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What Will It Take For Co-ops To Sell Again?

Started by Yentle
21 days ago
Posts: 41
Member since: Jan 2015
Discussion about
Picking up on the What’s Happening with the Co-op Market on the UES thread, but expanding on it.
Response by Yentle
21 days ago
Posts: 41
Member since: Jan 2015

Our building, like other Co-ops, has multiple units that aren’t selling no matter how much Sellers are chopping prices — truly some are 50% down in price from where sellers bought. Assuming it’s mortgage rates, crime worries, politics, maintenance fees, etc etc — what do you think it will take for old school co-ops to sell again? Or do you think that market is done for the foreseeable future?

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Response by Yentle
21 days ago
Posts: 41
Member since: Jan 2015

Our building, like other Co-ops, has multiple units that aren’t selling no matter how much Sellers are chopping prices — truly some are 50% down in price from where sellers bought. Assuming it’s mortgage rates, crime worries, politics, maintenance fees, etc etc — what do you think it will take for old school co-ops to sell again? Or do you think that market is done for the foreseeable future?

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Response by 300_mercer
21 days ago
Posts: 10026
Member since: Feb 2007

In general, the coops on UES side will do better to drop their downpayment requirement to 25%, 2 year maintenance and mortgage as liquidity (basically 1 year expenses), and reduce flip tax to no more than 1%. Not sure that is happening with the old guard.

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Response by 300_mercer
21 days ago
Posts: 10026
Member since: Feb 2007

By the way, why has the maintenance sky rocketed much more than I have seen in other places? 5% per year for last 10 years. Even more if I look back further.

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Response by multicityresident
20 days ago
Posts: 2078
Member since: Jan 2009

Our coop implemented @300mercer's advice, and that sadly did not move the needle for us. Nevertheless, we did have three apartments trade in the past year at prices that make no sense on the fundamentals to all cash buyers who happened to like what was being offered (and is somewhat niche). However, the two out of three of the sales took over four years on the market for the "one" to come along.

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Response by 30yrs_RE_20_in_REO
20 days ago
Posts: 9563
Member since: Mar 2009

Stuffy Coops need to sit down and reevaluate their existence and decide exactly what they want to be and take reasonable steps to move towards that. This includes floor prices, subletting rules, the whole 9 yards.

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Response by etson
20 days ago
Posts: 32
Member since: Aug 2010

Most of the issues are not coop specific in my view: Manhattan is not perceived as being as attractive relative to other areas over the past few years, and monthly costs have increased rapidly. My neighborhood is mostly coop but the older condos here aren't exactly crushing it either.
Other than that I think it's just "don't be crazy". Coops have a worse reputation than they deserve in my view, because people love to share horror stories / urban myths, including many on here. But a lot of boards clearly don't help themselves either. Our board used to have a tough reputation. That has changed and sales here seem to have picked up markedly, albeit still at depressed price points.

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Response by Yentle
20 days ago
Posts: 41
Member since: Jan 2015

That’s very helpful - and depressing. Sounds about right. But here’s the crystal ball question. Given that NYC government seems so dysfunctional and that unions have and will likely always have an iron grip on labor costs here, do you think those monthly costs will just be driven up more and more into the future so that five years from now it will be even worse? At our recent annual meeting, our Board had DE put on a dog and pony show about how current sales drought is just cyclical and how things will be looking up for sales any moment. Seemed like a bunch of hot air to me, though I wish I could believe it!

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Response by Krolik
20 days ago
Posts: 1022
Member since: Oct 2020

"That has changed and sales here seem to have picked up markedly, albeit still at depressed price points."

Do these "depressed" price points make sense on fundamentals?
I agree the issue is not coop specific, old condos are the same and new condos seem to have it even worse.

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Response by multicityresident
20 days ago
Posts: 2078
Member since: Jan 2009

@krolik - The prices where trades have occurred in my building are "depressed," but still don't make sense on the fundamentals. Fives sales have occurred in my building in the past two years (four of which were in the last year), and all the buyers consider themselves "lifers." The younger buyers have bottomless pockets, and the older buyers have enough to get them through to the end. We actually did have that conversation about an older buyer whose application we might have evaluated differently were they ten years younger.

@etson - I agree.

@Yentle - It is only going to get worse given what we know now, but the fun is that anything can happen. I had a little house in nowhere that I sold in 2017; I had owned it for almost 20 years, renting it out with the thought that one day I might use it again, but finally let it go when I realized that was never going to happen (and when my excellent long-term tenant passed away). Had I held on to it until the pandemic, it would have traded at a significantly higher price such that it would have turned out to have been an unintended investment. But the pandemic turned out to be a time of funny money everywhere, so the capital, redeployed in my beloved VBAIX, did just fine anyway. I would cut your losses.

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Response by Yentle
20 days ago
Posts: 41
Member since: Jan 2015

@multicityresident - But at what cut? When you search recent sales, it’s apparent that things are barely moving at ANY price. If a buyer is comparing high quality co-ops where one is listed at $1M and the other at $1.1 or $1.2, (when those prices would reflect a 50% loss to the seller) does that even make a difference? It would seem that things aren’t trading at ANY price, so the suggestion to cut losses doesn’t seem applicable. Are we headed to “zero”?

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Response by 300_mercer
20 days ago
Posts: 10026
Member since: Feb 2007

Reduce staffing: no doorman between 12-5 night time during the week. If you have doorman and concierge both, eliminate one. It will happen eventually.

Given that NYC government seems so dysfunctional and that unions have and will likely always have an iron grip on labor costs here, do you think those monthly costs will just be driven up more and more into the future so that five years from now it will be even worse?

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Response by multicityresident
20 days ago
Posts: 2078
Member since: Jan 2009

@Yentle - It does make a difference. @Krolik is a great example of someone who actually would buy one of these if the price made sense on the fundamentals. Do the math and set your price there. I don't think all coop boards will reject a price that reflects the actual market. I know ours would not. Granted boards change, but I just finished a term on our board, and we had no price floors, no stuffy requirements. We would accept whatever price the seller was willing to accept. However, that did not change the fact that none of our sellers wanted to admit the reality of the market and just waited for "the one" . . . . for years, ultimately cutting their price to something that was unthinkable to them at the outset. We've had a few others just withdraw their listings from the market.

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Response by multicityresident
20 days ago
Posts: 2078
Member since: Jan 2009

With respect to this: "Reduce staffing: no doorman between 12-5 night time during the week. If you have doorman and concierge both, eliminate one. It will happen eventually."

In our building, that is what every seller pushes for on their way out. The dutiful board on which I sat did our job and floated the idea with our shareholder population. It was a non-starter for those who call the building home and plan to call it home indefinitely. They bought into a building with a certain level of service that they can (presumably) afford, and they want to keep it that way.

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Response by multicityresident
20 days ago
Posts: 2078
Member since: Jan 2009

P.S. - On the night doorman issue, it was interesting that one of the shareholders who felt most strongly about this was one with teenagers. They really like the security and the set of eyes making sure nobody comes in or goes out. That was a surprise to me!

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Response by 300_mercer
20 days ago
Posts: 10026
Member since: Feb 2007

To make Yentle feel better. Sale above ask.
https://streeteasy.com/building/21-east-90-street-new_york/12d

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Response by 911turbo
20 days ago
Posts: 102
Member since: Oct 2011

I don’t think this is so specific to NYC, i think many large cities are experiencing this. I own real estate in both Los Angeles and San Francisco and for the smaller one bedroom and studio condos in the downtown areas, it’s definitely a buyers market. We recently toyed with buying a small condo in Paris France and again, it’s a buyers market, sellers are very much willing to negotiate even in very premium areas. This was not happening 2-3 years ago. My partner and I love living in big cities and all the warts that go with it but many people, in particular younger buyers, look at how little space you get for your money, the high costs of living in any large metropolitan area, traffic woes, crime and homelessness, etc, etc, and just decide the perks of living in a big city are not worth it, especially with high interest rates. If they really want the “city” life, they are more than happy to rent and not be tied down. I don’t think this will change anytime soon, at least until interest rates come down somewhat

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Response by steve123
20 days ago
Posts: 732
Member since: Feb 2009

On a 10 year timeline you have a lot of things that all lined up to make expenses far higher- taxes, building budgets, rates and 2017 tax code changes.

Taxes are up 50% and are no longer deductible with the SALT cap, so net they are up more like 150%.

Maintenance up 50%.

Rates - let's take a hypothetical $1.5M mortgage at 3% in 2014 you paid $27k net interest after full mortgage interest deductibility. 2024 mortgage at 7% and you can only deduct up to $750k mortgage so your net interest costs are $84k, a 210% increase from 2014 buyer.

Wages for the cohort of 2bed/2bath UES buyers are up, but id say closer to 25% than 50 or 210%... given what I've seen for my 10 years younger cohort in roles similar to mine. Pure inflation adjustment would say 33%.

I think these factors are explanatory as to why the starting point for a lot of these listings clearing is .. 2013 pricing. Might need a 10-30% drop from there to solve, but I think everyone is just waiting for rates to come down and hope things start to move again.

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Response by Yentle
20 days ago
Posts: 41
Member since: Jan 2015

When I research the history of sales in our building, units never traded anywhere near as low as what people are asking now, going back as far as StreetEasy posts records….. 2007, 2013 prices were all significantly higher than what people are asking now, and they sold relatively quickly….

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Response by steve123
20 days ago
Posts: 732
Member since: Feb 2009

I mean look at some examples-
Asking $1.325M
https://streeteasy.com/building/315-east-70-street-new_york/9f
Plug in the listing price and 7% interest to the calculator and you get $10,019/mo.
You get ~$21k/year savings with the $750k capped interest deduction so call it $8269/mo net.

Scroll back to 2013 sale at $1.15M
https://streeteasy.com/sale/834103
Use the sales price and plug in 3% interest you get $5883/mo.
Ballpark 25% of the maintenance as tax fully deductible, and mortgage interest fully deductible you get ~$13.4k/year savings... so $4771/mo net.

Let's say inflation adjusted earnings are up 33% so equivalent buyer budget is $6345/mo (1.33 x $4771/mo) net in 2024.
How much does listing have to drop to achieve this? To about $950K.

Not included is increases in homeowners insurance (above inflation), or consideration that this unit has had improvements in 10 years (kitchen appliances & reno, new floors) and still languishing on market 7 months while being on & off market for 3 years.

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Response by pinecone
20 days ago
Posts: 124
Member since: Feb 2013

>>It was a non-starter for those who call the building home and plan to call it home indefinitely. They bought into a building with a certain level of service that they can (presumably) afford, and they want to keep it that way.<<

Spot on MCR.

Meanwhile in my co-op we have a small handful of sales over the past year or so and all (including a current transfer) have happened at or around asking price, with units going into contract relatively quickly. The sale prices have been stronger than one might have expected. Go figure.

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Response by pinecone
20 days ago
Posts: 124
Member since: Feb 2013

^^have HAD^^ (hate that you can't edit a post)

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Response by Woodsidenyc
20 days ago
Posts: 138
Member since: Aug 2014

I just checked this building, another similar sized 2bed2bath apartment 2H was closed at 1.26 Million on 2/13/2024 https://streeteasy.com/building/315-east-70-street-new_york/2h

Lower floor gets to pay lower maintenance, good for 2H. More people likes higher floors, price wise, it's a wash.

I guess for 9F, I don't think it needs to go to that low of 950K, there were probably buyers at 1.1-1.2 Million unless the buyers become much more pessimistic during the last year.

Another example, 10J, just one bedroom one bathroom,went to contrcact with the listing price of 800K,https://streeteasy.com/building/315-east-70-street-new_york/10j.

By the way, 10J and 2H are using the same broker (free advertising to them, LOL), 9F should consider to switch the same broker used by 10J and 2H. Sometimes, a good broker (or a bad broker) does make a difference.

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Response by theburkhardtgroup
20 days ago
Posts: 2674
Member since: Aug 2008

2013, 2007... These are markets reminiscent of post covid. Basically buyers is acting somewhat irrationally chasing prices higher and higher. Or buying the outlier stuff, perhaps in neighborhoods that were not at the top of their list, however, less competition to get to contract.

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Response by Dickens
20 days ago
Posts: 103
Member since: Mar 2014

There's a solid 15+ years worth of buyers (and sellers) who have not seen either mortgage rates above 4-4.5% or savings accounts/bonds that pay that much on cash deposits. Super low interest rates created a very lopsided environment, imho, where brokers were able to convince buyers that their coop was a "solid investment" that's going to keep appreciating indefinitely. In their turn, buyers were easy to convince because low mortgage rates made real estate so much more affordable, prices DID keep rising for a long time, and there weren't many alternatives for those who don't feel that the stock market is a safe place to park excess cash.

Back to reality for everyone - it's nice if an apartment gains in price while one owns it, but it's not its main purpose; for "safe" investing, one can now lock in 4.5% interest on a 30-yr Treasury, which is hassle free, fully liquid, can be sold in $100 increments, and is exempt from state and local taxes to boot. In the meantime, as coops are forced to refinance their mortgages over the next decade, owning a unit will become more expensive. Glad I don't have a mortgage anymore.

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Response by etson
20 days ago
Posts: 32
Member since: Aug 2010

Some of the price-related comments here are not reflected in our coop, and the neighborhood as a whole from what I can tell. I described prices as depressed, but in most cases it's lack of appreciation for a really long time rather than major declines.
Very rough guesstimate I would say we are 10% above COVID lows, 10% below 2015 (!) peak, 10% above 2010ish. But the basic story is just flat flat flat.
Fairly typical east side regular coop price points with fairly typical maintenance: studios c.400k, 1-beds c.650-700k, 2 beds slightly over $1mm.
Apartments seem to sit for a couple to a few months but do sell eventually. Largest buyer group are empty nesters /retirees but it's gradually trending younger over time.
Just my observations, hopefully of some help.

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Response by Krolik
19 days ago
Posts: 1022
Member since: Oct 2020

>>>Our building, like other Co-ops, has multiple units that aren’t selling no matter how much Sellers are chopping prices — truly some are 50% down in price from where sellers bought.

Things do move at a lower price. A friend of mine just bought a large UES 3br coop for [1.5m to 1.8m]. this is a great deal vs. prices 1-2 years ago, but a steep monthly payment and a chunky down payment in my book, so not that "depressed". Apartments can move if the monthly payment and the down payment make sense, considering current mortgage costs and rents.

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Response by multicityresident
19 days ago
Posts: 2078
Member since: Jan 2009

I watch a few buildings, and among those 419 E57th moves listings in the same pattern as pinecone describes, as does 2 Beekman Place. I think the material difference between those that move and those that lag is the total units in the building. Full service boutique prewars (less than 40 units) have maintenance that makes sense for few. Same staff expenses over 100 units is more palatable.

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Response by pinecone
19 days ago
Posts: 124
Member since: Feb 2013

>>To make Yentle feel better. Sale above ask.
https://streeteasy.com/building/21-east-90-street-new_york/12d<<

This is a great example of how a 'view' apartment (especially one with 'protected' park views) can command a premium. Here's an estate-condition unit, which clearly needs a complete gut, but someone was willing to bid it up $500K over ask.

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Response by 300_mercer
19 days ago
Posts: 10026
Member since: Feb 2007

No doom and gloom here as despite needing reno.
https://streeteasy.com/building/49-east-96-street-new_york/11d

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Response by steve123
19 days ago
Posts: 732
Member since: Feb 2009

@300 - unit 1 floor below sold for 20% more in 2012, so not sure on the size of that win
https://streeteasy.com/building/49-east-96-street-new_york/10d

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Response by 300_mercer
19 days ago
Posts: 10026
Member since: Feb 2007

While I can't tell the condition differences between the two sales, it is nothing like the gloom and doom Yentle is talking about 40% down in price and no buyers. UES stuffy Coops clearly have been down 10-20% from the peak (down payment is the biggest indicator or stuffiness) as there are far more condo choices in general.

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Response by 300_mercer
19 days ago
Posts: 10026
Member since: Feb 2007

BTW, I am waiting for an estate condition stuffy Park Avenue coop around 86th to come on the market at $850 per sq ft below $3/sq ft in maintenance. So far nothing and doesn't look like it is getting there.

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Response by GeorgeP
19 days ago
Posts: 89
Member since: Dec 2021

We’re retirees who would pay all cash (budget under $600k for a 1/1) because we don’t want debt at this point in life, but fear we’d still be turned down because we’re not “rich” enough. With such an opaque system for co-ops, it’s just not worth the hassle.

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Response by 300_mercer
19 days ago
Posts: 10026
Member since: Feb 2007

George, $600k is kind of low for a 1 bed room in move-in condition on UES. I remember you were looking for decent size as well including ceiling heights etc. Hell's kitchen may be.

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Response by theburkhardtgroup
19 days ago
Posts: 2674
Member since: Aug 2008

George: if you're willing to explore a new neighborhood, check out 116 Pinehurst. Very interesting community.

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Response by 911turbo
19 days ago
Posts: 102
Member since: Oct 2011

You can definitely get a 1 bedroom coop in Hell’s Kitchen for under $600k and maybe they are less “stuffy”. One bedroom condo definitely not for under $600k in HK. We are also retired (albeit relatively young, upper forties) and were prepared to pay cash. Despite substantial savings, other real estate holdings, rental income and stocks, we were advised to NOT apply for Co-ops. Our agent told us our lack of “regular” income would hurt us. I was more than a little surprised. Fine, we bought a lovely condo, paid a little more of course, but we are very happy with our decision. Resale will be much easier not needing some board to “approve” any potential buyers. And honestly, having some board pour over our financials with a fine tooth comb and potentially just say No in the end, when we are clearly doing well enough to retire in our mid 40’s was something we did not want to go through.

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Response by GeorgeP
19 days ago
Posts: 89
Member since: Dec 2021

Hi 300_Mercer. Thanks for the feedback. Might be confusing me with someone else regarding large unit and ceiling heights. We’ve seen a few under 600k on UES that would work if we could just go in and buy it without the financial proctological exam.

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Response by 300_mercer
19 days ago
Posts: 10026
Member since: Feb 2007

George, I must be. I think if you show steady income in your retirement, coop should work.

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Response by Yentle
18 days ago
Posts: 41
Member since: Jan 2015

For long timers (I’ve only been in City for a decade), how much do you think crime is cratering sales?

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Response by Rinette
18 days ago
Posts: 379
Member since: Dec 2016

Nobody's not buying an Upper East Side co-op because of shoplifting at Duane Reade.

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Response by steve123
18 days ago
Posts: 732
Member since: Feb 2009

@Yentle - crime is only an issue at the margin I'd say. It's clearly worse than it was 5/10 years ago. Not as bad as peak 2020, and not as bad as the 90s. But the general level of disorderliness compared to the 2010s is fairly noticeable. Women tend to be more tuned into than men, and people certainly tune how much they admit to caring based on political affiliation...

But yeah, its rates/taxes/monthlies vs incomes/desire to be in NYC/desire to be in UES.

The other larger issue is demographics -
https://www.nytimes.com/2024/06/27/nyregion/nyc-census-children-teens.html

"The number of New Yorkers under the age of 20 fell by 9 percent — or more than 186,000 people — to 1.8 million in 2023 from just three years earlier, according to Social Explorer, a data research company that analyzed the census estimates."

"The New York City public school system has shrunk to roughly 915,000 students from 1.1 million a decade ago. "

This is more impactful as who is the net buyer of family sized apartments when it's financially harder and the number of families is decreasing?

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Response by GeorgeP
18 days ago
Posts: 89
Member since: Dec 2021

@theburkhardtgroup Thanks for the tip about 116 Pinehurst. You certainly get more for your money up there. Not sure if it’s too far away and not enough nearby amenities. But it’s worth a look.

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Response by Aaron2
18 days ago
Posts: 1548
Member since: Mar 2012

@George: one of the buildings I think about for UES 60s-era co-op comparisons is 118 E 60th. B & E units are ~800sf 1 BRs, C is a bit larger. Current B & E offerings range from 575k to 599k. C units just over 800k. Very ordinary building, ok location (noisy street) but they seem to have reasonable, if slow, turnover (population shifting to younger people as the original owners move on). Some of the odd combinations can be a drag on the market (e.g., history of 33H, which is a 4 unit combo - maybe they should uncombine it?).

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Response by MTH
18 days ago
Posts: 295
Member since: Apr 2012

@steve123 - that can't be good for the city. Kids bring vitality. WFH/plunging commercial real estate values + ever higher city and state taxes - will Manhattan below 96th become the preserve of old rich people (more than it already is)? One of the charms of Manhattan is rich and poor, young and old rub elbows. It would be a pity to see that disappear.

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Response by stache
15 days ago
Posts: 1123
Member since: Jun 2017

That's pretty much gone already. If you're rubbing elbows it's probably with someone that lives in an outer borough.

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Response by George
12 days ago
Posts: 1271
Member since: Jul 2017

Those 315e70 units are in a 1961 building that looks its age. No prewar charm and all the maintenance headaches of a building that's 25 years beyond its useful life. An bland office building like that would have been razed decades ago. Yet NYers persist with pouring massive $$ into crappy old buildings that have neither charm nor anything like what the market wants: 315e70 is not pet friendly, doesn't allow w/d, and has tiny bathrooms and closets. I bet you hear every ambulance from the old leaky windows and rumbling PTACs. Being a coop just adds a cherry on the sh1tcake.

Yet somehow that's worth $1m+? Screw that.

Going to 25% down doesn't change the fact that it's a crappy product that is and will be undesirable for years to come. So the question isn't when coops will sell again: you should ask when buildings decades past their prime in meh locations will sell again.

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Response by Aaron2
12 days ago
Posts: 1548
Member since: Mar 2012

@george: When a potential buyer's price is sufficient to mobilize the tenants to accept the offer. That co-op on Park did it (but far fewer tenants to convince), and more may follow, possibly led by the poorer boutique buildings on lots in desirable locations with unused air rights.

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Response by 30yrs_RE_20_in_REO
12 days ago
Posts: 9563
Member since: Mar 2009

Tell me more about this Coop on Park please.

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Response by George
12 days ago
Posts: 1271
Member since: Jul 2017

The thing about 417 Park is that it was a very nice building ($5-10m units) in a great location, designed by Emory Roth. Great bldg, but it made a lot of sense to raze it since the site is much better as a bigger office. Just like every mansion on Park and Fifth was replaced with bigger buildings of various quality.

But what about the 1961 coop without air rights on a midblock close to the hospitals in the 70s? The efforts to get everyone to agree might actually be harder bc there are more people where that $1m apartment is all they have and they fully intend to die there rather than sell and pay capital gains tax. And the value to be created is simply building a better more functional building of roughly similar size. Between holdout owners, NYC's ridiculously rigid height rules, and NYC's even more ridiculous construction costs, what shouldn't happen doesn't always actually happen.

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Response by Rinette
11 days ago
Posts: 379
Member since: Dec 2016

... "building that's 25 years beyond its useful life. An bland office building like that would have been razed decades ago."

something to think about

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Response by multicityresident
11 days ago
Posts: 2078
Member since: Jan 2009

I floated the idea of razing our building as the highest value use, but shareholders who plan on finishing their life in residence (the majority) found the thought blasphemous.

On a separate note, can we talk about "Owning Manhattan?!" Were I a legit real estate agent, my head would be exploding. However, as a consumer of escapist and absurd reality TV, I am giddy.

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Response by Aaron2
11 days ago
Posts: 1548
Member since: Mar 2012

@30: It's 417 Park, which George mentions.

But, now we've come full circle back to the 'buildings have a limited useful life' argument again, which is mostly twaddle.

Large swaths of buildings in Brooklyn Heights and Park Slope are certainly past their prime, and are only usable because of the constant application of money to their infrastructure. Great locations for high rises with views, and park access, respectively. Unfortunately Landmarks and a bunch of shouty gentrifiers got there first. Had they not, we might have ended up with sufficient apartments at reasonable prices, and a sustainable tax base for the city.

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Response by 300_mercer
11 days ago
Posts: 10026
Member since: Feb 2007

Exactly.

The way we live in our homes hasn't changed all the much in the last 100 years except AC, Washer dryer and increased electrical usage. Whereas, how we use offices keep changing every 30 years due to tech, industries occupying the building. and the way people want to work now.

The residential buildings do need to upgrade plumbing and electrical upgrades every 50 years but structures, foundations (very expensive in the city due to density, and type of construction) are not going any where. We are not exactly working with A frame wood structure for single family on a large lot where it it is easy to take down and rebuild. Those 60s residential building are perfectly usable with regular upkeep (new buildings need that too after 10 years) and probably will remain for another 50 years at least. New mid-end luxury building cost in Manhattan is min $1000 with carry/soft costs plus cost of land. And these buildings are already $1000 per sq ft with land.

>>> But, now we've come full circle back to the 'buildings have a limited useful life' argument again, which is mostly twaddle.

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Response by Rinette
11 days ago
Posts: 379
Member since: Dec 2016

People expect more space per person, kids less likely to share bedrooms, more bathrooms per person, more water flow for more sophisticated baths plus W/D and dishwasher, more home amenities, more building amenities including for fitness and pets. They understand better the need for more air circulation and light.

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Response by Rinette
11 days ago
Posts: 379
Member since: Dec 2016

Not to mention 8' ceiling heights are not acceptable.

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Response by 300_mercer
11 days ago
Posts: 10026
Member since: Feb 2007

Rinette, 60s buildings generally have adequate bathrooms and room size and are for basic-luxury doorman (yes dooman is a luxury) building consumer. Waterflow is limited by govt regulation for all new fixtures. A lack of W/D in the unit and diffficulty in adding central ac is typically the biggest compromise in these buildings but many do allow washer dryers and remaining have laundry rooms. Through the wall AC units are not bad. 8 foot ceiling and smaller size windows keep you electric bills low.

Of course, if you are richer, there is no limit to the luxury including ceiling height but it wouldn't be at $1000/ sq ft decent livable condition with $2-$2.75 maintenance.

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Response by Rinette
11 days ago
Posts: 379
Member since: Dec 2016

Adequate
Basic
Limited
Lack
Difficulty
Compromise
Not bad
Low electric bills

Sounds wonderful!

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Response by front_porch
11 days ago
Posts: 5207
Member since: Mar 2008

Rinette, every "vintage" of building has its advantages and disadvantages.

Modern new developments, unless they're ultra-luxury, have small 12' by 15' living rooms, bathrooms far larger than 90% of the population needs, foyers the size of a pin that you sometimes even have to get furniture custom-made for, and relatively small closets.

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Response by 300_mercer
11 days ago
Posts: 10026
Member since: Feb 2007

Rinette,
I don't think I was able to convey my point clearly about "everything has a price" and "not one size fits all". Some people only want to or can afford to pay

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Response by 300_mercer
11 days ago
Posts: 10026
Member since: Feb 2007

contd: $1000 per sq ft in a good area with decent schools. You have to make some compromises. If you can afford say $1500k+ per sq ft, you should expect fewer compromises.

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Response by Rinette
11 days ago
Posts: 379
Member since: Dec 2016

I agree with you front_porch on the living rooms, foyers, and closets.

and I understand 300_mercer, thank you

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Response by Dickens
11 days ago
Posts: 103
Member since: Mar 2014

Am I the only person who feels that a virtual doorman + virtual concierge + pin coded package room are superior to snooping, gossipy doormen? Maybe if I had school age kids who needed watching over, but otherwise, let me have my privacy.

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Response by 300_mercer
11 days ago
Posts: 10026
Member since: Feb 2007

Dickens,

How does that work? Which company? I am familiar with ButterflyMx and a few others who would do the virtual doorman and let some one enter with a package but I don't think they track packages and ensure only the intended receipient gets it? Appreciate if you have any video links of this type of service.

>>> virtual concierge + pin coded package room

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Response by 300_mercer
11 days ago
Posts: 10026
Member since: Feb 2007

Dickens, Separately, safety is a big one for physcial doorman. Virtual doorman is not a replacement for that. Unfortunately, there are not that many non-doorman buildings in Manhattan below say 96/110th unless they are very small.

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Response by George
10 days ago
Posts: 1271
Member since: Jul 2017

My view that buildings last 40 years, previously discussed here including when Surfside collapsed, was informed in college when I was involved with facilities planning of my university, who had a lifecycle management plan for every one of the several hundred buildings they owned.

The rationale was that the nature of buildings changes greatly in 40 years, and the maintenance and occupancy costs tends to shoot up at 40. This was true for residences, offices, classrooms, laboratories, hospital buildings, commercial units, stadiums.

For apartment residences, today buyers place much bigger premiums on light (bigger windows), larger kitchens and baths (previously minimized), one bath per bedroom, larger closets, bare white walls, central air (no PTACs), big package rooms, and American-style kitchens (i.e. the kitchen in the living space - something I abhor.) Not to mention that buyers want building amenities, often even more than a fancy lobby which used to be the way you showed your address was fancy.

AFAIC, few if any NYC apartments built from 1940 to 1980 are likely to be desirable in the long term. We won't fall in love with these buildings the way we did with Emory Roth buildings 100 years ago or Robert AM Stern buildings more recently.

Interestingly 985 Fifth, owned by Bernie and Elliot Spitzer, will soon be demolished. It's a 1969 construction that doesn't make sense for the area. But the Spitzers can do that because it's a rental and it's easy to boot the $20k/month tenants there. This process of regeneration should be happening all over NYC, but it's just too damn hard. Easier to build a new building in Miami or Dallas or Denver which are all competitive with NYC for the $500k/year families who would be buying $1-2m apartments in the city.

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Response by George
10 days ago
Posts: 1271
Member since: Jul 2017

BTW, who does demolition and rebuilding really well - Las Vegas. Every great casino-hotel today stands where some older crappier building was previously imploded, often around age 40. And rooms are still affordable for middle America, even in upscale properties like Mandalay Bay. Yet so much of NY residential real estate is the equivalent of the Hacienda, the Sands, the Aladdin - frozen in the 1960s, desperately in need of a wrecking ball. Nobody would be going to Vegas if they had to deal with run-down 1960s casino hotels, yet coop owners in NYC think the residential equivalent of the Tropicana is hugely undervalued at $1-2m per key.

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Response by theburkhardtgroup
10 days ago
Posts: 2674
Member since: Aug 2008

It's also much easier to vacate a hotel, then tear it down. Not so easy relocating 100+ occupants in a city like Manhattan. The plan sounds intriguing, not sure it's very practical. On a small scale, I did a complete inside out gut renovation of a 1960s home that I own in Florida. It was certainly less money than tearing it down and building.

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Response by inonada
10 days ago
Posts: 7559
Member since: Oct 2008

>> Nobody would be going to Vegas if they had to deal with run-down 1960s casino hotels, yet coop owners in NYC think the residential equivalent of the Tropicana is hugely undervalued at $1-2m per key.

LOL.

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Response by Yentle
10 days ago
Posts: 41
Member since: Jan 2015

Our building went up in the 1920’s - an era that, IMO, had superb construction standards. (High coffered ceilings, fire places, thick walls, crown molding, etc etc.) There are units for sale in our building that have been completely updated and offer nice finishes - and are now at “bargain” prices. We know the maintenance is a sticking point now that mortgage rates are up. My original post was not asking what it would take to get dated post war units to move - should have clarified. What will it take to get well built nicely renovated units to move? When you do detailed searches of units on the UES that are comparable to ours, looks like going rate for a nice 2 br 2 ba pre war co-op with full service maintenance is now hovering around 1.1-1.2. - down about 30% in nine years. My question for the group is what will it take for well maintained units to sell again - and do you think that price point is a permanent fall?

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Response by Rinette
10 days ago
Posts: 379
Member since: Dec 2016

what is your maintenance now vs. what it was 9 years ago?

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Response by Yentle
10 days ago
Posts: 41
Member since: Jan 2015

roughly 3300 then to 4300 now, reflecting tax and union contract increases…..

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Response by steve123
10 days ago
Posts: 732
Member since: Feb 2009

3% annualized isn't even that bad for maintenance increases, my condo is running closer to 7.5% annualized...

However you are starting from a higher base.. is that $4300/mo maintenance on a 2 bed / 2 bath?

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Response by multicityresident
10 days ago
Posts: 2078
Member since: Jan 2009

I agree with all of those who say that buildings can be maintained in such a way that there is no end to their useful life. I also agree with those who believe the 1920"s construction was excellent, and believe these buildings can be maintained to persevere indefinitely with a timeless appeal. The issue that I see with them is that they are a luxury due to the cost of maintenance. They are like fine art, with the differentiating point between them and fine art is that they do have an intrinsic value, which can be quantified by comparing other spaces that could function as residences.

So, with all of that said, I believe the price for these lovely apartments will rise and fall with the desirability of Manhattan in general. As so many have pointed out in this thread, Manhattan is not what it once was to the extent there are now many other substitutes that the market has demonstrated it is willing to accept. Will Manhattan ever regain the status it once had? I certainly don't pretend to have any clue on that front. All I know is that I love it now in its current iteration in the same way I have loved every previous iteration of it I have known of it. I feel the same way about San Francisco, but I don't feel that my love of either city is shared on a global scale the way it used to be.

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Response by multicityresident
10 days ago
Posts: 2078
Member since: Jan 2009

P.S. @Yentle - Those of us who love the product that is your building (it is lovely), might be tempted to move were the price right. I absolutely love our neighborhood, but it is missing the proximity to the park that yours has. Yours will move if you lower the price. I don't know if your board is one of those nitwit boards that maintains price floors (which are an antitrust violation, but the cost of establishing that point is not practical), but, again, your building is lovely and there is most certainly a market for what it is, notwithstanding the fact that the market clearing price is below the value sellers place on it.

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Response by 300_mercer
10 days ago
Posts: 10026
Member since: Feb 2007

Yentle, In my view, the WFH exodus from NYC (to suburbs and other cities) has run its course. BK prime prices are now comparable but they do have lower service buildings available. In my opinion, what we need is some relief in mortgage rates which may come more at the front end - 5/1 ARMs (10yr not as much but who knows) starting later this year if the current forecasts are correct. Rents for comparably property (my guess of what you have) are rather high even though accessory space kind of sucks for additonal maintenance per sq ft.

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Response by nyc_sport
10 days ago
Posts: 787
Member since: Jan 2009

The most sought-after and highest priced housing in much of the European cities is centuries older than NY. Age is not the issue. I am not a real estate expert, but there is a confluence of factors for the slow state of current Manhattan markets. Interest rates, political uncertainty, absence of foreign buyers, the emergence of Brooklyn as a favored spot, some fading fascination with urban living, a general reluctance of "kids" to over-reach on real estate purchases and a general lack of interest in large apartments, and fixation on amenity-laden new developments, etc. Some of the cheapest per square foot apartments right now are in the UES Park Avenue corridor, and "high end" coops like River House, One Beacon, etc. The latter two have apartments on the market for several years. Sure, the maintenance is now disproportionately high on the old grand dames. But what do you think the maintenance will look like on these new amenity-laden condos when the buildings age and the time comes to renovate/repair/replace those amenities? Will a condo board even lay out a half million to replace a gym or pool, or let them rot? I would take a doorman or two over a pool or gym every day of the week.

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Response by 300_mercer
10 days ago
Posts: 10026
Member since: Feb 2007

George, In your University replacement analysis from a while back, how does the useful life change if demolition and building new cost is min 50% higher per sq ft including 3 years lack of use/carry (reality of Manhattan even if the building is owned by a single entity permitting demo and rebuilding; and higher real estate taxes on new building by at least 50% vs university paying no taxes in most cases) vs what your facilities management was using? NYU is still buying up 100 year old buildings and renovating them rather than demolishing them.

As Sport said above about the most expensive real estate in many European cities and Paris.

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Response by 300_mercer
10 days ago
Posts: 10026
Member since: Feb 2007

Sport:

They will most likely replace with huge assessments every 2-3 years so that total $ amount of assessment is below board authorization limit under condo offering plan:

Will a condo board even lay out a half million to replace a gym or pool, or let them rot? I would take a doorman or two over a pool or gym every day of the week.

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Response by inonada
10 days ago
Posts: 7559
Member since: Oct 2008

Yentle>> …down about 30% in nine years. My question for the group is what will it take for well maintained units to sell again - and do you think that price point is a permanent fall?

You bought in at a cap rate of 2.x% when 30yr mortgage rates were 3.x%. Those sorts of numbers don’t make sense to me, but they did to you (and many others). Now, even with “bargain” prices, buyers are looking at cap rates of 3.x% against 30yr mortgage rates of 6.x%. Would you still have been a buyer 9 years ago at those sorts of numbers? Perhaps you would personally, but the pool of such people is just smaller.

There is always wide degrees of uncertainty with financial predictions, but my guess would be sideways on price for the next decade with perhaps the small downward drift we’ve been seeing the last couple of years.

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Response by inonada
10 days ago
Posts: 7559
Member since: Oct 2008

I’ll also point out that someone buying your apt would be paying ~$10/sqft/mo in maintenance and financing costs. Super-prime location? No. Elevation or views? No. High ceilings? No. Expansive windows? No. Ultra-lux finishes? No. Ultra-lux staffing level? No.

My current apt has all that, at $9/sqft/mo rent. Others I’ve rented over the past decade, same at $7-8. Now my situation is a bit exaggerated relative to most, but it wasn’t always. If I were signing up to spend $10/sqft/mo on a place like yours, I’d look at rental options at the same price. Or could I get a lot more umpf for (say) a small increment to $12? That’s how I’d look at it.

I’m curious, how did you look at it when you bought? And how would you look at it if you were a buyer now?

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Response by George
10 days ago
Posts: 1271
Member since: Jul 2017

There is no amount of maintenance that can make an ordinary 1960s building attractive to me, largely for the reasons Nada points out.

The artificially high cost of housing and the inflexibility of the housing market here are probably the single worst part of being in Manhattan. $1m for a well maintained unit in a 1960s building is an absurd price, especially when you look at what that buys in Nashville or Tampa - up and coming cities where you also don't pay 11% income tax and $1000 a month for parking. And as Surfside showed, so many of those old buildings are hiding huge maintenance issues that could require massive assessments.

As for Paris, the old Hausmannian buildings are some of the finest apartment blocks ever built anywhere in the world - often comparable to River House or whatever your standard is in NY.
They are stunning works of art inside and out, and often are located on quiet streets in beautiful neighborhoods - like River House if Le Perigord were still in business, but with a fraction of the maintenance costs bc construction costs in Paris are a fraction of NY and most buildings have just one staff member - the live-in gardienne.

But Paris is also littered with ugly 1960s construction - often even uglier than the equivalent in NY - and those units trade at big discounts. Ditto in many other European cities.

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Response by pinecone
10 days ago
Posts: 124
Member since: Feb 2013

>>Our building went up in the 1920’s - an era that, IMO, had superb construction standards. (High coffered ceilings, fire places, thick walls, crown molding, etc etc.) There are units for sale in our building that have been completely updated and offer nice finishes - and are now at “bargain” prices.<<

But are the 'completely updated' units now devoid of all the prewar charm that attracts buyers to older buildings? If a renovations involves completely streamlining and modernizing away the original character of a beautiful prewar apartment it can have an adverse effect on value.

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Response by 300_mercer
9 days ago
Posts: 10026
Member since: Feb 2007

George, This part is true. Assume you mean coop requirements by inflexibility.

— The artificially high cost of housing and the inflexibility of the housing market here are probably the single worst part of being in Manhattan.

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Response by theburkhardtgroup
9 days ago
Posts: 2674
Member since: Aug 2008

@nada I don't think most buyers are making that calculation. I'm going to guess yentle purchased her home based on aesthetics and budget.

We're currently in Lisbon (Alfama) in an over 200-year-old apartment, very beautiful and well maintained. Though there is an occasional faint sewage odor in the bathroom, unfortunately typical here.

There's something about the 1960s Paris architecture that is sort of beautifully ugly. Definitely more reminiscent of Soviet era construction. I wouldn't want to own it or live in it though. I remember staying in a friends, very old house in Paris. I absolutely loved it, I thought this would be the dream. They couldn't wait to move out, and wound up building a new home in the suburbs. The amount of upkeep, and hunting around for old pieces to maintain the home was a full-time job. I'd still take it, though!

But I do agree, although space wise, layouts, the '60s white brick buildings of Manhattan are practical. But they are pretty hideous, and always just slightly grimy looking for lack of a better world.

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Response by inonada
9 days ago
Posts: 7559
Member since: Oct 2008

Keith>> @nada I don't think most buyers are making that calculation. I'm going to guess yentle purchased her home based on aesthetics and budget.

That calculation is sorta the same as budget, no? If you run the numbers as of 9 years ago, it would have been (say) $8K/mo for the place. Even at the “bargain” price currently on offer, it’s (say) $12K/mo. That’s asking 50% more out of someone’s budget than 9 years ago, for aesthetics and renovations that are now 9 years more dated. There’s inflation, of course, so maybe the budget of an equivalent person now should be willing to pay $10K or $11K. But to get there, another 15-30% in price cut is required.

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Response by steve123
9 days ago
Posts: 732
Member since: Feb 2009

@nada - I think the problem is the mindset 9 years ago was still similar to the NYC RE mindset from 1998+

NYC RE always goes up / purchase is a one way door / once the numbers work for you to purchase you should do it so you don't get priced out forever.

Of course in retrospect we now know that stopped being true by 2008~2010 or so, and if you squint there were a few periods of good relative value like say the COVID bottom.

Personally I didn't really run a rent-vs-buy calculation in 2016~2017 when I bought. It was more along the lines of - I can afford to buy now, so let's see what I can buy with my purchase dollars. I bought a bigger/nicer place than I ever rented, and never cross shopped a comparable bigger/nicer rental. The closest I did was "well buying this bigger/newly renovated 2bed/2bath will cost me 2x the monthlies of my 30 years unrenovated 1bed/1bath, seems ok".

You can also add the Trump tax code changes as making the numbers worse for owners after they purchased. Personally it raised my net monthlies about 7% at the time... about 9.5% now that my taxes have gone up 2x faster than inflation.

The fact that this mindset continued 10+ years past it being true (and it was only true for about 10 years!) is one reason I post so much, like you, that people need to cross shop simply renting & investing in an index or 60/40 portfolio.

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Response by George
9 days ago
Posts: 1271
Member since: Jul 2017

Or rent in Manhattan and buy in Nowhere. You get a far better tax subsidy by owning investment property - depreciation, all furnishings and repairs, the entire mortgage not just $750k.

Imagine how much better the American middle class would be if their mantra were "own other peoples' homes with leverage" rather than "own your own home outright".

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Response by inonada
9 days ago
Posts: 7559
Member since: Oct 2008

Steve, I understand what you are saying. But even the simple “let's see what I can buy with my purchase dollars” perspective is severely impaired relative to 9 years ago. So I’m not sure why people with that perspective are bemoaning the current situation. Or else had trouble anticipating it as a future possibility when they purchased.

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Response by inonada
9 days ago
Posts: 7559
Member since: Oct 2008

George, where are cap rates is your corner of Nowhere running these days? I was talking to a friend who said Austin single-family is at cap rates of 2-3%. Which, under my KISS principle, would indicate that returns should suck in the upcoming decade(s) in expectation.

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Response by 300_mercer
9 days ago
Posts: 10026
Member since: Feb 2007

Nada,

$1mm+ single family properties in most cities with price run-ups are 3 cap (keeping $1k per month for insurance and upkeep). Example using Zillow price and rent estimates for what they are worth. If you go $2mm plus cap rate drops further towards 2. If you go for median prices home for the city, cap rates are higher.

Desirable area of Dallas due to private schools.

https://www.zillow.com/homedetails/4157-Hockaday-Dr-Dallas-TX-75229/26805342_zpid/
https://www.zillow.com/homedetails/3724-Northview-Ln-Dallas-TX-75229/26810207_zpid/

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Response by 300_mercer
9 days ago
Posts: 10026
Member since: Feb 2007
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Response by multicityresident
9 days ago
Posts: 2078
Member since: Jan 2009

inonada>> "So I’m not sure why people with that perspective are bemoaning the current situation. Or else had trouble anticipating it as a future possibility when they purchased."

I am thinking that inonada is missing w64th about now; w64th would have made that observation in a much less diplomatic way. I miss that poster (though not at all aspects of him). I found him hilarious, and at his best when he was making fun of my personal preferences, which were anathema to him.

@yentle - I asked the board for similar advice when we were selling our first coop in 2019. Everybody told me to to take the hit and move on. We did and sustained a 25% loss of capital without looking back. We are now five years later and it was the right thing to do. The market for what we were offering today is flat to where it was five years ago.

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Response by multicityresident
9 days ago
Posts: 2078
Member since: Jan 2009

*w67th

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Response by George
9 days ago
Posts: 1271
Member since: Jul 2017

If I bought in Nowhere at the price we were recently offered off-market, I'd be right at 3%, with a healthy allowance for repairs. At the price I'm in at, it's more like an 8, with a mortgage below 2.5%. So obviously there's been some run-up, but there's still about 1/2 to 1/3 the inventory compared to pre-covid, which has kept the market robust even if the frenzy is gone.

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Response by inonada
9 days ago
Posts: 7559
Member since: Oct 2008

>> Increase your rental budget and cap rates drop.

How do the numbers work out on that 11K sq ft McMansion? I don't have a good sense for current price, taxes, etc. and am too lazy to track it down given that you already have.

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Response by inonada
9 days ago
Posts: 7559
Member since: Oct 2008

MCR, yes... I think w67th might have said the same thing in a much more colorful way.

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Response by 300_mercer
9 days ago
Posts: 10026
Member since: Feb 2007

I tried but didn' find data. Prices should be $7-$10mm range looking at other listings. Taxes 2% of market value. So take $7mm. $150k taxes + $30k per year insurance and upkeep. $180k. $120k NOI on $7mm.

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