In Contract now - walk away?

As discussed quite a bit around here, it all has to do with your specific neighborhood and situation. Prices in Jackson Heights went up quite a bit during the bubble, but they're still between 300-400/sqft. That's quite a bit different than LIC or BH, which are granted much closer to Manhattan, but don't have the garden coop feel of JH. Plus JH tends to have a pretty close rent/buy ratio, especially in nicer pre-war buildings. Considering that by NYC standards JH is still a relative bargain to buy in, do you think that it will go down at least 10% over the next few years? And even if it does, in a place with a close rent/buy ratio, is it worth it to wait it out and lose the (I'm guessing) 30-40k deposit? Maybe not. But again, it all has to do with your specific situation.

Imagine if someone would have said "should I back out" posts would be happening this year a few months back. They would have been laughed off the board.

I'm wondering if anyone predicted that.

Patrick, I figure if you would be happy moving in, and living there for a while, it might not make sense to give up 10% to time the market...

If you can't afford it, thats another story.

I can afford it - it's in a prewar building just outside of the historic district, closer to the express subway lines - about 250/sq. foot (no garden).

I just keep reading things about the Japanese crash in 1990, and see a lot of spooky similarities - and with so many people saying on this board that I'll lose 50% of its value in 2 years...and with our gov't playing political games around the issue - I'm just getting nervous that I'll be underwater and trapped, should I ever want to move or relocate.

yes, that is possible. I think it comes down to a personal choice. Manhattan numbers say 10% down through August... and that was pre-panic. 10% might be less than the potential loss... BUT, will you have money for a deposit for something else in a year?

Most of the time when people on this board talk of 50%, they are talking about places that saw huge jumps during the boom (Manhattan, nicer parts of Brooklyn, and LIC.) Are places that went from 300/sqft to 700/sqft over the past five years sustainable? Probably not. Is one that went from 150/sqft to 250-300/sqft (like Jackson Heights)? Maybe. I think it will be rental prices that start going back down in JH. Right now a decent 1-bed will cost between $1200-1400 a month. That's really high, considering how affordable it is to buy.

I wouldn't jump out. no there is no guarantee of that a drop of 10% will still be there is 6 years in fact my guess is the value will be up 10-20% by then.

threaten to jump out; ask for further reduction by 20% - if not, consider walking

Jackson Heights, and central Queens hasn't seen the run-up quite as much as other parts of the city at least in terms of dollars (percentage might be close though). A $250k co-op will likely drop (assuming the shit hits the fan) but a $250k co-op dropping to $150k is $100k whereas say an "East Williamsburg" condo dropping from $600k to $300k is a much bigger loss, even though the percentage change isn't that much different. I don't see a JH co-op being as risky, and much more even to the rent/buy math.

Having said all of that, I wouldn't jump on it personally. But at this point I am very much risk-adverse.

How come no one ever threatened me with walking away from their deposit money? I'd have been extra nice about it.
Maybe I should ask more people to read Streeteasy boards...

"threaten to jump out; ask for further reduction by 20% - if not, consider walking"

Yes, Cartman, threaten the owner that has a signed contact and your 10% deposit. This is truly moronic advice.

xellam, I don't know the area well but your price per square ft seems reasonable compared to rents. The question you should ask yourself, is it better to lose 10% now guaranteed or potentially lose 10% when you decide to sell (your timeframe is important here). Additionally, have you done a rent / buy analysis? If you want to look at your home from an investment point of view, the only thing that matters is that over the time you own that buying is cheaper than renting. Play with the numbers a bit, factor in tax benefits and different rates of depreciation and appreciation. On your rent scenario, you should factor in the 10% you are walking away from as a “cost of renting”. Create best and worst case scenarios and make the decision that way. Based on your numbers (and the 10% sunk cost), my guess is you will come to the conclusion that buying is better, but it really does depend on your timeframe.

Those were my thoughts too. Thanks. Feeling better.

Fist time purchase - I'm like a groom with a case of cold feet.

at 250 psf, sign the contract. Your rent will be much higher.

"Fist time purchase - I'm like a groom with a case of cold feet."

Don't compare buying real estate to a man getting married. Buying real estate right now might only put you in the poorhouse, but a wife can drive you insane...

A) 1000sf apt purchase @ 225k (250k - 10%)= $2000/month (Mortgage + CC/taxes)
$1200-1500 of that monthly payment is tax deductible. So this mean $500 out of pocket per month

B) Rent 1000sf apt for $1800/month Not tax deductible.

So why pay $1500 out of pocket per month and rent?

sorry, $1300 out of pocket difference and rent

Go for it! It would be fun to walk away dad!

> So why pay $1500 out of pocket per month and rent?

Because you like money.

$2000 - 500-600 tax savings is $1400-1500. Compared to $1800 in rent, that is $300/400 per month. Given that you have to put down $25k, that is another $100 or more from a CD. So, lets just say $250 gap.

Would one pay $250 for 12 months for the option of buying at a cheaper price?

I'd certainly pay a few thousand to save what could be TWENTY or FIFTY thousand....

NYC10022, he'd be losing 20+k if he walked away from his deposit.

Sorry, I thought we had moved on to a hypothetical example....

My point for the deposit guy was it really depended on whether or not it takes away his ability to put down a deposit elsewhere...

Ah, I see your point now. My mistake.

nyc10022,
my mistake on the math part.
You are correct, $250-350/month savings plus principle = 8-9k a year.
So the price of the apt needs to drop to 215k (from $250k) within a year for him to actually show a loss.

Given its area and the price of 215/sf, I highly doubt he has anything to lose.

Huh? Your math is still off.

Its $250-$350 a month MINUS principal. That is NOT 8-9k a year, that is $4k a year tops, likely more like $2k

Meaning you only need price to get to $240k (a $10k drop) to come out way ahead.

it should be plus the principle.
Part of that 2000 mortgage includes the principle.

$1600 Mortgage includes roughly $350 Principle and $1250 Interest.
Tax benefits of the $1250 is around $500.

$500 + $350 = $850

$2000-$850 = $1150
$1800 RENT vs $1150 Buying

$650 saved x 12 = 8-9k

His equity is $225k from day one. According to your math, he has negative equity by $15k. He is not getting a subprime loan nor my assumptious rate imply that.

This doesn't include the CC which could also be tax deductible.

EEek.

It's not getting any better, is it?

Not yet.