Rents are going up

Not my experience at all. I rented a year ago and locked in for a two year rate (higher base of +$200 per month on a base of $6600 (in lieu of $6400)for a two bedroom) so that i would avoid an uncontrolled uptick. Mistake -- rents are flat to down. It depends where you are renting.

JuiceMan, already tried this method with stevejhx - he'll tell you the sample size is too small, which it admittedly is. Nonetheless, I did that exercise once ~late June, and again about a week ago. Same results. These are pretty high-end apartments, but I think it's safe to say that his $4500 rental is a pretty good deal, and below the average rate. If you look at surrounding neighborhoods on nybits, many other 2BRs are cheaper than their Chelsea listings, but I think the most accurate gauge is from their Midtown West listings, where the median is ~$5145. Just anecdotally, I think rents are holding flat, or rising minimally. I don't believe we'll see drastic rent decreases at all, but that's just my .02.

At $5100 per month that is over 70% of a person who earns $150K per years monthly take home. Yeah paying someone else over 70% of your take home (no 401K subtracted if so it woul dbe higher %) while you try to time the RE market is such a smart and sound financial position.

I totally agree that it depends on where you're renting. There are at least three other factors.

1) My experience has been that rents are somewhat seasonal, going up in the summer months when there is more people moving into the city, and going down in the winter.

2) My experience has also been that the rental market is much less efficient than one might imagine (because of huge information inefficiencies), even taking the rent controlled and rent stabilized places out of the equation. Some apartments rent at a lot more than they're worth because the renter didn't know any better, was desperate, in a rush, etc. Other apartments rent for a lot less because the owner may care less about getting every last dollar, and more about stability, good tenants, etc. Or may similarly be uninformed.

3) It's tough to tell the true state from listings. Asking prices may be set in stone, or may be totally negotiable. There may be a month free thrown in if you ask. You may have to pay the brokers fee, or the owner will pay it, or there may be none at all.

So unfortunately, the data is hazy at best. You can still spot long-term trends, but much more difficult to isolate short-term shifts, other than maybe on specific apartments.

petrfitz - what's your point? What do you suggest that person making $150K/year do? Buy a $1MM+ apartment in Manhattan? Um, how?

yes I do. How? Save money for a down payment. Buy the apartment. It is that simple.

And that is why the US economy is in bad shape right now. What do you do when you want to live beyond your means? - borrow more money. Fantastic advice. Would you lend that buyer the $800k?

petrfitz, you're forgetting that while you're saving that down payment, you have to live somewhere. It's either rent or live on the street in my experience, and with most NYC rents, it's pretty tough for a lot of folks to save money. Your take is way too simplistic.

Check out the 26-page July, 2008 Manhattan Rental Market Report provided as a pdf at:

http://www.tregny.com/manhattan-apt-rental-report.jsp

An excellent report covering different types of properties and neighborhoods.

Bottom line: On balance rental prices have been flat to lower over the past 12 months.

Enjoy.

Petrfitz - you're either really bad at math, or pretending you are.

rents are quite expensive right now. If they stay that way, certainly the case for buying would be made to appear more compelling.

As a buyer-side sales agent, I don't pretend to be an expert in the Manhattan rental market. But looking in from the outside, I'm seeing MUCH more availability, slightly lower rents, more cases of a free month, and more OP's (owner pays some / all broker fee).

I guess rents are only going up in Chelsea, because I still can't find a $4500/mo two bedroom rental on nybits.com. In fact, if you search streeteasy (which would be an appropriate sample size perhaps?), there are only 3 two bed listings under $5000 and 1000 sqft or higher. There are 31 between $5000 and $7000. Either that $4500 isn't market rate or rents are going up in Chelsea, I can't figure out which.

topper, thanks for the link

newbuyer please explain your comment. mycalcs are based on paying 40% of your income to taxes, no 401K withheld. Please explain.

BJW - "its pretty tough for people to save money" - wah wah wah wah - oh its hard to be responsible and save for my future... grow up get a pair take charge of your life no one is going to do it for you.

JuiceMan,

Check out the New York Times website. I found 74 two-bedroom apartments for rent for between $3700 and $4500 in area code 10011.

Pete, you're beginning to sound like the love child of Robert Kiyosaki and Joel Osteen.

"BJW - "its pretty tough for people to save money" - wah wah wah wah - oh its hard to be responsible and save for my future... grow up get a pair take charge of your life no one is going to do it for you."

Weren't you the one crying about all the poor, uninsured Americans?

Thanks Topper. Would like to search by sqft and NYTimes doesn't allow. A 600 sqft 2 bed doesn't help much.

http://www.nybits.com/apartmentlistings/21_chelsea_archived_rentals.html

http://www.nybits.com/apartmentlistings/casa_155_west_21_archived_rentals.html

FWIW, we just spent a couple weeks looking for a classic 6 on the UWS and saw nothing decent under $7000. A few great places were available for $7500+, but not much to choose from.

spending $7000 per month on rent is completely idiotic.

What about spending $14,000 per month to own the same unit? Is that less idiotic?

east cider - i thought that you were smarter than to buy into the whole "its cheaper to rent than own" idiocy.

Thanks, I'm flattered. But you're painting me with the wrong brush...I'm part of the "it's cheaper to wait before buying" idiocy.

I just sublet out my 2-br 800 sf coop for $3400. I didn't even expect it to fetch that much. It seems that anything below $4000 is considered a deal. Amazing. Rents going DOWN? Where? For what?

ah east cider - so you are an admitted market timer!

east cider - do you also day trade? or sell amway?

Petrfitz,

What is your rental / credit criteria for your tenants? I have always heard that income must be at least 40 X monthly rent. At 150K per year they can afford $3,750 per month. Regardless of what market rents are $3,750 is the top that they can qualify for.

Pez - keep in mind that a landlord only looks at income on initial lease, follow on lease renewals you dont look and you take a risk that your tenants who have been paying on time still have a good income and can afford to pay a higher rent.

Honestly we dont do a strict income vs rent analysis. We look at income of all renters on lease - most are multiple, job stability, etc. We ask for co-signers if there are questions or younger, and/or ask for more months downpayment.

Since my properties are downtown we tend to have more self employed, independent tenants who are not employed with a corporation so income can be harder to judge. Often we go with people we feel good about and want to live in our buildings. Sometimes that screws us but often in most cases it doesnt.

I currently do not own an apartment in the city, but I rent one. I am considering buying, but don't feel particularly rushed to do so given the deteriorating fundamentals and the removal of the credit tailwind in the market. Does that make me a "market timer?" In your view, probably yes. But you may be surprised to learn that your opinion has very impact on my real estate decisions. In fact, your growing frustration with the weakening market has been a useful confirming indicator, for which I am grateful.

typo: "has a very important impact"

As a renter in a rental building, I don't expect rents to go down. However, I do expect the quality of tenants to go down. To Petrfitz's point above, I think landlords will rent to people who are greater risks but are willing to pay the rent. Even at a higher percentage of total apartment earnings than the 40 X rent as well as with co-signers.

For me that means more shares in my building (3 or 4 people in the 2 bedrooms) and more noise and less respect for the building potentially down the road.

Also this will apply to condo owners / landlords who just want to get the rent. However as a renter, I can move out at any time.

my guesses - 1) a lot of people with decent deals are staying put, so it's the overpriced stuff that's coming onto the market 2) landlords that are taking flat or lower rent are doing so as quietly as possible - - they don't even want word to get out within the building, let alone to the public 3) free month's rent is back, after having been absent from the scene since 2004

petrfitz, why would you make a statement that renting a place for more than $7K is "idiotic." If you have a large family and can afford to do it, why should you not do it? Hate to break it to you, but if you need 3 bedrooms and need to live in Manhattan, that's your option.

wasn't the consensus on this board that rents were suppose to drop quite dramatically in 2008?

sure was! on the one hand, nominal rents seem flat to up ... on the other hand, free month's rent is back for some buildings

Petrfitz - explaining my comment about your math abilities. There are many proxies/rules/calculation to figure out what mortgage one qualifies for based on income. None of them get the guy making $150K remotely close to qualifying for a mortgage to buy the $1MM apartment, as you recommend.

I guess he could hypothetically save $20K/year for 30 years to put $600K down, but I presume that's not what you meant.

I have no idea who or what you're referring to specifically, but someone making $150K / year shouldn't be spending anywhere near $5000/month on housing, whether renting or owning. When I made that much, I had roommates, spent between $1000 and $1300/month at various times, and had a great time.

starfish - i too have a family and live in a 4 bedroom that i own so i dont know what your point is.

East Cider - i have no frustration with the market. All the properties I own are in the LES and several are getting doubled buildable FAR due to the current rezoning. My valuation is going through the roof. the only frustration I have in RE right now is finding 2 brownstones to buy. There are numerous great properties in the market and I am torn between buying in Cobble Hill or directly on Prospect Park.

Newbuyer - I am sorry that you are finance challenged. A person making $150K per year should be able to afford a property in NYC. I think that you need to better understand what to look at and where. I am not math challenged as I currently own 4 buildings in Manhattan, 1 in Nevada, and another at the Jersey shore.

"spending $7000 per month on rent is completely idiotic."

Not nearly as idiotic as that statement.

Everybody spends on housing, whether through rent, mortgage/maintenance payments, and/or opportunity cost of the cash used to buy the apartment or house. How much you spend depends on 2 things - your needs/wants (i.e. family as starfish points out, or a desire for a specific neighborhood, etc.) and your means, i.e. income. Spending $7000K / month on housing is idiotic for a single guy making $200K, but makes perfect sense for a 5-person family making $800K.

Now the form in which you spend it (i.e. rent or own) is a completely separate question. It depends on prices for what you want, availabilities, your outlook on the market, your time horizon (i.e. when will I outgrow this place, or when might I move from this city), interest rates, etc., as well as intangibles (such as psychological benefit to owning your home). In some markets, in some times, in some individual circumstances, it makes sense to rent. In others, it makes sense to buy.

Making blanket statements such as "renting is always stupid" or "renters are throwing away their money" is just is idiotic as the opposite blanket statements, such as "renting is always cheaper than buying".

Newbuyer says "Spending $7000K / month on housing is idiotic for a single guy making $200K, but makes perfect sense for a 5-person family making $800K" - no it doesnt - just because you have money it doesnt mean that it makes sense to throw money away in rent.

I didnt say "renting is always stupid" - I said spending $7K month on rent is idiotic. There's a difference.

Maybe you should actually try buying a place before you try giving advice to people about buying.

petrfitz - I was asking a question. Why is somebody who pays $7K for an apartment per se an idiot?

I am not giving anyone advice - you are. You just proved my point with your typical blanket statement. How is rent any more "throwing money away" than interest property plus maintenance?

Having money to invest doesn't mean you always should (especially at the top of a bubble). Stock market returns are solid over time. But did it make sense to invest in 1999? If you did, congratulations, you're basically flat 9 years later.

I just talked to 2 different middle/high end rental companies... their prices are back down to near 2005 levels (after major jumps in 2007 or so). Doorman/gym buildings, most not too fancy. Most of the buildings are Upper East / Midtown (West and East). Lots of it is one bedroom inventory, of course, but its some of everything.

Also, take a look at 20 pine today. Want to see MASSIVE declines in asking rents, check out their streeteasy listings...

interest is deductible and maintenance can be as well. also your payments go towards something that builds a credit history (rents dont show up) and a very good potential of building equity.

There are numerous reasons why you should own instead of renting. Renting is something you do when you cant afford to buy.

No finance advisor will ever tell you to rent and time the market.

Petrfitz: Argh - not only are you math/logic challenged (regardless of what you own, and where), but you're also obstinate.

"petrfitz - what's your point? What do you suggest that person making $150K/year do? Buy a $1MM+ apartment in Manhattan? Um, how?"

"yes I do. How? Save money for a down payment. Buy the apartment. It is that simple."

Now you're saying he should be able to afford "a property" in NYC. We weren't talking about "a property", we were talking about a $1MM apartment, which is approximately what the apartment he rents for $5100 would sell for, and which YOU suggested he buy".

In any case, I am done arguing with you, since you refuse to acknowledge when you're wrong, and this is just not a good use of my time.

Absent some obvious circumstances, such as short-term time horizon, some corporate subsidy, some personal family situation, etc., I don't see the logic in paying $7000/month to rent either. If you have the money for a down payment, you can own a nice-size place for the same monthly payment.

newbuyer i am sorry that you dont have anyone in your life giving you good financial advice. Renting for $5k is moronic. if you cant see that then you deserve to pay someone else 70% of your monthly take home pay. I am sure that your landlord thinks that you are a genius for market timing.

> No finance advisor will ever tell you to rent and time the market.

No financial advisor with a brain will tell you to spend more money buying (leveraged) than renting an asset in decline..

but Eddie what financial advisor will tell you to rent for 8 years while waiting to time the market and waste over $400K in rent money? I guess yours.

"Renting for $5k is moronic." First it was $7,000 now $5,000. What is the threshold? You clearly aren't factoring location, size/utility, incomes or anything else of relevance into your decision so the answer would be simple.

"No finance advisor will ever tell you to rent and time the market." Didn't you call Suze Orman a hack and are now telling people to listen to a financial adviser??

"Now the form in which you spend it (i.e. rent or own) is a completely separate question. It depends on prices for what you want, availabilities, your outlook on the market, your time horizon (i.e. when will I outgrow this place, or when might I move from this city), interest rates, etc., as well as intangibles (such as psychological benefit to owning your home). In some markets, in some times, in some individual circumstances, it makes sense to rent. In others, it makes sense to buy.

Making blanket statements such as "renting is always stupid" or "renters are throwing away their money" is just is idiotic as the opposite blanket statements, such as "renting is always cheaper than buying"."

A bit lost in all this back-and-forth is newbuyer99's pretty spot-on summation of how complex and unique each housing decision really is. A lot of people on the internets throwing about blanket statements saying buying is "stupid" or renting is. It's crazy that common sense is brushed aside so often, no?

perfitz: how long has your over-priced coop been sitting on the market?

eric - i currently have no properties on the market, and own no co-ops. just buildings.

TheFed - Suze Orman is a hack so are most financial advisors.

I am done trying to hammer it into your heads that renting is not an investment or a sound financial strategy. Please keep renting i need to keep my buildings filled with idiots paying me over 50% of their take home pay each month.

Congrats you guys are winners. Keep market timing. Keep thinking that renting will make you rich.

Or you could listen to th ewisdom of BJW a health care worker whose smart investment was a condo in Williamsburg that is glutted with a huge unsold inventory of condos.

Pete, here's a question for you to answer. Over the course of a thirty year mortgage, a borrower who puts 20% down will spend roughly 110% of the home's purchase price on interest payments. On a tax affected basis, call it 65% of the purchase price. So to buy a $1.5 million apartment with 20% down, you will not only pay the $1.5 million for the apartment itself, you will pay an additional $1.6 million ($980,000 adjusted for the tax benefit) to the bank. Is this money wasted? What about the taxes, maintenance, and upkeep spent over the 30 years? Is that also wasted?

petrfitz: "filled with idiots paying me over 50% of their take home pay each month."

stevejhx: If you accept a renter who pays over 50% of their take-home pay each month, you have no concept of risk management and are likely to be burned. Moreover since you "tend to have more self employed, independent tenants who are not employed with a corporation so income can be harder to judge."

I daresay the renters are not the idiots. They may be desperate, but they sure do know that if they don't pay their rent it can take you a year to evict them, and you might even have to pay them to leave.

no - when you buy east cider you will understand the finance of owning - tax write offs, credits, etc. You will also understand things like cap gains exemptions, credit history, etc.

East Cider - do you also day trade while trying to time the RE market?

I am done trying to help you understand that renting is not an investment. Please see a remedial financial advisor and try starting with setting up a basic savings account then take it from there.

petrfitz, I never asked anyone to "listen to my wisdom." And please keep your opinions about my industry and home to yourself. I happen to like them, but they are pretty irrelevant to this discussion.

"TheFed - Suze Orman is a hack so are most financial advisors." Yet you directly made statements that a financial advisor would support your position. I guess that is OK since you admitted that they are hacks and would support your viewpoint. Or were you trying to prove credibility.

"I am done trying to hammer it into your heads that renting is not an investment or a sound financial strategy. Please keep renting i need to keep my buildings filled with idiots paying me over 50% of their take home pay each month." As a building owner I am sure you understand that owner-occupied RE isn't an investment in contrast to your (supposed) income producing properties which are an investment.

east_cider - sure you would have payed the interest, but after 30 years the apartment would be worth much more than $1.5 million, and the comparable rent would rise to a much higher level.

"I daresay the renters are not the idiots. They may be desperate, but they sure do know that if they don't pay their rent it can take you a year to evict them, and you might even have to pay them to leave."

Well put Steve. Though I tend to give people the benefit of the doubt, I tend to question that petrfitz has rented out so many apartments. Anyone who's been a landlord eventually runs into pretty tough issues with some tenants, which can take a lot of money and time to resolve. Not just evictions, but disputes over major repairs, breaking leases, and (in the case of one tenant my father had), mental health issues. Owning a rental unit is not the same thing as having money dumped into your savings account monthly. It's work.

Pete, you're correct as always. I took up day trading when I decided that making video games and "virtual worlds" using cheap Canadian programmers was childish and added nothing to society or my pocketbook.

Way to answer my original question. Does your bank not charge you interest? Do you not pay maintenance, upkeep and property tax?

> but Eddie what financial advisor will tell you to rent for 8 years while waiting to time the market
> and waste over $400K in rent money? I guess yours.

Any financial advisor whose goal is to get you more money rather than less... maybe some day you'll understand the copy.

Its also funny how you double my rent with each post. If only that worked as a landlord. And who said I was timing the market for 8 years again?

Pete, if you have to lie to make a point, its really not likely to make a good point...

Let us know when you move out of Nevada, maybe then you'll learn something about RE in this town...

> Way to answer my original question. Does your bank not charge you interest? Do you not pay
> maintenance, upkeep and property tax?

In the country of Nevada, they don't use money. They use corn.

LICComment... I do account for appreciation in the price of the home as well as increases in rent when I construct my models. I also build in increases in maintenance costs and modest "leakage" due to repairs and upkeep costs borne by the owner. It all feeds into an IRR model that is conceptually similar to the NYTimes rent vs. buy tool. And I keep getting the same answer: this is a lousy time to enter the market as a buyer.

It's easy to speak in generalities like "rent would rise to a much higher level," but modeling the numbers out tends to give a better answer.

Not to mention any increase in rent would likely be met and overshadowed by a decline in values on the other side...

Eddie thinks real estate values will decline over 30 years. Genius . . .

LIC/Pete, if you'd bought $1m of gold 8 years ago instead of buying a $1m apartment you'd be up $6m. So in essense buying an apartment has cost a buyer at least several $million compared to gold.

Obviously this is silly b/c you had no idea gold would go up. But that's exactly the argument for buying an apartment: "You will be worse off not buying if you assume apprecication comparable to what we've witnessed over recent history." That's a miserable way to conduct analysis when your net worth is at stake.

> Eddie thinks real estate values will decline over 30 years. Genius . . .

LICC apparently can't read. Extra genius.

> That's a miserable way to conduct analysis when your net worth is at stake.

BINGO.

I remember all the investor "geniuses" in 2000, too... who had 25% of their money left in 2002. The folks who stop the game halfway through to clap for themselves usally have trouble winning the actual game.

Eddie Wilson quote: "Not to mention any increase in rent would likely be met and overshadowed by a decline in values on the other side..."

Eddie has this tendency to write something and then immediately deny that he meant what he wrote.

> Eddie has this tendency to write something and then immediately deny that he meant what he wrote.

I'm surprised you didn't paste "30 years" into my sentence.

Wow, you have no hesitation in lying.. can't say I'm surprised.