Why are you on here daily, posting articles and wishing for the housing market to decline? Clearly, it is because you are hoping for the right opportunity (in your mind) to step in and purchase a home. My question is why? Why do you care? If the value of home ownership v. renting is strictly a matter of a mathematical formula or a 23x rental analysis (or whatever), you shouldn't care about the... [more]
Why are you on here daily, posting articles and wishing for the housing market to decline? Clearly, it is because you are hoping for the right opportunity (in your mind) to step in and purchase a home. My question is why? Why do you care? If the value of home ownership v. renting is strictly a matter of a mathematical formula or a 23x rental analysis (or whatever), you shouldn't care about the market dropping. Simply rent, sit back and take advantage of the situation.
Take the reverse situation. If you owned an apartment and rents were high, you clearly wouldn't be on a message board posting articles about how rents are going to decline and hoping that the rental market declines so that you can get in and rent, would you? Perhaps the reason for that is that there is a huge value and sense of pride with home ownership that is not accounted for in your rent/buy analysis. People prefer to own - that's why this board pretty much exists. Home ownership gives a sense of stability, pride, commitment to your community, and freedom that renting doesn't. It gives you something that you can enjoy for your entire life and pass on to you children. There are studies which actually show that children whose parents own v. rent actually have a higher IQ and are better adjusted. Using a strict formula which only accounts for the financial aspects of ownership v. renting entirely ignores these social benefits.
You constantly ask for someone to explain why the market can sustain prices of 23x rental - there's your reason. The value of home ownership exceeds the mere financial considerations you consistently espouse. Most people prefer to have a stable home of their own than rent a place that they can be evicted from upon lease termination. They'll pay a premium for it. Add in the fact that there are far less places to own than rent in Manhattan, and the premium to obtain those social benefits increases.
I'm not saying that the market won't decline - it may. I'm just saying that if it declines it's not solely because of some rent v. buy calculation or p/e ratio. There are other factors propping up this market that may not be so easily undermined. Just my .02.
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Response by stevejhx
over 17 years ago
Posts: 12656
Member since: Feb 2008
"you can deduct at least $4,000 a month in mortgage interest on your $800,000 mortgage."
It's the PIMI that matters, lowery. A person who can only afford to rent $4,500 cannot get an $800,000 mortgage.
The equation is Rent = PIMI. PIMI is what you can get financing for. The "tax benefit," while real, is not available to the person who can't afford the 100% markup to buy.
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Response by lowery
over 17 years ago
Posts: 1415
Member since: Mar 2008
Steve, I'm assuming you can get that mortgage. If you really are priced out of that price range because of your income, you shouldn't be paying $4,500 in rent. Don't pay the rent at the maximum of what you can afford. That's the same thing as buying too much house for one's income.
If you want to see really awful comps in a neighborhood screaming for a correction, look at the Charleston, 225 E. 34th Street. Last I checked they had released one bedrooms (1.5 baths) for $880,000. A one-bedroom unit was on the market for rent this winter/spring for $3,500/month.
The reason I look at this rent-to-buy ratio is that if it is too far out of balance people find themselves in a situation where if they can't sell when they move or get laid off, they have to rent out for a loss so huge that they can't possibly come out whole. As I've said, I suspect investors have been buying condos with large downpayments, or all cash, because it's the only way they could be renting them out at these rates.
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Response by newbuyer99
over 17 years ago
Posts: 1231
Member since: Jul 2008
Ignoring all the personal attacks and coming back to the substantive topic - i.e. bulls vs. bears. I've been reading these threads for almost a year. Fall 2007 the argument was - can this incredible price appreciation continue, or will it flatten out. Spring 2008 the argument was - will prices drop or stay steady/grow modestly. Now the argument is - will prices drop 10% or 50% from peak. I think that trend in and of itself is interesting.
For the record, I am a bear who thinks all the fundamentals point to a substantial drop in Manhattan RE prices. However, I freely admit that a lot of factors could significantly affect the actual outcome one way or the other. Therefore, I don't claim to be able to predict what's actually going to happen.
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Response by dco
over 17 years ago
Posts: 1319
Member since: Mar 2008
Declines between 30-40% from 2006 levels. The worst is still ahead.
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Response by joepa
over 17 years ago
Posts: 278
Member since: Mar 2008
"Now the argument is - will prices drop 10% or 50% from peak. I think that trend in and of itself is interesting."
I think that trend may be due in large part to the fact that after the Fall of 2007 and ramping up in the Spring/Summer of 2008, most of the chatter on this board has increasingly come from Steve and his disciples. I don't think it's necessarily a reflection of what's actually going on out there. A trend of what inquriing minds/bumble-heads on this board blog about does not necessarily equate to a trend in the actual market place.
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Response by EddieWilson
over 17 years ago
Posts: 1112
Member since: Feb 2008
> most of the chatter on this board has increasingly come from Steve and his disciples
Don't agree with that at all... even the former bulls are included in the last survey, with all of even them predicting at least 10% or 15% decline....
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Response by haterhater
over 17 years ago
Posts: 16
Member since: Aug 2008
finally, a thread that is interesting!
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Response by EddieWilson
over 17 years ago
Posts: 1112
Member since: Feb 2008
haterhater, you should check out the survey on total decline thread...
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"you can deduct at least $4,000 a month in mortgage interest on your $800,000 mortgage."
It's the PIMI that matters, lowery. A person who can only afford to rent $4,500 cannot get an $800,000 mortgage.
The equation is Rent = PIMI. PIMI is what you can get financing for. The "tax benefit," while real, is not available to the person who can't afford the 100% markup to buy.
Steve, I'm assuming you can get that mortgage. If you really are priced out of that price range because of your income, you shouldn't be paying $4,500 in rent. Don't pay the rent at the maximum of what you can afford. That's the same thing as buying too much house for one's income.
If you want to see really awful comps in a neighborhood screaming for a correction, look at the Charleston, 225 E. 34th Street. Last I checked they had released one bedrooms (1.5 baths) for $880,000. A one-bedroom unit was on the market for rent this winter/spring for $3,500/month.
The reason I look at this rent-to-buy ratio is that if it is too far out of balance people find themselves in a situation where if they can't sell when they move or get laid off, they have to rent out for a loss so huge that they can't possibly come out whole. As I've said, I suspect investors have been buying condos with large downpayments, or all cash, because it's the only way they could be renting them out at these rates.
Ignoring all the personal attacks and coming back to the substantive topic - i.e. bulls vs. bears. I've been reading these threads for almost a year. Fall 2007 the argument was - can this incredible price appreciation continue, or will it flatten out. Spring 2008 the argument was - will prices drop or stay steady/grow modestly. Now the argument is - will prices drop 10% or 50% from peak. I think that trend in and of itself is interesting.
For the record, I am a bear who thinks all the fundamentals point to a substantial drop in Manhattan RE prices. However, I freely admit that a lot of factors could significantly affect the actual outcome one way or the other. Therefore, I don't claim to be able to predict what's actually going to happen.
Declines between 30-40% from 2006 levels. The worst is still ahead.
"Now the argument is - will prices drop 10% or 50% from peak. I think that trend in and of itself is interesting."
I think that trend may be due in large part to the fact that after the Fall of 2007 and ramping up in the Spring/Summer of 2008, most of the chatter on this board has increasingly come from Steve and his disciples. I don't think it's necessarily a reflection of what's actually going on out there. A trend of what inquriing minds/bumble-heads on this board blog about does not necessarily equate to a trend in the actual market place.
> most of the chatter on this board has increasingly come from Steve and his disciples
Don't agree with that at all... even the former bulls are included in the last survey, with all of even them predicting at least 10% or 15% decline....
finally, a thread that is interesting!
haterhater, you should check out the survey on total decline thread...