What's happening with the coop market on the UES?

I started a discussion about a year ago asking if UES co-ops don’t appreciate anymore. That was geared towards the 1/1 market but the conclusion still holds. Among younger potential buyers the UES has gone the way of fur coats. It’s out of fashion now in favor of Brooklyn.

I think more and more people don't want to deal with strict coop approval process on UES. Not saying your coop is like that. Did you make any improvements to make up for wear and tear since 2014?

BK popularity is very true amongst younger generation with choices of non-doorman buildings and cheaper taxes unless you are getting a new high-rise condo.

I would love to get a non-doorman large apartment on UES but the choices are limited. Every place comes with a lot of doorman + services where the labor cost has become rather expensive for large apartments.

UES is only for hospitals now.
https://nypost.com/2024/05/16/business/nyc-hospital-building-boom-on-upper-east-side-roils-residents/

I always got the sense of UES being less of a neighborhood and more a place where people who didn't really want to be in the city lived. You lived there because you HAD to be in the city. Not like hardcore UWSers, downtowners, or BKers who seemingly made their neighborhood a component of their personality.

Further, I wonder if UES has fallen out of fashion generationally across income levels.

People who saved and saved to squeeze into a small coop during their kids-in-school years have an increasing propensity to leave the city (hybrid work justifies longer commute but fewer days, also look at NYC school enrollment numbers).

And master of the universe types have also moved on, taking new dev condos downtown over stuffy old coops.

Also both cohorts have moved to FL HQ2 type locations where possible for tax purposes if they are in banking/funds.

I knew a few GenX/elder millennials at work who were in UES say 5-10 years ago who subsequently left to burbs/Florida/etc.

I have not followed this threat for a while. Wanted to add some answers/updates. Still have not sold my apartment. The asking price is 725K now + giving the 7K worth of maintenance concessions, and still no offers.

The biggest issue seems that the kitchen and bathroom need to be updated. People today are much more picky in this regard. They just don't want to do any work after the closing, afraid of the costs and complexities of the approval process for these projects, it seems. Wasn't like that when I bought it in 2014 - it was a very desirable area with great elementary and middle school, especially for the young parents with kids this was a top neighborhood. Not sure what happened and why this is not the case anymore. The schools are still pretty good.

Steve, I think UES has always been very popular due to some of the best schools in the city and proximity to Central Park. What has really changed is desirability of Brooklyn, new condo supply in other areas, and people’s willingness of deal with difficult coop boards. Increasing real estate have played their part. UES in fact was a popular place to go out 25 years back but Meatpacking and LES didn’t have much in that sense that time. Try finding a condo in UES and they still aren’t cheap. So in my mind strict coop requirements.

Increasing real estate TAXES have played their part.

Flat since 2014 is pretty much the average story in Manhattan, I don't think anything special is going on with the OP's apartment. It's fairly easy to identify with a quick search. Monthlies are fine ($2000), with a modest increase since where it was in 2014 ($1400). The Brooklyn effect or the suburb or the FL effect? Sure, to an extent. But I don't think that's it.

In 2014, this place could rent for (say) $3500/mo. With a cost of capital at 3.5%, buying it would come in at $3700 including monthlies. Maybe the buyer would have the illusion / delusion of untold price appreciation.

In 2024, it rents for (say) $4500/mo. Cost of capital is perhaps more like 6.5%, so buying it would come in at $6000 including monthlies. A buyer would have less illusion / delusion of untold price appreciation, partially from the worse carry, partially from 15 years of flatness. What's the play?

I understand all this could be said about *anything* in the market, and it could have been said *anytime* in the last year or two. What's the difference? The pool of people who *have* to buy no matter what dwindles over time, and increasingly you are left with a potential buyer pool for whom the finances make no sense.

Nada, What you are saying generally correct except I would put a little higher value on rent which may be partiall offset by $300 extra maintenance in the text.

To OP,
You can clean your bathroom tile mold/dirt and retake the picture. Spray below and a 25% bleach. Partially regrout the bad areas and potentially change your vanity. Your bathroom can be spruced up so much for $1k.

https://www.amazon.com/Concrobium-25326CAL-Mold-Control-Spray/dp/B084CNTQX2/ref=asc_df_B084CNTQX2/?tag=hyprod-20&linkCode=df0&hvadid=693672013889&hvpos=&hvnetw=g&hvrand=16670651068882078559&hvpone=&hvptwo=&hvqmt=&hvdev=c&hvdvcmdl=&hvlocint=&hvlocphy=9067609&hvtargid=pla-944095028128&psc=1&mcid=941222a138cd39019620ebd80684e91a&gad_source=1

Ah, I didn’t read the text. Yeah, I find the “The owner will give a $7,200 concession at closing to cover the $300 difference for 24 months” kinda lame.

I went with $4500 given the similar unit that had rented at $5200. Except that one views treetops instead of brick, is recently renovated, and was furnished. I thought $4500 was generous in comparison.

But whatever. As your $300 points out, capital cost + monthlies is now $6300 in 2024 compared to $3700 in 2014. That’s a 70% increase compared to rents at 30%, wherever the rent level for this type of apt. An in an environment where perceived price appreciation potential is lower. Putting aside the general market, remember all the hoopla about the 2nd Ave subway line producing untold price appreciation once the construction ends and the line opens?

I am kind of late to the party on this one (it's been a month), but IMHO $3/sf maintenance for a mid-block post-war isn't "low." The climate of 7% interest rates isn't helping, and so the overall strategy might be "delay and pray" until rates drift down and this looks like a more attractive purchase vs. renting.

As far as what the OP can do, the windows need, very badly, to be washed, and this is also probably a good situation for actual staging -- have a company come in and bring better/more eye-catching furniture, and reshoot.

The current photos are kind of generic, and if the market niche is crowded and the market is slow, I'd advise making them prettier to get people to come in. As far as listing copy, I would also do a little more to "sell the block" -- the Upper East Side is a big place, so tell potential buyers about *this* particular location -- and I'd put the fact that the principal bedroom has a corner exposure in the listing copy. Just my $.02.

ali r.
{upstairs realty}

Ali, Say 875 sq ft commonly marketed at 950 sq ft as it is a 2 bedroom. $2300 maintenance. $2.5 per sq ft which these days is at the low-end for a door-man building in this area.

Nada,
I put rent a little higher as I take what is available in a rental building right now close to subway ex 96th street. 86 is fairly popular due to the express stops on 4/5. Even if I take 20% deduction for mortgage, your point is generally valid that at the current interest rates, buy vs rent is in favor of renting if you don't have a lot of cash to put down, which is why rents continue to be strong in <10k segment.

But still can't believe someone will take a bathroom picture with mold in the grout when strong bleach solution, 1 hour wait, and light brushing can fix it.

I didn’t really look to rental buildings, just figured a comp in the building is about as good as it gets.

Regardless of buy vs rent, the larger point of ownership cost now vs a few years ago remains. This is the point I tried making a few years ago, that if/when 2.x% mortgages come to an end (because the Fed stops buying them and/or needs to take their head out of the sand on inflation), the economics will change. Were people considering that in their purchase decisions? It sure didn’t seem so at the time.

Initially I thought the OP posted the address of the actual apartment.

With a few information in the OP's single post, all of you guys figured out which apartment that original post was talking about, LOL

From the listing history of the apartment, it seems that the OP is very desperate to sell and the realtor didn't price the apartment at the right level. Keeping deceasing the price a little bit a time is not going to help the seller.

> Regardless of buy vs rent, the larger point of ownership cost now vs a few years ago remains. This is the point I tried making a few years ago, that if/when 2.x% mortgages come to an end (because the Fed stops buying them and/or needs to take their head out of the sand on inflation), the economics will change. Were people considering that in their purchase decisions? It sure didn’t seem so at the time.

I was not taking the interest rate increase and the subsequent change of the economics into account when I was making the decision to buy. My thinking was that the apartment (3bed2bath) was big enough to accommodate my family's need for my whole life and it will be my forever apartment.

I was also realizing that I overpaid a little bit about 10% (compared with rent) at the time of purchase about three years ago. As of now, with the increase of the rent, the cost with buying is a little bit cheaper than renting.

In terms of buy vs rent comparisons, with the exception around 2009-2013, the computation will always say rent is cheaper at the time of purchase, but the calculus will change after living in the apartment for several years (buying cost using the original purchase price and original interest rate vs the current rent).

Nada,

Here is an interesting study. Low correction between interest rates and housing prices which is what we have seen Nationally recently.

In addition, standard investing wisdom seems to be 60/40 with 40 divided in 30% 10y and perhaps 5-10% cash. At 2-3% rates, was the 30% bond exposure not so good. I think so. By buying and borrowing 10y+ and reducing 30% 10y portion, you in fact went short 10y bonds - which was partially offset by interest rate sensitivity embedded in long real estate (how much not clear; if you believe the articles below you clearly went short). So net/net, you likely reduced your 10y long bond exposure. In my opinion, Manhatta real estate flat lining has less to do with rates and more to do with BK popularity, increasing real estate taxes, stuffy coops, and pandemic migration/WFH related reasons.

https://www.urban.org/urban-wire/how-higher-mortgage-rates-have-historically-affected-home-prices

Another article suggesting 4.6y duration over 10years (1% increase 4.6% decrease over 10years, but 2.5% decrease/2.6y duration over 2 years) for housing.

https://www.dallasfed.org/research/economics/2023/0815

Some more:

Housing duration (sensitivity to interest rates) seems to be 5y or below and in shorter term even less. Dallas Fed paper seems to the best one. This suggests that buy vs rent carries some weight but not as much weight as one would theoretically think in purchase decisions. Buy-vs-rent would suggest Housing duration of more 10+ years which is the appx duration of 30y mortgage with prepayments etc.

https://libertystreeteconomics.newyorkfed.org/2021/09/the-housing-boom-and-the-decline-in-mortgage-rates/

>> the calculus will change after living in the apartment for several years (buying cost using the original purchase price and original interest rate vs the current rent)

Seems like a faulty calculus to me unless you account for opportunity cost of capital at comparable risk.

Perhaps this graph holds the secret of low than expected sensitivity of real estate to mortgage rates.

https://www.statista.com/statistics/375884/share-of-homeowner-equity-in-real-estate-usa/

>> standard investing wisdom seems to be 60/40 with 40 divided in 30% 10y and perhaps 5-10% cash

Here’s the thing about standard investing wisdom. It can start out as wise and then turn into mindless silliness. At one point in 2020, yield on the 10yr was 0.68%. Who was holding 10yr duration, and why?

I recall a convo on this thread in Aug 2021, when 10yr was 1.3% and inflation was raging, about holding fixed income. Why? Because Benjamin Graham, who died 50 years ago and had never seen ZIRP nor QE to the tune of buying a large fraction of all bonds ever issued, said you should hold X% in fixed income.

Never mind that Warren Buffett, the Graham acolyte that has by all measures surpassed his teacher, happened to be alive and wouldn’t touch 10yr and kept 25% or whatever in cash paying 0%. I also find it telling that he continues to keep Berkshire’s $200B in cash, forgoing locking in these “high” 10yr rates before they surely go down.

I think the operative word in the “delay and pray” strategy is “pray”, because it’s taking the other side against Buffett who (as demonstrated by his lifetime’s historical portfolio) has no particular aversion to fixed income per se.

Nada, I don't think I made my point clear. Was it better to borrow with 10+y duration and invest in 5y duration real estate asset (believing Dallas Fed research) when the rates were low. The standard portfolio allocation will have some long duration.

As far as asset allocation goes, if you believe the percentage equiyt in homes chart, you would have suggested that American households have less than optimal equity exposure. Why did they make such asset allocation decision despite rates being very low in the past? Why didn't they borrow more put it into SPX?

Considering RE a 5yr duration bond is misguided IMO. Starting with an assumption of a “standard” portfolio allocation as a good by fiat doesn’t make sense to me either. Conflation of 8% cap rate RE as the same thing as 2% cap rate RE also doesn’t make sense to me.

On the asset allocation decisions of American households… I don’t have the capacity to make very good sense of it.

Take boomers, for example, sitting on $80T of wealth. Which sounds like a lot, I suppose. It works out to $1M average per boomer. Is that a good? I dunno. I look at it as follows. Suppose the a boomer earning the average income continually invested X% of income in SPX over the past 50 years and spent *all* the rest, saving nothing, no home, no other assets. What would X% need to be to have turned into $1M today?

Answer: 2%.

That sort of number is foreign to the way I think, so much so that I have a hard time assessing the motives behind decisions of “the American household”.

Nada, Is this the right summary of your opinion?
1. SPX generally better than allocation to 2-3 cap real estate.
2. Dallas Fed housing duration of 5 year has higher cap areas. Lower cap areas duration likely to be higher.

>Suppose the a boomer earning the average income continually invested X% of income in SPX over the past 50 years and spent *all* the rest, saving nothing, no home, no other assets. What would X% need to be to have turned into $1M today?
> What would X% need to be to have turned into $1M today?

> Answer: 2%.

This is interesting . I didn't check the actual math computation and I trust what you said. This low percent (2%) allocation of income to SPX to achieve 1M has much to do with the tremendous return of SPX for the past 50 years.

I guess the key is the to keep investing 2% of income into SPX for 50 years. Some people may have retired after working for the 30 years, so they don't have new money to put in for the next 20 years and also they need to take the money out to spend so that math doesn't work for them. Other people just don't have the guts to do go all in SPX.

> Seems like a faulty calculus to me unless you account for opportunity cost of capital at comparable risk.

Real estate is a sticky asset and most people buy the place to live in for at least 7 years. The opportunity cost has already lost after the purchase.

I guess you are talking about the 20% down payment and the additional pay down of the principal still earns merely sub-3% while the the treasury bill is now making more than 5%.

However, the 5%+ treasury bill may only translate to only about 4% after paying federal tax depending on the tax bracket. so it's about 1% loss on the 20% down payment and additional principal. For my own apartment of around 900K purchase price, it's about $1800 a year for the 1% loss on the 20% down payment, the cost is not too bad.

> Real estate is a sticky asset and most people buy the place to live in for at least 7 years. The opportunity cost has already lost after the purchase.

This is normally true everywhere, but was very much not true for Manhattan 1998-2008 (and to a lesser degree it continued in BK/QNS maybe another 5-10 years). There is still some latent memory of this in the NYC RE industrial complex that is starting to roll over.

Even some of the advise here has slowly evolved from "only buy if you plan to be there 5 years" to "ok actually plan to be there 10 years" due to low appreciation and high round trip transaction costs.

I'd probably have held out longer myself if I felt 10 years was really the break even back then.

And what did locking in costs by owning protect me from .. apparently a 17% rent increase in 7 years on the last apartment I rented as per its last rental listing.

Oh and don't forget my taxes/maintenance/insurance have gone up annually so actually my "fixed cost" from owning has gone up ~12% in 7 years as well.

>> SPX generally better than allocation to 2-3 cap real estate.

Depends on the fundamentals of SPX at a given time, I would say. I don’t believe in absolutes about asset classes.

>> Dallas Fed housing duration of 5 year has higher cap areas. Lower cap areas duration likely to be higher.

I don’t have an opinion about high vs low cap. The reason I find it weird is terming the whole thing as “duration”. Suppose I have a product that holds 10% in a 10yr treasury and 90% in a coin flip. The “duration” of that product is 1 year according to your characterization, and one can hedge it via a loan borrowing 10% at 10yr treasury + 2% (say). We can then characterize the portfolio as hedged. Except it still holds a lotta risk on the 90% for no benefit, with an expectation of loss on the hedged 10%.

>> I guess you are talking about the 20% down payment and the additional pay down of the principal still earns merely sub-3% while the the treasury bill is now making more than 5%.

Its not just what T-bills earn, but rather what an investment with comparable risk should earn. A good fraction of NYC RE held the past 15 years wiped out the proverbial 20% down payment. Some of it in the form of negative carry. Some of it in the form of transaction costs. Some of it in the form of price loss. The OP may find himself in that situation once all is said and done.

Regardless of outcome, comparing something with that type of loss potential against risk-free T-bills is a mistake IMO.

>> And what did locking in costs by owning protect me from .. apparently a 17% rent increase in 7 years on the last apartment I rented as per its last rental listing.

Do you think that was normal for your market, or an outlier?

My entry-level apt from way back went up 40% over the last 7 years (after being flat the prior ~10). My high-end apt from more recent times was flat over the past 7 years. I think it’s mostly a reflection of demand at the entry-level vs high-end compared to 7 years ago. Not really what I would have predicted.

Woodsidenyc, this is the calculator I used:

https://dqydj.com/sp-500-periodic-reinvestment-calculator-dividends/

@Nada - I don't think it was much of an outlier

I was in an in-demand neighborhood, renting in a condo from a longterm owner landlord who didn't really do a lot of upkeep. So sort of high end hood, high end building, mid end unit.

Nada, What spread (cap rate - financing rate) would you like to compensate you for owning real estate to live in assuming rents grow at inflation?

Meanwhile, back to the poster's original comment. UES is not appreciating. Period. It may never appreciate. Younger people have zero interest in living there. My wife and I looked at retiring into a UES co-op but she, rightly, refuses to buy something which comes with a financial proctological exam, even though we are cash buyers, and perhaps an inability to get approval to sell down the road if the board is unhappy with the sales price. We won’t be handcuffed like that.

>> I was in an in-demand neighborhood, renting in a condo from a longterm owner landlord who didn't really do a lot of upkeep. So sort of high end hood, high end building, mid end unit.

17% over 7 years is pretty tame.

@nada - exactly, but also 17% fits in between your 40% low end / flat high end buckets right?

By comparison my first rental - a dumpy ground floor uptown studio is +60% over 14 years it looks like (showing entry level is appreciating more as per your anecdote). My wife's better situated studio from the same 14 year timeframe appears to be +40% (mid end splitting the difference).

>> Nada, What spread (cap rate - financing rate) would you like to compensate you for owning real estate to live in assuming rents grow at inflation?

I’d consider somewhere around 0% as decent compensation, but with an asterisk around 2020-2021 rates that were dependent on Fed policies that could clearly not sustain. Also, there’s an effect from absolute levels (I might be inclined to want less if financing rates are higher or more if rates are lower) as well as investment opportunity landscape elsewhere.

But fundamentally, I just don’t think I have much interest in buying financials aside.

Nada,
Your thinking (leaving aside alternative opportunities) is not far from what a multi-family investor would want for a finished stabilized property. Right now, they may be 50-100bps below financing rate (5 cap vs call it 6% financing) in good areas and were 50-100bps over when mortgage rates were 3%. Depreciation, 1031 exchange, and pockets of capital already allocated play a significant part in that market.

https://apartmentloanstore.com/new-york-city/new-york/cap-loan-rates

Closed shower curtain looks like you're trying to hide something. It appears that streeteasy no longer has a link for comments about specific buildings but I remember there were quite a few negative remarks about this place. Looking at the exterior of this building I would say it has not aged well as far as style. It's a good price but it's an uphill battle due to changing fashion.

That sounds like a similar ballpark, 300. Perhaps I’d have thought 4% was decent before, and 6% now? The advice from the link you sent is interesting, because it suggests cap rates are too low and buyers should wait for sellers to come to terms… said by someone with a vested interest in the industry that sells loans.

Also telling from the article is the following tidbit. The cap rates quoted as below financing rates comes with the newly-added change of requiring 50% down instead of 35%.

At least now I have a model for you thinking which is simply stabilized multi-family cap rate for you to buy.

Down payment will increase to ensure you can meet DSCR due to negative carry on financing. But down payment obviouly doesn't change cap rate. Some investors will see the 5-5.5% cap rate as post tax yield due to depreciation and wouldn't mind putting more cash down than leverage. Even the famous BREIT has appx 50% equity.

Nada,

What do you think of decision of the corporate buyers in the articles below? Could they not really find a location nearby with their brand power?

https://www.wsj.com/real-estate/commercial/interest-rates-commercial-real-estate-luxury-rents-25bb7cfa?mod=real-estate_lead_story

>> At least now I have a model for you thinking which is simply stabilized multi-family cap rate for you to buy.

Possibly not for me to *actually* buy, I like renting. I suppose at some cap rate, I turn into a buyer. The cap rate you model is where I’m saying there’s a decent degree of financial incentive, though not slam-dunk. Given my 1.x% cap rate, we are so far from even that point that it’s all moot.

The OP’s predicament is also not enticing. At the sorts of properties I’m dealing with, there has been a lotta units on and off the market for years with various degrees of price cuts but no luck selling. I don’t really care to own to begin with, why layer that sort of annoyance atop it, to say nothing of the financials. Why pay extra for something you’d rather not even have, with a dose of headache layered atop it?

>> What do you think of decision of the corporate buyers in the articles below? Could they not really find a location nearby with their brand power?

I don’t get aspirational products personally. By aspirational, I mean stuff where you’re paying (say) 90% for marketing and limited production vs 10% for the actual goods. I don’t have an issue with it, I just don’t “get” it personally. So how can I even begin to opine on the business of aspirational products?

That said, I do like a particular cologne from Hermes. It’s priced funny. You can get it in various sizes, 1x to 8x. The 8x size costs 2.25x as much as the 1x size. Why? I dunno. Would Hermes have not been able to draw business on the “wrong” block of London’s Bond St, or would that imbue a lesser impression of the brand permanently in the aspirational mind? No clue, I just buy the XL online. They still have it packaged up all nice when it delivers. I still haven’t gotten around to posting haul videos on Tik Tok, though.

I'm a little late here, but I disagree with the idea that the UES is out of favor. As proof, try finding a decent 2BR rental for under $10k without going to York Ave or where the Roosevelt Island ? looks straight into your unit. The rental market is as strong as ever, and there's virtually no condo market.

What's out of favor:

Coops
Sh1tty old buildings
Sh1tty old apartments

Seems OP is 3/3 on that score

George,

I couldn't agree more. UES is a still a high demand neighborhood for families due to some of the best schools in the city. That is not changing any time soon. Since my kid goes to school on UES, once in while for fun, I look for 3 bedroom (not 4 as 4th bedroom is sheer waste for me) rentals with at least 1800 real sq ft (listed generally more) with open (ish) kitchen around 86th and Lex west of 3rd below 91st with 9+ foot ceiling. Nothing to be found even for 15k. Most of such options are coops there. Condos choices are limited and not cheap. There are smaller 3 bedroom options in 8 foot ceiling post wars. So many young families in the same boat. Things do open up East of 1st ave even though the buildings are mostly 8 foot ceiling post war which work well for smaller apartments but not for large apartments. The stuffy coop would be up 20% easily if they were to loosen up - just my opinion.

300 - problem for OP is that the unit is tiny. If you can afford $80k a year for Chapin (which is what it will be next year with after school, sports, and the required donation), you're not living in a cramped 2br in a 1959 building with no view. And if you can't afford Chapin, why are you on the UES?

Indeed. Many families are there due to private schools.

I will add that many parents are on UES as K-5 public schools are also very good and there is plentiful supply of reasonable priced post-war not so stuffy but not so sexy coop apartments east of 3rd avenue. Q train a big plus vs before.

Don't forget Central Park and mostly residential neighborhood. Far fewer protestors and traffic disruptions.

I say all this despite being a long-term Greenwich Village resident and I am not moving any time soon.

Also, personally if I were to be on a tight budget but needed a 2 bed, OP's unit is good but it needs budget clean up / minor updates.

But that K-5 PS family isn't buying a coop

George, Are they renting instead of buying as well-priced condo options are limited.

>> But that K-5 PS family isn't buying a coop

I could see why that’d be the case with 6.x% mortgages. But you don’t think people with an infant would park themselves in a $700K coop at 3% with a 10-year plan for seeing said infant through K-5?

>> I'm a little late here, but I disagree with the idea that the UES is out of favor.

I’m in total agreement.

>> What's out of favor: Coops, Sh1tty old buildings,
Sh1tty old apartments. Seems OP is 3/3 on that score.

On this, I’ll disagree somewhat. Those were out of equally out of favor a few years ago, 10 years ago, etc. What’s out of favor (well, it was never really “in favor”) is paying ZIRP- and QE-elevated prices for RE with 6-7% mortgages.

My current place is in the primest of neighborhoods, in a shiny building, and built to a tee. The owner was unable to sell after 1.5 years despite 25% in price chops, down to a point where a bid at their late 2008 purchase price + reno costs would have probably cleared. But no takers. It’d be just as silly to say “Are apartments built to a tee in shiny buildings situated on the primest of neighborhoods out of favor?”

My last place is in a similar situation…

And the one before that got pulled after testing the market for a few months…

>inonada- thought you are now in the Financial District.
Not prime

>inonada- thought you are now in the Financial District.
Not prime

>inonada- thought you are now in the Financial District.
Not prime

Nada never lived in FIDI.

No, I've never lived in the Financial District. You must be conflating it with some mention of the broader notion of downtown (below 23rd or 28th or whatever), where I've lived in many neighborhoods.

This whole "prime" thing is somewhat sophomoric. I suppose it means wherever people are willing to pay the most ppsf for similar housing stock? Or maybe the availability of high-end housing stock? Of the neighborhoods where I've lived, I've certainly preferred some "less prime" neighborhoods over other "more prime" ones, but I don't think personal preference really dictates "prime" in the minds of people.

Regardless, I agree. No one I've ever known has considered the Financial District as prime, so you are in good company.

George/Others, What would you pay for this? Needs kitchen and bathroom updates (min $200k but realistically $500k for this $ level of purchase without central ac) but the layout, which I like, seems to be fine. In my opinion a very good deal for $2mm but not sure you can get it at that price.

Nada, What would be a comparable rental after a $300k bathroom/kitchen updates in listing below if you can find it?

https://streeteasy.com/building/47-east-88-street-new_york/10d?from_map=1

I'm surprised how many UES private school families rent. I'm sure they could get into plenty of coops but they aren't. Bc who knows how long you'll actually be in the city, and why tie yourself up financially?

47 E 88 is a great example of something that looks cheap but isn't. I assume you use zero equity financing (to account for the expected return on equity). At $2.5m this place is $12,500 of mortgage interest at 6% plus $5000 maintenance (which seems artificially low for a century old building with just 58 units) or $17,500. Plus $85k of closing costs to buy and $200k to sell. That adds $800/mo amortized over 10 years. There's some tax benefit which I haven't included. Can I get a better rental for $18,300? Of course I can.

So the only way you'd buy is if you believe in Manhattan RE so much that you think this place is going to appreciate rapidly during your holding period.

>> Nada, What would be a comparable rental after a $300k bathroom/kitchen updates in listing below if you can find it?

This is pretty far outside my bailiwick these days, so I defer to George. Maybe $10K if you discriminate for a deal, $15K if you take whatever?

>> … to $17,500. Plus $85k of closing costs to buy and $200k to sell. That adds $800/mo amortized over 10 years.

It adds $2400/mo amortized (you forgot to include the $200K). So $20K/mo total.

>> There's some tax benefit which I haven't included.

OTOH, you’d be hard-pressed to get a 6% mortgage currently. And you should have probably charged something more for equity. So all-in-all, kind of a wash.

>> 47 E 88 is a great example of something that looks cheap but isn't.

Exactly. For all the people wondering why people aren’t lining up to buy their places at prices they’d paid a few or a dozen years ago despite the passage of time & inflation, I suggest they crunch the numbers. What barely made sense back then, if you squinted and squeezed using a 2.x% ARM and ZIRP for cost of capital, implicitly or explicitly assuming they’d be there forever, is no longer an option. Buying at current prices and rates has become an unambiguously poor choice financially. Will some people still do it? Sure. But don’t be surprised if they’re not lining out the door.

Rent vs Buy remains skewed for sure especially with where rates are.
In my BK condo I have a lot of datapoints for 2 BRs.
Pre-vax covid bottom for the worst line was $5800 rent. Post covid best line was $8300. Median seems to be around $7200.

Meanwhile 2023-2024 sales for some of the same lines that have rented out are ~$1.7M pretty consistently. About $2500 in tax+maintenance and with 20% down a $8800 mortgage at current rates. So close to $11.5k/mo all in vs $7.2k/mo rent. 60% premium to todays rent to own.

In a year maybe rates are down enough to bring mortgage down $900 while monthlies likely go up $200 so let's say you get to $10.8k/mo owning, or a 50% premium to own.

I mean hey if mortgages get down to 3.25% again in 5 years, we'll have a $5900 mortgage + $3100+/mo for inflated monthlies gets you down to $9000/mo owning & a 25% premium to todays rent.

Add in some foregone return on $360K downpayment and you are out another $1k/mo easily, not to mention amortizing your round trip closing costs over the holding period, which if is 10 years might be easily another $1k/mo. You can offset some % of this with the mortgage interest tax deduction of course.

Basically, you’re saying the median-line 2BRs in your building are running at a 3.3% cap rate. And the “play” is to hope that in 5 years, we revert to ZIRP-era mortgage rates that are >3% lower than today (despite forward curves to the contrary)… so you can finally go from losing 13.2%/yr on equity in the form of negative carry to collecting 3%/yr.

Oh boy…

@nada - exactly
If you bought or re-fi'd by summer 2021, you could rent out your unit and more or less cover your cost of carry if you don't look to carefully.

Which also means if you were to buy at current prices/rates and need to rent your unit out, you are competing with the rest of the owners who can absorb a lower rate than you due to their 15% lower cost basis & >50% lower interest rate.

All of this also ignores whether owner occupying or renting the unit out as a landlord, you are responsible for unit upkeep/repair costs, guidance is 1-4% of purchase price. Granted condo has its own maintenance budget that comes out of your monthlies which is already 1%. Reasonable to add another 1% for the in-unit upkeep, or +$1500/mo.

High maintenance co-ops are struggling everywhere, and not just the UES.

Here’s an example from the West Village. Price cut now down to purchase price in 2013:

https://streeteasy.com/building/166-bank-street-new_york/phc

Nada, Not that many options for large size rentals in this area (west of 3rd between 92nd and call it 82nd). You can get smaller/lesser whatver 3 beds for 15k. Closest listing after spending $300k on reno will be $21k in a lesser location. That is why in my opinion, after last 10 years of price adjustment in prime UES coops of 15-30%, values are getting much better.

https://streeteasy.com/building/111-east-88-street-new_york/4b?from_map=1
https://streeteasy.com/building/11-east-86-street-new_york/rental/4413180?from_map=1
https://streeteasy.com/building/the-lucida/5b?from_map=1

>> This is pretty far outside my bailiwick these days, so I defer to George. Maybe $10K if you discriminate for a deal, $15K if you take whatever?

https://streeteasy.com/building/30-east-85-street-new_york/16b?from_map=1
https://streeteasy.com/building/9-east-82-street-new_york/rental/4420285?from_map=1

If you compromise on the location a little (further from the express subway, lesser location but marginally so) and on the dated kitchen/bathrooms (no pix but one can assume) offset by views. $15k. Seems like a long term rental.

https://streeteasy.com/building/carnegie-hill-tower/30ef?showcase=1

@300 - worth noting on that Carnegie Hill tower unit that we are seeing rent at only 25% above 2009 level. That is to say 1.5% annualized increase. It's actually below the 2013 and 2015 rental price, but matching the 2016 price.

And you could have rented on other floors for $11.5-14k
https://streeteasy.com/rental/4190784
https://streeteasy.com/building/carnegie-hill-tower/11a

Steve, 30EF is a bigger unit by 300 sq ft vs others. But I do like 11A which seems renovated.

I mean 18A.

> So close to $11.5k/mo all in vs $7.2k/mo rent. 60% premium to todays rent to own.

> I mean hey if mortgages get down to 3.25% again in 5 years, we'll have a $5900 mortgage + $3100+/mo for inflated monthlies gets you down to $9000/mo owning & a 25% premium to todays rent.

60% premium should never make sense to any buyer financially unless he is gambling on the price trend or rent increase or interest rate decrease.

If the interest rate is already at 3.25%, 20% premium is still too high. 10% is the highest premium that I am comfortable with. For 10%, it has to be the place for my rest of life.

> hope that in 5 years, we revert to ZIRP-era mortgage rates that are >3% lower than today (despite forward curves to the contrary)

I am not saying the hope of 3-4 % mortgages interest rate is realistic.

I won’t trust the forward rate, which is probably very weakly correlated to the actual rate in the future date. For example, how does the forward rate for 2024 in 2021 tell us anything useful of the actual interest of 2024?

Woodside, I have always had the the concept of owning premium which I can "Freedom Premium". It varies with the buyer's wealth and price of the apartment. For myself, I put it around 15-20% as location and layout (large 600+ sq ft living room and large open kitchen; I am sure we can manage with much less if we have to) is very important to me. I don't do the second home stuff so primary residence is where we spend most of the time.

Which I CALL "Freedom Premium".

re: https://streeteasy.com/building/carnegie-hill-tower/30ef?showcase=1

That kitchen isn't for a family of 4+. Just the gas stove alone without ventilation is irresponsible for a parent to subject children to.

The kitchen is indeed a little small but not that bad. The ventilation is built into the microwave which in these building is usually attached to a cental vent.

That little flap above the microwave door is all the ventilation you are getting.

No. Vent is from the bottom of microwave and the ducting runs at the back of microwave. You can get 350-450 cfm from these which is adequate. In addition, you can carbon filter option.

The vent on top of mircrowave is just for what you are cooking in the mircrowave.

Here is an example:
https://www.ajmadison.com/cgi-bin/ajmadison/MU30WSU.html?utm_source=google&utm_medium=cse&utm_term=MU30WSU&gad_source=1&gclid=CjwKCAjwr7ayBhAPEiwA6EIGxHlmr2vqTu2VxV5ATiFYCVyAgo-ml46XC1JX8AJBUpGox4KZz3XGzBoCMpoQAvD_BwE

alright

$1100 microwave, 300 I knew you were fancy

Ha. Just for Rinette but commensurate with a $15k per month apartment.

The "freedom premium" is the premium to toss the keys and walk away. It's the opposite of the coop discount.

George, If you are flexible in the type of place and location (within the city and across country), there is certainly freedom in renting. Of course, you can have a generous budget as well of more than 25k per month in this market.

Back to my original question, what would you say is the comparable rental in the hood of 47 east 88th apartment after $300k Reno?

>> I won’t trust the forward rate, which is probably very weakly correlated to the actual rate in the future date.

The point isn’t how well it predicts the future rate in an absolute sense. The point is how much better it predicts relative to a number that is 3% lower (or higher). As crappy an estimate it may be, it’s less crappy than all the rest.

Isn't ownership more of a security premium? Your landlord can't decide to terminate the lease or jack up rent. That said, there's the possibility maintenance appreciates quickly depending on taxes or coop finances - that offsets the security premium to an extent. I wouldn't know how to put a price on it.

MTH, NYC has plenty of rental housing if you are not particular and are willing to move. So there are people like me who put a premium on ownership of right place for their family and not wanting to move. Then there are people like Nada with much higher housing budget where with his negotian skills he can get 1 percentish cap rate for renting and perhaps he actually likes a little change in where he lives.

@MTH: I agree -- I think it's a security ('peace of mind') premium -- ownership takes away one external factor that could put you on the street - but I think it's a small factor. I choose to own because I like the stability of location (like 300 - I found a place, like it, and factors other than financial return take precedence).

As for maintenance, yes, in a coop you don't have full control over who is setting the rates, but you also don't have control over the going rate for plumbers to fix something in your rental, the cost of which will be directly borne by your landlord, and much of which may be passed on to you in the next lease renewal. I view all those external costs as being mostly equal between renting and owning a co-op. Vs private property it's a different story: a co-op is pretty much obligated to maintain the property to a reasonable standard (the fancier the building, the higher the standard). In a private home, I could ignore my drippy faucet, unmowed lawn, and peeling paint.

@300 True, the rental market is large, so as long as you're happy to move around there's no risk of ending up homeless. It can get harder as you get older, though. Depending on how much notice you are given, you might end up with a lease on a place or in a neighborhood you're not crazy about. And who knows, people like nada might happily apartment hop late into their 90's.

@Aaron2 Yes, you lose a little autonomy with a board. I don't know about routine neglect. Sometimes you see pictues of an estate sale that's a complete wreck.

Charts like this also should lead to questions about who the next generation of NYC buyers is supposed to be

https://x.com/jayparsons/status/1793651259213271064/photo/1

NYC leading metro areas in both % and # of 20-34 year olds leaving in last 3 years.

Page 6. Job losses in Retail, food/accomodation/construction which don't pay at the high-end. Overall job gains vs pre-pandemic.
https://edc.nyc/sites/default/files/2024-04/NYCEDC-NYC-Economic-Snapshot-April-2024.pdf

We moved to this UES address because of the very good public elementary (Yorkville Community School) and middle school (Wagner Middle School) zoned for it. Back in 2014, we could not find any other 2br in this price range of 700K+. We also have some relatively young professionals in our building who have bought in the last few years and some seniors (couples) that perhaps wanted to live on the UES side close to the parks, Whole Foods, restaurants, everything else this area has to offer.

@Steve123 That study also showed the highest percentage of young people in the country moving to The Villages, the massive retirement community in Florida. What’s that all about?

Last three years includes pandemic flight so the numbers are skewed.

Using subjective as op