over 14 years ago
Posts: 6236
Member since: Jul 2007
"And at the end of the day, the renter is still throwing his money away."
This is such a common, yet uninformed refrain. Throwing money away how? The renter certainly gets something in return for the money. Just because you don't recognize that value doesn't mean it doesn't exist.
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Response by NYCMatt
over 14 years ago
Posts: 7523
Member since: May 2009
"This is such a common, yet uninformed refrain. Throwing money away how? The renter certainly gets something in return for the money. Just because you don't recognize that value doesn't mean it doesn't exist."
And so is the buyer.
WHILE they are paying, they are both getting use of the apartment.
The buyer, however, will eventually OWN the apartment.
The renter will own only a stack of cancelled rent checks.
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Response by Topper
over 14 years ago
Posts: 1335
Member since: May 2008
The renter will also have a nice diversified portfolio with the money he didn't spend paying off the mortgage.
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Response by alanhart
over 14 years ago
Posts: 12397
Member since: Feb 2007
The buyer, however, will eventually OWN the obligation to make major repairs to the apartment.
The renter will own only the much more valuable, more highly-appreciated profits from his wiser investments.
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Response by bjw2103
over 14 years ago
Posts: 6236
Member since: Jul 2007
"And so is the buyer.
WHILE they are paying, they are both getting use of the apartment."
How does a landlord get "use" of the apartment? Look, I'm an owner myself, but I hate the "throwing away your money" mantra about renters. It's just plain wrong. Depending on your circumstances, there are pros and cons to either situation, so there's no one-size-fits-all solution. I'm amazed at how many people here really want to convince everyone there is.
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Response by somewhereelse
over 14 years ago
Posts: 7435
Member since: Oct 2009
"But at the end of the day ... eventually ... I will OWN the apartment free and clear.
The renter will NEVER own his apartment."
This is the kind of ignorance that led so many to ruin.
Yes, you get equity with your mortgage payments. But it is entirely possible to OVERPAY for that equity. That is the point.... yes, you get that part "back". But there is a point where YOU DO NOT GET BACK ENOUGH to cover the extra you paid.
Take any apartment, and compare buy to rent. Double the buy price. Double it again. Double it some more. At some point, the price is not worth it relative to the rent.
We're just talking about finding that point.
If you think there is NEVER a breakeven point (which you have basically inferred), then you just have horrible, horrible finance skills.
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Response by NYCMatt
over 14 years ago
Posts: 7523
Member since: May 2009
"The renter will also have a nice diversified portfolio with the money he didn't spend paying off the mortgage."
No he won't.
Human nature being what it is, he will have used every available penny for housing, whether in the form of rent or mortgage/maintenance.
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Response by NYCMatt
over 14 years ago
Posts: 7523
Member since: May 2009
"How does a landlord get "use" of the apartment?"
Um, we're talking about renters here.
Please keep up.
TIA.
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Response by Miette
over 14 years ago
Posts: 316
Member since: Jan 2009
No doubt the Manhattan price to rent ratio isn't exactly great, but the Trulia data only includes 2 BRs in condos and townhouses. That pushes up the average sales price quite a bit. E.g., if I search all 2 BR condos for sale in Manhattan on SE, I get an average price of $1,550,000 (close to Trulia's $16k number). If I do the same search for coops I get an average price of $979,000. The "any" median price is $1,250,000.
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Response by Miette
over 14 years ago
Posts: 316
Member since: Jan 2009
(Sorry -- meant Trulia's $1,600k number.)
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Response by somewhereelse
over 14 years ago
Posts: 7435
Member since: Oct 2009
> Human nature being what it is, he will have used every available penny for housing, whether in the
> form of rent or mortgage/maintenance.
"he would have spent it anyway" is getting pretty childish.
> Please keep up.
Same to you... you s haven't addressed the possibility of overpaying for equity.
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Response by bjw2103
over 14 years ago
Posts: 6236
Member since: Jul 2007
"Um, we're talking about renters here."
Talking about buyers as well. So are you basically conceding your point that the renter gets "nothing"? Because you really should.
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Response by malthus
over 14 years ago
Posts: 1333
Member since: Feb 2009
"Human nature being what it is, he will have used every available penny for housing, whether in the form of rent or mortgage/maintenance."
Some portion of Matt's dopey rantings now make sense to me. In a world where there is no opportunity to use money for anything but housing, the concept of opportunity cost does not exist.
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Response by JacksonHole
over 14 years ago
Posts: 113
Member since: Apr 2011
i often wonder why so many anti-own folks are even on this board? Is it that they have to constantly remind themselves not to buy and put down others who will buy....both arguments above are correct......in the end...will real estate appreciate? will the stock market tank? who knows...its all a risk
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Response by somewhereelse
over 14 years ago
Posts: 7435
Member since: Oct 2009
Ha, true.... I think you nailed it.
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Response by marco_m
over 14 years ago
Posts: 2481
Member since: Dec 2008
buying RE doesnt prevent one from investing elsewhere. Everyones situations are so different that I really dont think a blanket buy or dont buy formula can be applied.
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Response by somewhereelse
over 14 years ago
Posts: 7435
Member since: Oct 2009
Agreed, never a blanket. The formular is just to assess the cost of one relative the other. You might want to spend a little more on one choice or the other... just maybe not a tremendous amount more.
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Response by huntersburg
over 14 years ago
Posts: 11329
Member since: Nov 2010
w67thstreet, you hadn't posted in a while, and we figured that you got stuck in your building's slow moving service elevator after the doorman in your building said that your type (dirty hairy apes) weren't allowed in the resident's elevator.
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Response by 300_mercer
over 14 years ago
Posts: 10570
Member since: Feb 2007
People on this board will keep on doing the buy vs rent comps without adjusting for the significantly better quality of apartments for sale and potential for the rents go up over time - and they have - the 2b/1.5bath 1100 sq ft high floor apartment I rented in 2003 for $3850 rents for $5200 now at 300 mercer and it is not renovated. So much for $3400 for 2 bed room.
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"Think it's time to finally stop writing checks to your landlord and buy a home instead?"
You're right.
It's SO much better to be writing $42,000 in checks each year to a landlord -- where you're guaranteed to NEVER see the money ever again ... than to write those same checks to a bank towards a mortgage on a property you are slowly earning title to.
$1mm bubble studio bought at 2007 VS. $1mm 3bdrm on cpw at $500psf in 2012 after 5 yrs of rents, Who's got more 'equity'?
Stfu matt.
Matt, what do you think happens to all the interest you pay on a mortgage? Does it circle back into your checking account?
Nice one bjw2103 - same question for all the money in equity - as if it's not a sunk cost of money that could have been invested elsewhere.
Well, the down payment immediately goes into your equity obviously, but yes, especially if you're buying an investment property, there's major opportunity cost there. I expect Mattie will retort something about mortgage interest deduction of course, but I'm not expecting to convince him of anything.
at the end of the day, someone is gonna be the owner
"Matt, what do you think happens to all the interest you pay on a mortgage? Does it circle back into your checking account?"
Of course it doesn't.
But at the end of the day ... eventually ... I will OWN the apartment free and clear.
The renter will NEVER own his apartment.
The question comes down to whether you could earn more on your home equity in a diversified portfolio of stocks, bonds, etc.?
The price-to-rent ratio in New York can only be justified if you believe that rents will increase over the long term at a very brisk pace.
and you'll forever pay monthly costs that may very well be greater than renting a nicer apartment in a different city. if you wish to commit to leaving manhattan in a body bag, that's one thing, but if you are likely to be decamping for something different the advantages are not at all apparent, especially now.
"The question comes down to whether you could earn more on your home equity in a diversified portfolio of stocks, bonds, etc.?"
No, that's not the question.
We're not talking about *investment* dollars, we're talking about *housing* dollars.
"The question comes down to whether you could earn more on your home equity in a diversified portfolio of stocks, bonds, etc.?"
No, that's not the question.
We're not talking about *investment* dollars, we're talking about *housing* dollars.
I am not sure if $1.6 million and $41,000 rent are apples to apples. For $1.6 million, you can probably get a 1,300 to 1,500 sf apartment in a nice new building in a top neighborhood. $41,000 per year rent (~3,400 per month) might get you an 800 sf 1 bedroom in the same building. Add the monthly carrying costs of owning, and you are still talking about a better place.
And at the end of the day, the renter is still throwing his money away.
Has no one seriously asked where a $1.6 million 2BR apartment is renting for $3,400/month?
"And at the end of the day, the renter is still throwing his money away."
This is such a common, yet uninformed refrain. Throwing money away how? The renter certainly gets something in return for the money. Just because you don't recognize that value doesn't mean it doesn't exist.
"This is such a common, yet uninformed refrain. Throwing money away how? The renter certainly gets something in return for the money. Just because you don't recognize that value doesn't mean it doesn't exist."
And so is the buyer.
WHILE they are paying, they are both getting use of the apartment.
The buyer, however, will eventually OWN the apartment.
The renter will own only a stack of cancelled rent checks.
The renter will also have a nice diversified portfolio with the money he didn't spend paying off the mortgage.
The buyer, however, will eventually OWN the obligation to make major repairs to the apartment.
The renter will own only the much more valuable, more highly-appreciated profits from his wiser investments.
"And so is the buyer.
WHILE they are paying, they are both getting use of the apartment."
How does a landlord get "use" of the apartment? Look, I'm an owner myself, but I hate the "throwing away your money" mantra about renters. It's just plain wrong. Depending on your circumstances, there are pros and cons to either situation, so there's no one-size-fits-all solution. I'm amazed at how many people here really want to convince everyone there is.
"But at the end of the day ... eventually ... I will OWN the apartment free and clear.
The renter will NEVER own his apartment."
This is the kind of ignorance that led so many to ruin.
Yes, you get equity with your mortgage payments. But it is entirely possible to OVERPAY for that equity. That is the point.... yes, you get that part "back". But there is a point where YOU DO NOT GET BACK ENOUGH to cover the extra you paid.
Take any apartment, and compare buy to rent. Double the buy price. Double it again. Double it some more. At some point, the price is not worth it relative to the rent.
We're just talking about finding that point.
If you think there is NEVER a breakeven point (which you have basically inferred), then you just have horrible, horrible finance skills.
"The renter will also have a nice diversified portfolio with the money he didn't spend paying off the mortgage."
No he won't.
Human nature being what it is, he will have used every available penny for housing, whether in the form of rent or mortgage/maintenance.
"How does a landlord get "use" of the apartment?"
Um, we're talking about renters here.
Please keep up.
TIA.
No doubt the Manhattan price to rent ratio isn't exactly great, but the Trulia data only includes 2 BRs in condos and townhouses. That pushes up the average sales price quite a bit. E.g., if I search all 2 BR condos for sale in Manhattan on SE, I get an average price of $1,550,000 (close to Trulia's $16k number). If I do the same search for coops I get an average price of $979,000. The "any" median price is $1,250,000.
(Sorry -- meant Trulia's $1,600k number.)
> Human nature being what it is, he will have used every available penny for housing, whether in the
> form of rent or mortgage/maintenance.
"he would have spent it anyway" is getting pretty childish.
> Please keep up.
Same to you... you s haven't addressed the possibility of overpaying for equity.
"Um, we're talking about renters here."
Talking about buyers as well. So are you basically conceding your point that the renter gets "nothing"? Because you really should.
"Human nature being what it is, he will have used every available penny for housing, whether in the form of rent or mortgage/maintenance."
Some portion of Matt's dopey rantings now make sense to me. In a world where there is no opportunity to use money for anything but housing, the concept of opportunity cost does not exist.
i often wonder why so many anti-own folks are even on this board? Is it that they have to constantly remind themselves not to buy and put down others who will buy....both arguments above are correct......in the end...will real estate appreciate? will the stock market tank? who knows...its all a risk
Ha, true.... I think you nailed it.
buying RE doesnt prevent one from investing elsewhere. Everyones situations are so different that I really dont think a blanket buy or dont buy formula can be applied.
Agreed, never a blanket. The formular is just to assess the cost of one relative the other. You might want to spend a little more on one choice or the other... just maybe not a tremendous amount more.
w67thstreet, you hadn't posted in a while, and we figured that you got stuck in your building's slow moving service elevator after the doorman in your building said that your type (dirty hairy apes) weren't allowed in the resident's elevator.
People on this board will keep on doing the buy vs rent comps without adjusting for the significantly better quality of apartments for sale and potential for the rents go up over time - and they have - the 2b/1.5bath 1100 sq ft high floor apartment I rented in 2003 for $3850 rents for $5200 now at 300 mercer and it is not renovated. So much for $3400 for 2 bed room.