Why does it cost triple to buy what you can rent for?

moron

yep. new york bits & streeteasy are pretty eye opening about this disparity - check this one out:

this EXACT apartment and another in the building are being listed for both for sale and for rent:

http://www.streeteasy.com/nyc/sale/180293-condo-200-west-24th-street-chelsea-new-york

somebody please tell me why it would make more sense to buy this baby at 1.499K than to rent her at $5500 a month?

The more direct comparable is the same layout in the same building listed at $7,500. Little disingenuous to needlessly compare apples and oranges. Too many variable with Steve's rental listing: floor, amenities, type of building, views...need to know these things and you can't from the somewhat self-serving example.

Still, why on earth someone would pay that much to buy OR rent in this building is beyond me. It's far from parks, kinda grungy looking to the west, non-descript around 8th, Whole Foods is too far to walk in crummy weather or with groceries... This is pretty top dollar for poor layouts (bedrooms on the small side and very limited living space for over $2MM). This is one of those buildings that I don't get whether renting or buying. Nothing charming about any of it.

"Whole Foods is too far to walk in crummy weather or with groceries"

At $2.2 million, I'll have delivered.

And actually, on with an almost identical layout to the $2.2 million apartment is

http://www.nybits.com/apartmentlistings/bcb0fefb47c3361821566726ed8f3a3a.html

The rooms are almost exactly the same size - the only difference is one has a half-bath and the other has a balcony (preferred).

there is an apartment in my hood selling for 1.395, renting for 4500

Oops! Messed that post up:

"Whole Foods is too far to walk in crummy weather or with groceries"

At $2.2 million, I'll have delivered.

And actually, ONE with an almost identical layout to the $2.2 million apartment is

http://www.nybits.com/apartmentlistings/bcb0fefb47c3361821566726ed8f3a3a.html

The rooms are almost exactly the same size - the only difference is one has a half-bath and the other has a balcony (preferred).

AND IT ONLY COSTS $3,995!

Of course houser says I'm a "moron" - only a moron would pay $2.2 million for something you can rent for $3,995.

nyc - give us the link!

sorry, I saw it in a window of one of the brokers.... but it seems to be pretty typical.

bc in 10 years that $3,995 rent will be $7,000 and if you bought your payments would be the same and you'd have 10 years worth of equity built up.

Come on steve, this is pretty lazy, especially by your standards. Kylewest points out what I hope would be obvious: it's disingenuous and self-serving to compare these two. We are well aware of your predilection for renting, and yes, it's more expensive to own than to rent, but let's not get swept up in hyperbole here - it smacks of a somewhat perverse agenda. Your comparisons of the same exact unit up for rent or sale were much more valid. Run the same exercise for the apartments at Northside Piers - again, much more useful than this.

> and you'd have 10 years worth of equity built up.

What is 10 years' worth of equity in a declining market worth? And how much will you have overpaid for that equity after interest payments?

"if you bought your payments would be the same and you'd have 10 years worth of equity built up"

Actually, no, because the property tax is abated & will probably go up to $2k a month from where it is now.

"you'd have 10 years worth of equity built up."

Not if the price falls by 50% - it would seem to have to fall that much to equal rents in 10 years.

"Your comparisons of the same exact unit up for rent or sale were much more valid."

They are valid, but it's always better to compare market rental buildings because they're professional landlords.

You must say that the $3,995 apartment has room sizes and a layout that are almost identical to the $2.2 million apartment. You say, "it's more expensive to own than to rent." First, it shouldn't be since you get the same thing, and second, tell me why the $2.2 million property is worth that price.

Please.

Steve- don't you get bored constantly harping about how it's always smarter to rent than to own? You're not going to convince anyone on this site. People have personal reason as to why they would want to buy or rent. Why don't you just keep it to yourself. You're really painful and you provide a dis-incentive to read these blogs. If streeteasy had any sense, they'd ban you because you drive traffic AWAY from their site.

Let me also add I have no "predilection" for renting - I currently do both. I do, however, have a predilection for whichever is cheaper.

The answer is that is does not cost triple to buy what you can rent. steve likes to make misleading comparisons of different apartments in different buildings and say they are identical.

Here is a whole set of examples...

http://www.streeteasy.com/nyc/building/20-pine-street-new_york

20 pine... tons of these studios down to $2500. Outside of heigh/views, they're all exactly the same.... sub zero kitchens, big bathrooms, washer dryers

Taking the avg. rent of the studios, you get $2800 or so.
Average of the 10 *cheapest* listings... $800k
Thats a 24x ratio...

If you look at what these actually sold for, the ratio jumps to 30x pretty quickly.

"The answer is that is does not cost triple to buy what you can rent."

Spoken like LICC - "The answer is that is does not cost triple to buy what you can rent."

But apparently it does.

"You're not going to convince anyone on this site."

I think I've convinced a bunch of people, actually.

"Why don't you just keep it to yourself."

What are you, a communist? You like to suppress dissent?

I like to suppress annoying gnats, which is what you are.

Be careful, stevejhx. If you try to rock the boat too much, they (the brokers, developers, investors) may force you to be "re-educated". NYC is immune to the economy just the way Wall Street is immune to...oh wait...nevermind.

"You say, "it's more expensive to own than to rent." First, it shouldn't be since you get the same thing, and second, tell me why the $2.2 million property is worth that price."

A lot of things "shouldn't be" but the fact is that it IS more expensive to own, as you yourself have stated so many times. I am actually in agreement with you that it should change, though for all the perfectly good logic about renting vs buying, most people will pay some kind of premium to own. No way will it be 100% (or 200% for that matter), but it is there. Your comparison was just a bit lazy, as you wrote that the apartments are "about the same size in about the same neighborhood in about similar buildings." If someone used those criteria for two other such "about the same" units to conclude that renting costs are about equivalent to owning costs, I think you'd be right here with me denouncing that kind of comparison.

iMom, it's not about "rocking the boat"; it's about holding someone's feet to the fire when they make a dubious claim, from EITHER side of the discussion.

ok it seems there was some confusion about the example I put up. The building: 200 west 24th street. 2 apartments are listed both for sale or for rent:

#3B is for sale at 1,499,000 & for rent at $5,500.

#9A is for sale at 1,749,000 & for rent at $6.995

I actually went to an open house and saw both these apartments & the (newer) rental listings are for the same apartments.

Can we agree that this is an actual apples to apples comparison and discuss rent vs buy without bickering about bad examples?

Here's the link to the building

http://www.streeteasy.com/nyc/building/200-west-24-street-manhattan

"dubious claim"?

If I were comparing an apartment in Hell's Kitchen to one in Tribeca, that would be dubious. What I'm comparing is two relatively new apartment of approximately the same size right around the corner from each other. There's nothing dubious about that.

Sure finishes and amenities will be different, and that's worth some premium, but certainly not 3x. The comparison wasn't "lazy" at all - it took me some time to find it.

"If someone used those criteria for two other such "about the same" units to conclude that renting costs are about equivalent to owning costs, I think you'd be right here with me denouncing that kind of comparison."

Absolutely not. If you ever watch House Hunters, or have hunted for your own, you'd know there are always trade-offs. For instance I live in Chelsea and wanted to stay here, but to me Hell's Kitchen is a fine neighborhood if I can get 1200 square feet with 2 balconies on the 20th floor - for less than my 950 square foot 8th floor unit with a view of the old Barnes and Noble. Just my trade-off.

If you need to know, I don't care if I own or if I rent since I do both, but if I can lock in a good capitalized rent by buying at a good price, I will. However, there's no way in the world I could buy that rental property for anywhere near what it would cost me to rent.

My feet are icy cold right now.

"annoying gnats"

Riv_Drive, you must be a broker, or at minimum someone with an overpriced apartment on the market.

I think its apples to apples if you are talking about THE SAME APPLE. ;-)

But, yes, I think we have some pretty clear examples there...

bjw2103: I was referring to Riv_Drive and his/her comment to "Why don't you just keep it to yourself." Funny that someone would say that on a...hello...discussion board. Apparently, only those who agree with Riv_Drive and those of his/her ilk are allowed to post. Everyone else should just keep their opinions to themselves.

So, should I rent or buy in 200 west 24th?

Steve, why did you search so long ("it took my some time to find [the example]") when the same building offered the perfect comp? By selecting the same building, you control for building quality, exact location (the two you chose may be around the corner from one another but one may have river views while the other looks at another building and sits next to a firehouse), relative finish quality within the apartments, amenities... I think you wanted to press your ever-present point and stretched unnecessrily to do so. Now you are getting spanking and digging in your heels instead of just saying, "okay, same building comps are even better and my point stands that it is better to rent."

mrsbuffet, your examples are obviously fine and indeed show the rent vs own is out-of-whack in that building. It's not even close to 3:1 though; it's slightly under 2:1, which is not good, but a far cry from what this thread is titled.

stevejhx, there are obviously trade-offs between units, and yes, I have searched quite a bit in the past. But just because two buildings are "around the corner from each other" does not make them apples-to-apples. Case in point, I used to live on Elizabeth St, literally steps away from what's going up at 211 Elizabeth. My building was a fairly beat-up walkup building, with zero amenities, and from the floorplans I saw for 211, there are similarly sized units there. Proximity and square footage are not enough for a good comparison - kylewest laid out the variables quite well in his post. And the sale you cited is quite the anomaly given the markup from the closing only last April at $1.545m.

Kyle, I said there's nothing wrong with either comparison - asking prices asked by professionals (market rentals) are more accurate than rental prices asked by condo owners, who aren't familiar with the market and have a real estate agent who wants a fatter commission. Whereas rentals in the same building (often) control for other factors, such as amenities.

How much those amenities are worth are demonstrated by comparing similar units in different buildings.

All the comparisons are accurate - they demonstrate different things.

iMom, sorry for the confusion - I am actually here for the discussion - just trying to keep a certain level of accountability around here.

I like dissent but Steve posts the same thing over and over and over and over and over and over and over and over again. It gets REALLY old.

Let me guess, Steve - you're single!?!?!??

This statement has a lot of truth to it "asking prices asked by professionals (market rentals) are more accurate than rental prices asked by condo owners, who aren't familiar with the market and have a real estate agent who wants a fatter commission. Whereas rentals in the same building (often) control for other factors, such as amenities."

There is never really an apples-to-apples comparison here. A condo (or co-op) leased out by the owner isn't the same asset class as a multifamily rental building.

So a rental in the same building, with the same layout, is asking $7500, but steve decides to instead compare the apartment to a $4200 rental in a different building? It's sad seeing steve stretch like this to avoid embarrassment. Dubious - hmm, that's an interesting word to describe steve . . .

Guys, lets move on and get back to the post. Agree that Steve's comparison was a little sloppy, but that point has been made... and some more ideal comparisons have already been given.

Get back on point.

also, just because you find a few examples where it is cheaper to rent than own doesn't mean that is always the case

nyc10022, definitely. I'm in agreement that there are a lot of places where it's close to a 2:1 ratio (assuming 20% down). mrsbuffet's example is "more ideal" as it's the same unit. I will say interest rates are quite low right now, even for non-conforming. Hell, if you put 50% down on that unit renting for $5500 at the current rates, renting vs owning is close to a wash on monthly costs (and this is assuming you pay full ask) - I recognize 50% down is not typical, but it's worth mentioning. If rates jump back up (which I think they will), the renting argument is even easier to make however.

evillager: "also, just because you find a few examples where it is cheaper to rent than own doesn't mean that is always the case"

Unfortunately, no one has ever been able to provide an example of the opposite case.

"I used to live on Elizabeth St, literally steps away from what's going up at 211 Elizabeth. My building was a fairly beat-up walkup building, with zero amenities, and from the floorplans I saw for 211, there are similarly sized units there."

Fully agreed, but the two buildings I picked are very similar. The one to buy is somewhat more luxurious, but at what cost?

"I will say interest rates are quite low right now, even for non-conforming"

Not really - you'll need to put down a ton of dough.

> Hell, if you put 50% down on that unit renting for $5500 at the current rates,
> renting vs owning is close to a wash on monthly costs

So I can pay $700k for the right to keep my monthly payments same as rent. You sold me! I'll never rent again.

;-)

stevejhx, I'll admit, I don't know if those two buildings you picked are that similar, but the listing doesn't provide much. The building website has more info, but still a bit lacking. Either way, no denying the seller of the other unit you pointed out is out of his mind to mark it up so much after such a short amount of time. Unreal.

nyc10022, was having a little fun with the math there - definitely did not mean that to advocate doing such a thing. The $700k though is not JUST for the right to keep payments equal, but I think you know that. Anyway, good talk guys, enjoy the weekend!

nyc10022 - agreed - when you're pulling 700K out of other investments to pay what you would to rent it just sounds crazy to me - what are the arguments for doing just that (buying vs renting at these levels), if any? THis is the exact dilemna I'm dealing with right now with my apartment search... I'm interested to hear what the owner-bulls have to say.

I agree with steve that this apartment is WAY overpriced at 2.2M but comparing it to that nybits postage stamp is well, stevejhxish.

"Unfortunately, no one has ever been able to provide an example of the opposite case."

You should be a politician steve, you spin more than pertfitz. Just because you won't agree with the examples posted on this board (many times), doesn't mean it hasn't been done. We don't need you to admit you are wrong; the people on this board are perfectly capable of seeing through your bull. Case in point....this thread.

Common Charges: $956
Taxes: $426
Ok, so now we need to make some decisions based on mrsbuffet's comps.
1. Down payment (everyone ok w/ 20%?)
2. Mortgage Rate
3. Percentage annual increase in rent
4. Annual home apprciation
I realize # 3 is going to cause a battle. We might want to consider a few different scenarios.

http://housemath.us

It's all right there. Does all the math for you, and gives you the rental comparison. You'd be surprised - I threw in mrsbuffet's numbers (since its literally the exact same unit) and with a 10 year horizon, using the defaults for everything (except: 7.5% mortgage, since its jumbo) and buying is actually $500/month cheaper than renting.

Of course it assumes 0.5% appreciation over inflation. It also expects rents to rise exactly with inflation. If there's depreciation, or market rate rents decrease, renting is clearly the right answer. Maybe both will happen, maybe not, only time will tell.

"Just because you won't agree with the examples posted on this board (many times), doesn't mean it hasn't been done."

You posted on very odd example on 23rd Street that I agreed was approximately in equilibrium. LICC claims to have posted an entire building, but I can't find that post anywhere and he refuses to cite it again (because it doesn't work). There was also a website (forgot the name offhand) that showed the same thing.

"the people on this board are perfectly capable of seeing through your bull"

There are the apartments, go to their websites, view the amenities, etc., etc., and so on and so forth, and give me a proper price for the one listed at $2.2 million.

steve, just compare it to the $7500 in rent, no need to compare it to the $4200. It still priced at an incredibly stupid level.

By the way, I enjoyed the “Tasered” thread and your thoughts on the situation.

Thanks, JuiceMan.

tech_guy: "buying is actually $500/month cheaper than renting."

There are fatal flaws with that analysis.

1) it assumes ever-rising property prices.
2) the property tax rate is twice that for condos in Manhattan - that's the rate for single-family homes
3) NYC income tax is excluded
4) NYC mortgage tax is excluded
5) Transfer and stamp tax is excluded
6)and most fatal: someone who can afford to pay no more than $5,500 per month CAN'T afford to pay $9,767 in monthly payments.

PITI PITI PITI: Principal, Interest, Taxes, Insurance can be up to 30% of your gross income. That equals 40x monthly rent, which under normal interest-rate conditions yields a price-to-rent ratio of 12. 12 x 5500 = $660,000.

Depending on the interest rate, on a PITI basis, that apartment should cost between $650k and $750k, not $1.499 million. It is twice overpriced compared to rentals.

Facts are facts: with a standard mortgage the same people who can buy that apartment can't rent it. But since you're living in the same place, it should cost the same.

tech_guy, why do you believe apartment prices will go up faster than inflation?

e_c, the issue is PITI. Sure I'd pay $10,000 a month IF I COULD.

It's a PITI that I can't.

You can rent an apartment, and you can buy a home. That is the difference. Sometimes home buying will be extra expensive compared with a simple utilitarian view of shelter in a rental, but over the long-term it is hard to say they are comparable.

Anyway, someone made the comment that in 10 years you will build up equity. The way mortgages work, interest rate will affect this calculation, but typically around year 20 in a 30 year mortgage your debt balance will be reduced by half, not after just 15 years. So 10 years wouldn't get you 1/3rd but much less (you can run mortgage calculators through Google or Microsoft Excel to get the exact numbers).

I still can't believe, that people are still arguing rent Vs own equation. If you can't see, that renting in NYC is much cheaper today, even more then ever, then you need, to have your head examined.

At this stage of the game, if you still believe that buying is cheaper then renting in NYC, I'm sorry but you are one step below slow.

Every single person who believes buying is cheaper fits into one of two categories.

1. Broker
2. Bought at the height.

Or perhaps you qualify for both, in which cases makes you a bad at your job.

Here is the building, posted for a second time because steve didn't see it the first time even though it was posted right in the thread:

http://www.streeteasy.com/nyc/building/245-east-54-street-new_york

The after-tax monthly costs compared to rents in this building seem pretty reasonable.
People place a premium on owning, not on renting. It doesn't make sense for initial ownership costs to be less than renting.

I am obviously late to this thread. Steve's original example is interesting because we are looking at the Ellington to possibly rent there. I am fairly familiar with both the rental market and the RE market for these types of apartments. I am also fairly familiar with the area.

I must say that the Ellington listings are definitely outliers on the low end of the rental range for an apartment like Steve shows. Most like that I see are anywhere between $4700 and $5700. We were planning to actually check out the Ellington tomorrow, so I will report back whether we see anything about their 2-bedrooms that explain the low-ish prices.

On the other hand, the condo at 310 W 52nd is ridiculously overpriced, especially given the 2007 transaction price. Forget $2.2MM If the seller manages to break even after transaction costs, I will try to take negotiation and marketing lessons from them.

Like others on this thread, I agree with you both that (1) renting is cheaper than buying and (2) RE prices in NYC should come down, but the example you give is nowhere near typical.

Renting in NYC is exorbitantly expensive. Period. As is buying.

"Here is the building, posted for a second time because steve didn't see it the first time even though it was posted right in the thread"

Which apartments, LICC? I don't see an apartment for rent that is readily identifiable as for sale, as well.

"The after-tax monthly costs compared to rents in this building seem pretty reasonable."

Unfortunately, under the Universal Law of PITI, the tax benefit isn't taken into account to obtain financing, so you can't use it. The fact is, the same person who can rent those apartments cannot buy them.

"People place a premium on owning, not on renting."

Actually, no they don't. Not historically, only recently. Sometimes it's even more expensive to rent - like when prices start plummeting and no one dares to buy.

"It doesn't make sense for initial ownership costs to be less than renting."

Why not?

"You can rent an apartment, and you can buy a home."

That is a nearly unique American psychological introject, thank you National Association of Realtors. In many parts of the world - Switzerland, Germany, for example - the norm is to rent, as it is in NYC.

Newbuyer, I've passed by the Ellington a few times but never been in. Let me know what you find, because from the looks of it I can get 20% more room for 20% less than in Chelsea, and I like Hell's Kitchen. I'd miss things about Chelsea, but Central Park is right there.

"Central Park is right there?" What map do you use? It is nearly 1/2 mile away. That's like saying someone who lives on Avenue A lives right near Washiington Sq. Park. Why do you say things like that?

"Unfortunately, under the Universal Law of PITI, the tax benefit isn't taken into account to obtain financing, so you can't use it. The fact is, the same person who can rent those apartments cannot buy them."

So you are saying that if you can afford to buy, you can use the tax deduction in the rent vs. buy calcs and if you can't afford to buy, than you can't use the tax deduction in the calcs. ok, that works for me.

I know you don't like the neighborhood, kyle, but I walk more than 6 blocks to the gym.

"That's like saying someone who lives on Avenue A lives right near Washiington Sq. Park."

What map do you use? 1st, 2nd, 3rd, Lexington, Park, 5th - that's 6 crosstown blocks as opposed to 6 uptown blocks. You have lived here long enough to realize that crosstown blocks are significantly longer than uptown blocks? An equivalent distance would be from 53rd Street to 70th Street.

What, JuiceMan? Please re-explain your question.

What I'm saying is that a person who can rent an apartment at $4,200 cannot afford to buy it at $2.2 million, because they don't qualify for the financing. I'm also saying that when you look at the price-to-rent ratio you can't explicitly take the tax benefit into account because a) it is already implicit in that ratio; and b) it is not included in the PITI ratio for financing, so you can't get financing based on it.

Is the benefit real? Yes. Is it available to the person who can afford just $4,200? No.

Yet it should be. 30% PITI = 40x monthly rent (repeatedly proved) = approximately 12x price-to-rent ratio (depending on the interest rate and other factors). The modality of tenancy should make no difference - buying, renting - since you're getting the same thing.

Did I forget Madison?

Quoting steve and answering inline:

1) it assumes ever-rising property prices.

"Robert Shiller's plot of U.S. home prices, population, building costs, and bond yields, from Irrational Exuberance, 2d ed. Shiller shows that inflation adjusted U.S. home prices increased 0.4% per year from 1890–2004, and 0.7% per year from 1940–2004"
http://en.wikipedia.org/wiki/Housing_bubble

0.5% above inflation has strong nationwide, historical history. It has more data backing it than any other predictions here, bearish or bullish.

2) the property tax rate is twice that for condos in Manhattan - that's the rate for single-family homes

I added the tax to the monthly maintenance and removed the tax listed.

3) NYC income tax is excluded

No it isn't

4) NYC mortgage tax is excluded

Wrong again

5) Transfer and stamp tax is excluded

So add it? I don't know the details of all the closing costs (mine was a coop, so I didn't have to worry about most) - but you can change any number you want. And I doubt these costs will eat up 500/month.

6)and most fatal: someone who can afford to pay no more than $5,500 per month CAN'T afford to pay $9,767 in monthly payments.

We've had this conversation before. Just because some guy down the street can afford to rent but can't afford to buy doesn't change the buy vs. rent calculations for me. He's in the rental market creating demand, which props up prices, which contributes to *my* rent vs. buy decision for capitalizing my rent, as you put it.

As part of steve's bizarre contortions to justify his wacko analysis, he insists that you can never factor in the tax benefit of owning, because someone who rents at their maximum approved level could not get approved for financing at an equivalent price to buy. This is a ridiculous argument, because it assumes that everyone is renting at their maximum approved amount. This assertion has been shown to be nonsense time and again on these boards, but steve keeps saying it, like a parrot over and over, because he knows his conclusions fall apart like a house of cards when you analyze them realistically.

tech - in prior threads I've provided data showing that in Manhattan, real estate has appreciated at an annualized rate of 8-9% over the last 35-40 years.

steve, it wasn't a question, I agree with what you said. The equilibrium is different for someone who can't afford to buy vs. someone who can. The tax benefit changes the equilibrium for someone that has the financial resources to buy and will change further depending on the tax bracket. If you look at rent vs. buy calcs only from the perspective of people that can't afford to buy, then of course it doesn't make sense to use the tax benefit. When you look at rent vs. buy from the perspective of people who can afford to buy (down payment, income, etc) than the tax benefit is critical in the calculation and will increase importance as your income increases. It is disingenuous to only look at it from a perspective of people that can’t afford to buy the property.

"This assertion has been shown to be nonsense time and again on these boards"

Ignore the mosquito that is LICC - he lives in Long Island City for a reason.

"in prior threads I've provided data showing that in Manhattan, real estate has appreciated at an annualized rate of 8-9% over the last 35-40 years"

Ignore the mosquito that is LICC - he lives in Long Island City for a reason.

tech_guy - I only see NYS income tax and mortgage tax; NYC has a surcharge. Did you add in an abated tax, or the actual tax rate?

But moreover, the Case-Shiller index is a moving average since the end of World War II. Look at the graphs of appreciation / depreciation over time. Look at what has happened to prices since 1990.

http://en.wikipedia.org/wiki/Image:Barrons_BubblesNewHome.png

Manhattan is in fact worse than Boston and the New York Metropolitan area.

If you think that is sustainable, then put your money into the market.

steve: you're right, no NYC tax rate. However, that *helps* the purchase argument (more of a tax deduction). Under "NY Closing" however, there is a "NYC Mortgage Tax" item.

I used the abated rate. I didn't look close enough to find the actual rate. I did put my money in this market, but in a coop, so I don't know (or care) what all those weird condo rules are. But, you can adjust every number on housemath, so adjust it for what you think is right.

Personally, adjusting it for exactly what I paid recently, my "capitalized rent" has a savings over my current rent (significantly smaller / worse condition place), and a *significant* savings over equivalent rent of what I bought. In fact, the place can *depreciate* by 2% annually in real terms over the next 10 years, and I still come out slightly ahead (but not far enough ahead that I'd take the risk, if I thought that had a significant chance of happening).

Misconception: taxes never "help" because you never receive a tax benefit equal to your tax payment.

I also own a co-op in Suffolk but - at these prices - I won't invest in Manhattan, not even long-term, since in the short-term I can get twice the rental apartment for what I can get if I bought.

Hey mosquito: "Here is the building, posted for a second time because steve didn't see it the first time even though it was posted right in the thread"

Which apartments, LICC? I don't see an apartment for rent that is readily identifiable as for sale, as well.

steve: Trust me, I know math pretty well :) You're right that taxes never help. But while I can choose whether or not to buy an apartment, I can't choose whether or not to pay taxes. Now since I'm already paying NYC tax whether I like it or not, adding it to the rent vs. buy calculation undeniably helps me.

Unless you know something about tax evasion that I don't, but that's very much outside the rent vs. buy discussion ;)

Are you subject to AMT?

steve keeps saying he can get twice the rental apartment for what he can buy, but of course he has yet to show any example that supports his claim.

LIC is a great up-and-coming area in a great location with lots of young professional and creative types living there and moving in. I agree that steve wouldn't fit in at all.

LICComment- I heard that 5 SL is unofficially accepting lower bid, they just don't want to advertise price reductions. Did you hear anything?

Just my POV - The Ellington is not that nice once you get inside. I looked at it a 5 years ago (because it seemed less than other rentals in the area) and passed. It just sorta' felt seedy...just my POV.

I am subject to AMT.

"steve keeps saying he can get twice the rental apartment for what he can buy, but of course he has yet to show any example that supports his claim."

LICC, click on the links that start this thread, then get out of my hair.

AMT phases out the federal deduction for property and income tax.

"I looked at it a 5 years ago"

Hells Kitchen is not today what it was 5 years ago - fully agreed.

I haven't heard dco. Where did you hear that? I'm seeing a friend of mine tonight who knows some people at 5SL, I'll ask her if she knows anything about it.

During research and need to keep up with market conditions, I got it from the horses mouth. It's about 86% sold and they are worried about the remaining 14% and possible flippers. If you look, you will see several units back on the market. Even if they try and sell, for the same price, it's cheaper then buying from 5 SL, because of the increased in closing costs to the buyer. Also some buyers are actually selling their parking spots, as part of the sale. At the height 5 SL sold these spots for $70,000.

It's just the beginning and LICC I'm not just saying that about LIC. I find your insight about the neighborhood to be useful, that's why I direct my LIC questions at you.

Steve and I-MOM: It seems to me that while the Manhattan market is certainly not immune from the effects of the lousy macroeconomy, it has held up pretty well. So yeah, it is different. Could be we'll see some price drops, but we're three years into the national housing crisis, and while things may be deflating a little bit, I haven't heard any loud crashes or bursts.

I-MOM, I don't why I have always pictured you as Sarah Palin. Always, even before the bridge to nowhere.

"we're three years into the national housing crisis, and while things may be deflating a little bit, I haven't heard any loud crashes or bursts."

Because, as is documented all over the place, NYC tends to lag the country in economic downturns, which also tend to last longer here. You haven't heard any "loud crashes" yet because the first one was barely a year ago, when the first Bear mortgage funds went under. That began a crisis that is just now working its way through the system.

Because of good layoff packages, the unemployment figures don't show up for 6 months. Last year was - because of a good first half - still a record bonus year. This year there won't be many bonuses, even for those who still have jobs. Especially if their jobs are shifted to the commercial banks (JPM / BAC) which typically don't pay big bonuses.

It's just a lag. The figures you're seeing are for new development that went into contract 12-18 months ago. Nothing is going into contract now.

First off, PLEASE stop arguing whether the tax deduction can/should be taken into account when comparing rent vs. buy. It's been covered many times, and any reader can form their own opinion. Regardless, whether the reader agrees with Steve or not (I don't) going over the same arguments won't change that reader's opinion, so please let it be.

I do agree with Steve on the proximity to the park, though. I love the park, and for me critical question is - can I walk there reasonably quickly on a regular basis. Anywhere below, say 45, the answer is no. From 52nd and 8th, it's less than a 10-minute walk, which is great.

We went to the Ellington today and saw several apartments. Saying the building and apartments are run-down would be an exaggeration, but not by much. The carpets and walls in the hallways are dirty. The apartments are very plain. The appliances, cabinets, etc. are about as plain/low-end as I've seen in a doorman building. None of this stuff is deal-breakers necessarily, but I can see why it necessitates a discount to similar sized apartments. Also, they are doing work on parts of the buildings, apartments, balconies, and it's unclear when it'll be finished. One of the apartments we saw was 17C, which has an amazing, huge terrace. Except, it's closed, in total disrepair, and the doorman thought it won't be ready for a year. We'll call the leasing office when they reopen on Monday to confirm this.

Ellington is an older building - like 20 years old. Thanks for the information, however. I'll look into it in a few weeks. Personally I'm less interested in the state of repair than I am in getting the space, but that's a trade-off I'll decide on when I see it.

BTW the tax benefit can be use in certain equations, just not in PITI or the price-to-rent ratio. It is used in imputed rent and owner's equivalent rent.

Hey dco- I saw on AFine's site that he has a resale at 5SL. It will be interesting to see if they get the price. He is asking $799k for a decent-sized low-floor two-bedroom, without much of a view of anything. It will be a good sign if he gets that price or close to it.

"we're three years into the national housing crisis, and while things may be deflating a little bit, I haven't heard any loud crashes or bursts."

Crash.

(7% and sinking)

50%.

Look at all the new buildings going up, every last one of the geared to the same market: luxury condos for the Wall Street set. Some buildings are lucky enough that they can convert floor plans into rentals (smaller, less luxurious); others are stuck with marble countertops and - yes! - "pods" that look like crap.

Just look at the listings for Manhattan: open listings hovering around 8,000 (a one-year supply in a good year), while total listings down. That means that closings are happening, but nothing is going into contract.

No Bear bonuses. No Lehman bonuses. No Merrill bonuses. Goldman will pay, but not Morgan Stanley or JPMorgan - because they don't have to. At least not in cash. Rather, restricted stock that doesn't vest for years, as an incentive to get people to stay. Of course they'll stay anyway, since there's nowhere else to go.

Don't forget that with the average hedge fund down 5-10% there will be no bonuses this year or NEXT year as they have to make up a high water mark.

"pods" that look like crap"

"pods", one of those phases that we will all laugh about in five years. What a freakin joke.

"Because, as is documented all over the place, NYC tends to lag the country in economic downturns"

Steve - I'm new here and would appreciate you pointing me to such an analysis. I agree that NYC has lagged in this particular real estate cycle -- it peaked later and is crashing later. And crash it most certainly will.

However, my recollection of the last cycle was that NYC was one of the earlier ones to start to fade, in 1988 or 1989. This is a long time ago and I was young then; i'm not completely willing to trust my memory so any links you could post would be much appreciated.

Bonuses? When they're trying to rebuild capital? If there are bonuses, they will be niggardly, and in stock.

Pods. Imagine being stuck with one of those! Great for resale values: "Care to touch my pod?"

Admiral, many posts have linked to articles that say that slowdowns tend to start later in New York - you can search the conversations. I wasn't living in the country in 1988 or 1989, so I don't know. What I do know is that prices crashed in 1988 and didn't recover in nominal terms until 1998, and in the period leading up to 1988 they didn't go up by nearly as much as they have over the past 5 years: 100%.

I was ridiculed when I first started posting here about the impending crash in Manhattan - all the indicators pointed toward it. Now, however, there are just a lonely few....

Bonuses? When they're trying to rebuild capital? If there are bonuses, they will be niggardly, and in stock.

Me and my husband are getting a bonus this year. It will be down. But it will still be handsome.

My friend at Lehman said the same thing...

Will you be buying NYC real estate with your handsome bonus?