Another Building Where Carrying Costs Exceed Rents

stevejhx: Some big reductions at Chelsea Stratus today. Any closer to equilibrium there?

I'm looking at the D line and despite the reductions they're still nowhere near breakeven:

26D:

StreetEasy History

04/27/2007 Listed in StreetEasy by Elliman at $1,870,000
11/24/2008 Price decreased to $1,665,000

Total Monthly Payment: $10,522

24D:

04/19/2007 Listed in StreetEasy by Elliman at $1,715,000
11/24/2008 Price decreased to $1,645,000

Total Monthly Payment: $10,402

19D:

04/20/2007 Listed in StreetEasy by Elliman at $1,705,000
11/24/2008 Price decreased to $1,585,000

Total Monthly Payment: $10,044

Rentals, same square footage and description:

10/20/2008 Listed in StreetEasy by Elliman at $6,800
11/10/2008 Elliman listing entered contract

StreetEasy History

08/27/2008 Listed in StreetEasy by Elliman at $8,995
10/31/2008 Price decreased to $7,750
11/20/2008 Price decreased to $6,950

I don't know what 9D thinks they're trying to sell, given the much lower prices on higher floors:

StreetEasy History

03/25/2007 Listed in StreetEasy by Elliman at $1,485,000
08/21/2008 Sale closed for (insiders only)
09/05/2008 Price increased to $1,880,000

We've already determined that this buyer paid more than asking - about as much as 19D is currently listed for.

So no - not close to breakeven, and still more expensive than the falling rents at all the rental buildings across the street.

BTW add to that that Chelsea Stratus is tax abated, and over I don't know how many years the real estate taxes will rise to probably about $2,000 a month for units in this price range, and you will see that the building is still 50% overpriced.

I don't know why I am doing this but

1 Why is it relevant finding examples of some seller setting a purchase price too high relative to the rent they are asking. What if the seller asked 20k to rent 8D? Would that mean the asking price on the sale was cheap? What is the point of all this?

2 Why do you keep using 7.5%? Don't answer, I know your answer. Its just not reality. I got 5.5% money on a 15 year fixed 3 weeks ago fyi. My buddy got low 6s on 30 years, the countrywide broker has quoted low to mid 6s on 30 year money again and again. Your point, that renting is cheaper then buying, will still be true without your overstatement and manipulation of the facts.

3 8D is not a 2 bedroom. Its a 3 bedroom, albeit with a small living area, with tons of outdoor space. Not to mention that the quality of the apts you mentioned are not comparable to the Oculus. Again, doesn't change your point, still overpriced, way overpriced. You don't have to fudge.

There goes steve with his misleading, cherry-picked, incorrect-data rent ratio analysis again. He really is stubborn when it comes to pushing wrong information to justify himself.

"My buddy got low 6s on 30 years, the countrywide broker has quoted low to mid 6s on 30 year money again and again"

Conforming or jumbo?

ccdevi:

1) Because you wouldn't buy an apartment to rent to someone else for more than it would cost you to carry it, so therefore it is irrational to buy an apartment to rent to yourself for more than you could get to rent it.

2) According to bankrate.com, national averages:

30 yr fixed jumbo mtg

This week 7.36%
Last week 7.53%

Chase won't even quote such a rate.

If your "buddy" got an ARM, that is not the proper rate to use as you need to use the long-term fixed rate for a long-term fixed asset. Otherwise, you're assuming an interest rate risk that you will have to adjust your rate for, which will give you - voila! - the 30-year fixed rate.

3) I didn't quote the price for 8D. I quoted the price for 9D.

I answered dwell's question - that's why the Chelsea Stratus data are there.

Those are the data for two new development buildings. I defy anyone to obtain data that contradicts these - they don't exist.

Ignoring comment by LICComment.

I got 5.5% money on a 15 year fixed 3 weeks ago fyi.

Show me where I can get that quote. You've been telling this tall tale for months now.

ha ha, god you make it so easy.

"Because you wouldn't buy an apartment to rent to someone else for more than it would cost you to carry it, so therefore it is irrational to buy an apartment to rent to yourself for more than you could get to rent it."

Well no thats not correct at all but who cares, its totally non-responsive. Again, what is the point of these examples?

"If your "buddy" got an ARM"

not an ARM or I would have said so, I don't fudge like you to make my point.

"I didn't quote the price for 8D. I quoted the price for 9D"

Are you feeling ok, please look at your first post in this thread.

" I defy anyone to obtain data that contradicts these - they don't exist."

What are you talking about? Data to contradict what?

"Show me where I can get that quote. You've been telling this tall tale for months now."

I am available tomorrow to meet you. West81 can come as witness/judge. Bring $1,000. If I do not produce documentation showing my jumbo loan for 15 years fixed at 5.5% that closed in the last month, I will give you $10,000.

C'mon Steve think of something smart to say.

Or you can just keep talking out your ass. Your tolerance for looking stupid knows no bounds.

<<2) According to bankrate.com, national averages:

30 yr fixed jumbo mtg

This week 7.36%
Last week 7.53%>>

A quick check shows at least one lender with 15 year fixed jumbos at 6.125% and 30 year fixed jumbos at 6.25%. Hudson City is a great bank that doesn't sell their mortgages. I suspect mortgage brokers need to charge higher rates than direct lenders as the securitization market is currently broken.

http://www.hcsbonline.com/site/mortgage_ny1_frm.html

ccdevi: OK, but you'll both have to come uptown. I have kids to drop off / pick up.

For current rates, Manhattan Mortgage is pretty reliable. Currently, 15-year fixed zero-point jumbo is 5.75%. 30-year is 6.375%.

http://www.manhattanmortgage.com/ratefinder.asp

When steve knows he can't win an argument with a particular person, he does his "ignoring comment" bit.

ccdevi, you're too easy:

"Imputed rent is an imputation for the net rental income of owner-occupied housing. It is based on the assumption that owner-occupants are in the rental business and that they are renting the houses in which they live to themselves: As tenants, they pay rent to the landlords (that is, to themselves); as landlords, they collect rent from their tenants (that is, from themselves), they incur expenses, and they may have a profit or a loss from the rental business."

http://www.bea.gov/regional/definitions/nextpage.cfm?key=Imputed%20rent

Therefore, if you are, economically, effectively in the business of renting to yourself, it is illogical to pay amortized rent for an apartment in excess of the carrying costs.

You can read the theory behind it here:

http://www-rcf.usc.edu/~yongkim/housingApril08.pdf

It will explain to you the correlation of rents to housing prices during certain time periods since WWII.

"I didn't quote the price for 8D. I quoted the price for 9D"

I certainly hope that the rest of your argument is better, ccdevi, since I quoted 8D for Oculus, and 9D for Chelsea Stratus, and your question was about Chelsea Stratus. That's pretty lame on your part.

Or, to put it in your words, "Your tolerance for looking stupid knows no bounds."

I'm neither interested in giving you $1,000, nor do I need your $10,000. Simply tell me the bank and I will obtain a loan quote from them, either by calling, or by accessing their website.

"Or you can just keep talking out your ass."

"at least one lender with 15 year fixed jumbos at 6.125% and 30 year fixed jumbos at 6.25%."

A far cry from 5.5%, and "Hudson City is a great bank that doesn't sell their mortgages," and that has very strict underwriting standards.

modern, mortgage brokers are not reliable. Here are Bank of America's (and hence Countrywide's) current rates:

Mortgage Type Current Rate Points APR Monthly Payment


30-Year Fixed-Rate Jumbo 8.000 3.375 8.444 $5,870.12


30-Year Fixed-Rate Jumbo 8.000 3.375 8.444 $5,870.12


3/1 ARM Jumbo* 8.250 3.525 6.175 $6,010.13


3/1 ARM Jumbo* 8.250 3.525 6.175 $6,010.13


5/1 Adjustable-Rate Mortgage (ARM) Jumbo 8.250 3.225 6.661 $6,010.13


5/1 Adjustable-Rate Mortgage (ARM) Jumbo 8.250 3.225 6.661 $6,010.13


15-Year Fixed-Rate Jumbo 8.000 3.050 8.652 $7,645.22

Chase's rates are about about the same, but all (Chase and BofA) are higher than the rate that I used. Unfortunately Chase's can't be copied, but you can go to chase.com and get your own quote.

They are the major players in New York's mortgage market. That there might be others, fine, but to use anything but the average rate - or the rate that an average person could get - is misleading.

And, further, ccdevi, it is also commonly accepted economic theory - I'll get the quote for you if you need - that purchasing is seen as a hedge against rental price risk. If carrying costs to purchase are in excess of rental prices, then that is not a hedge; it's a reverse (and illogical) hedge. Especially in a market where the expectation is that future prices will fall, and fall dramatically. You would therefore be locked into a amortized cost of renting far in excess of market rents, and would lose your principal if you were forced to sell.

There is no economic theory or data that support your "thesis."

Hudson City is not a mortgage broker, they are a major regional bank that keeps their loans on their books. No bailout money needed, and their stock price is up 13% YTD.

Chase and BofA are loser banks that need to charge high rates and are bad lenders in this market, as they don't have the capital so they need to charge more.

I don't know why you would borrow from them at a higher rate when you can get a lower rate from a better lender. Unless you have lousy credit or are a deadbeat or something, but the days of lending to people who can't pay back their loans are over (hopefully).

modern, I know what Hudson City is - I was referring to Manhattan Mortgage. But Hudson City is not a "major regional bank": it is a savings bank that has 125 branches in New York, New Jersey, and Connecticut. Their current 30-year jumbo rate is 6.625%.

Just because you might want a loan from them does not mean they want to lend you money.

BTW Washington Mutual also kept its loans on its books. That means nothing.

"Chase and BofA are loser banks that need to charge high rates and are bad lenders in this market, as they don't have the capital so they need to charge more."

That is truly funny. Chase is one of the best banks in the country, with more than enough capital. It did not make subprime loans. BofA did not make subprime loans either, and it was fine until before Countrywide and Merrill Lynch - now I can't opine until I see their losses in the 4th quarter.

"Therefore, if you are, economically, effectively in the business of renting to yourself, it is illogical to pay amortized rent for an apartment in excess of the carrying costs."

nope, incorrect, but again, whats the point of the examples.

"I certainly hope that the rest of your argument is better, ccdevi, since I quoted 8D for Oculus, and 9D for Chelsea Stratus, and your question was about Chelsea Stratus. That's pretty lame on your part."

Please show me where asked a question about the Stratus? And where you mentioned 9d at the Stratus? I'd also note that your original post was about the Oculus and compared it to a couple rental buildings and my post of course pointed out how poor that comparison was. C'mon steve try harder.

"I'm neither interested in giving you $1,000, nor do I need your $10,000. Simply tell me the bank and I will obtain a loan quote from them, either by calling, or by accessing their website."

Translation, I got undressed and don't have the spine to admit it.

"A far cry from 5.5%"

And even farther from 7.5.

Hudson City is one of the top 20 banks (by market cap) in the country. JPM is a generally a good bank but they took TARP money and are not immune to credit issues and needed to build their loan loss reserves big time. And they are laying off thousands of employees.

HCBK did not take TARP money. And their current jumbo fixed rate is 6.25% as per the link I provided, where did you pull that 6.625% from? Wait, I don't want to know, TMI.

HCBK is what lenders used to be, they made sure the borrowers could pay it back.

And WAMU was one of the biggest securitizers in the market, they did not "keep their loans on their books".

Anyway, if people are dumb enough to pay 8% when they can get a loan for 6.25%, that is their problem, but it doesn't change the fact that lower rates are available. Economic innumeracy is rampant in thie country (and apparently on this discussion board).

"nope, incorrect, but again, whats the point of the examples."

Tell me why. Show my your theory. Your data. I have told you the one time when that might not be true - if you expect property prices or rents to rise dramatically in the near-term. Otherwise, on the whole, it makes no sense.

Re 9D, I wasn't answering you: "Some big reductions at Chelsea Stratus today."

"And where you mentioned 9d at the Stratus? "

Read from the top.

"Translation, I got undressed and don't have the spine to admit it."

No. Just tell me the bank and I'll call them up and go on their website. Publicly accessible data.

"And even farther from 7.5."

That rate is below Chase, BofA, or Countrywide for an $800,000 mortgage on a $1,000,000 property, condominium, primary residence, excellent credit, documented loan. He who is "undressed" is the one who can't provide a link.

modern, market cap of financial institutions today is not what I would be looking for. JPM took TARP because they were forced to. You have no idea what Hudson is exposed to - they may not be exposed to today's problems, but they might be exposed to tomorrow's. Just look at the decline of Citigroup's stock over the past year.

"And their current jumbo fixed rate is 6.25% as per the link I provided"

No, dude, that rate is for loans below $417,000. The rate we were discussing is the jumbo rate required for Manhattan properties.

"And WAMU was one of the biggest securitizers in the market"

No, in fact, they weren't. They kept almost all their loans on their books.

"if people are dumb enough to pay 8% when they can get a loan for 6.25%, that is their problem, but it doesn't change the fact that lower rates are available."

I've already said that your rate is wrong for what we are discussing. You also assume that Hudson will give you that particular rate. Read the fine print at the bottom. You also assume that Hudson has the ability to make an infinite number of loans and hold them on their books.

They can't. The are limited by their deposit base as they don't securitize. I have no problem with their banking model; just a problem with how you interpret what happens in a market.

"Tell me why. Show my your theory. Your data"

What data do I need to disagree with the contention that "it is illogical to pay amortized rent for an apartment in excess of the carrying costs." Thats a value judgment plain and simple. Should I then go on to explain why its illogical to vacation in the Hamptons, be an early adopter of new technology or join a country club? Value judgments, personal preferences and decisions one and all.

"Re 9D"

Did you or did you not reference 8d at the Oculus, and then in the same post give examples of 2brs at the Westminster and Archstone as reasons why they wouldn't get the rent? And when called on it did you say that you had not quoted the price on 8D even though you had quoted your determination of the monthly costs and the rental asking price? Why can you just admit you made a mistake?

"No. Just tell me the bank and I'll call them up and go on their website. Publicly accessible data."

You called me a liar on the mortgage. I offered to show up and prove it. You declined, case closed. Again just admit you were wrong.

"That rate is below Chase, BofA, or Countrywide for an $800,000 mortgage on a $1,000,000 property, condominium, primary residence, excellent credit, documented loan. He who is "undressed" is the one who can't provide a link."

I don't understand, are you now claiming that rate isn't available? Before you just said it was a far cry from 5.5%, which is it steve?

As for the link you mention. Putting aside how lame you are that apparently things don't exist in your world unless they can be linked to on the internet, take a look at Manhattan Mortgage's website (oh yeah, not reliable), what about bankrate (you used to quote that to us, what happened, of course you'll claim all the lenders they list with low rates are not credible). Do you really go into Best Buy or a car dealer and pay sticker price? How sad.

" If carrying costs to purchase are in excess of rental prices, then that is not a hedge; it's a reverse (and illogical) hedge"

That is bad logic.

Hedges always cost money. If you are paying say 10% more to buy vs. renting to ensure that you'll never pay more than that, that is a hedge. This makes sense if you worry rents will increase 20% or 30%.

Hedge's are rarely free, so not sure why you are expecting this one to be..

"Thats a value judgment plain and simple."

No it's not. It's accepted economic theory. The purpose of buying is to hedge against rent risk. It makes no sense to hedge a risk by paying more than what you're hedging against.

"Should I then go on to explain why its illogical to vacation in the Hamptons, be an early adopter of new technology or join a country club? Value judgments, personal preferences and decisions one and all."

No. Because we all need someplace to live. That is also accepted economic theory - and reality.

I referenced 8D at the Oculus in one context and 9D at the Chelsea Stratus in another. You said, "D is not a 2 bedroom. Its a 3 bedroom, albeit with a small living area, with tons of outdoor space. Not to mention that the quality of the apts you mentioned are not comparable to the Oculus."

I was comparing them to Chelsea Stratus.

"You called me a liar on the mortgage"

No I didn't. I said tell me the bank & I'll get a quote. You won't do it. Case closed.

Bankrate and Manhattan Mortgage are quite different. Bankrate gets a referral fee. Manhattan Mortgage is a wholesaler. The bankrate rates I used were the averages. MM is quoting their "best" rate, which one may or may not qualify for. We are talking in generalities here. Bankrate's rates coincide with those published by the major lenders. MM's don't.

Anomalous.

"Do you really go into Best Buy or a car dealer and pay sticker price?"

Yes, no, respectively.

Here's the real definition of imputed rent - something that (much to steve's dismay) helps the buy side of the equation:

http://en.wikipedia.org/wiki/Imputed_rent

Note how in that short article, it already mentions the key difference that makes it help the buy side of the equation: the government can't tax imputed rent. The reason why it may make sense for me to buy and "rent to myself" while at the same time, makes absolutely no sense to buy and rent to someone else for the same amount, is that the "rent to myself" option is tax free. The rent I collect from someone else is taxed as ordinary income.

> the government can't tax imputed rent

Well, it taxes real estate... but, if that is already factored in, the point holds...

"The purpose of buying is to hedge against rent risk"

"No. Because we all need someplace to live"

You're being intentionally dense. Some people value the non-monetary benefits of owning. I know you don't and thats fine but its completely unfair for you to impose your value judgments on others. Wanting to own a home so that you can mold it to your whim, so that you can furnish it to its specifications, wanting to know that you can be there as long as you like, enjoying the feeling of home ownership, those are value judgments no different then deciding b/w the Hamptons and Fire Island. Your response to this will probably be to make fun of those desires, you have before, something about a toilet or something, but frankly that really just proves my point.

"I was comparing them to Chelsea Stratus"

So you are claiming you were comparing the Westminster and Archstone to the Stratus not the Oculus, despite the fact that you mentioned the Westminster and Archstone in the first post of the thread after discussing the Oculus and didn't mention the Stratus until your 2nd post of the thread? Why are you lying on something so trivial?

"No I didn't."

Did you or did you not say "You've been telling this tall tale for months now"?

Steve, you post as if the other people on the board can't see prior posts. Its frankly bizarre.

It taxes real estate the same regardless of whether I rent my apartment to you for $5000 or to myself for $5000. Yet if I rent it to you, I only pocket about $3000 per month after taxes, yet still have to pay $5000 to live in an equivalent place somewhere else. That's a $2000 loss to rent to you, vs. living there myself.

In the above hypothetical apartment, if the monthly cost to carry was under $3000, I'd make money renting to you. If it was between $3000 and $5000, I'd make money living there myself, but lose money renting to you. If it was above $5000 I'd lose money no matter what. You, nyc10022, claim today's conditions fall into that last category which is perfectly fine. stevejhx claims that the middle category doesn't exist in any market, anywhere, any time, which is unequivocally wrong.

> It taxes real estate the same regardless of whether I rent my apartment to you for $5000 or to
> myself for $5000.

Absolutely.... but given that the city doesn't tax different rates if you own and live vs. own and rent out... I think its fair to say that they are taxing on the assumption that someone is living there. In my mind, I would consider that "imputed rent" - given its based on certain assumptions of usage - but I think thats more of a matter of opinion. And not relevant if you are factoring it in correctly already.

"In the above hypothetical apartment, if the monthly cost to carry was under $3000, I'd make money renting to you. If it was between $3000 and $5000, I'd make money living there myself, but lose money renting to you. If it was above $5000 I'd lose money no matter what. You, nyc10022, claim today's conditions fall into that last category which is perfectly fine."

No, thats not what I claim.

What I would claim is that you might be losing money in ALL scenarios, if you factor in all costs of ownership, including capital loss. You are pointing out cash flow positive, for the most part. But you can be cash flow positive and still have a loss (and vice versa).

I'm not going to call making a $1k cash spread on an apartment a success if I lose $100k on the apartment each year.

"So you are claiming you were comparing the Westminster and Archstone to the Stratus not the Oculus"

Absolutely. Read the thread.

"You're being intentionally dense."

Because I disagree with you?

"Some people value the non-monetary benefits of owning."

They do. And some people enjoy the non-monetary benefits of renting. However, those are not quantifiable - accepted economic theory states that purchasing is a hedge against rent risk.

Like it or not.

"So you are claiming you were comparing the Westminster and Archstone to the Stratus not the Oculus."

No, I am confusing two of my posts on similar threads. There are no 3-bedroom apartments available for rent in the neighborhood. My point is that they are asking 50% more than apartments approximately the same size. I stand by it.

And sorry, that last post is confusing. It has to do with the multiple threads. Ignore my first sentence - it is incorrect.

"No, thats not what I claim."

Fair enough - but lets forget NYC right now, forget the last 10 years (and next 10 years) and consider a stable market where housing prices go up exactly with inflation. Further, lets say "cost" of the apartment includes the opportunity cost of the down payment. You agree that there are those 3 buckets of profitability (or lack thereof)? That stevejhx is wrong when he claims the middle bucket never exists?

"They do. And some people enjoy the non-monetary benefits of renting. However, those are not quantifiable"

Correct, I agree with all of that, but your conclusion is well since its not quantifiable its to be ignored and you fall back to if your carrying costs of the home you plan to buy to live in exceed what you could rent it for, it is illogical to buy it. It simply doesn't follow. I may do a rent/buy calculation, determine that its more expensive to buy then to rent, and still buy the place because of the value I attribute to the non-monetary benefits of owning. Someone else might do the calculation and determine that its more expensive to rent then to buy, and still rent because of the value they attribute to the non-monetary benefits of renting. Its all just a value judgment. How can you dispute that?

"No, I am confusing two of my posts on similar threads. There are no 3-bedroom apartments available for rent in the neighborhood. My point is that they are asking 50% more than apartments approximately the same size. I stand by it."

Finally an admission. Well sort of.

> Fair enough - but lets forget NYC right now, forget the last 10 years (and next 10 years) and
> consider a stable market where housing prices go up exactly with inflation.

I'll forget it as soon as you take away the last 10 years of excess gains... ;-) (I think thats a 50% decline).

But I do believe there is a middle bucket.

Look at that - and just an hour ago, you were claiming stevejhx was never incorrect... his whole "imputed rent theory" that you just admit is wrong has been the cornerstone of his argument all along.

While we're going on the tangent, while the last 10 years may have seen an extra 50%, the previous 10 years was rather sad. How much of the 50% was excess, and how much was making up for an unusually long downturn before it? We'll never settle that for another 10 years

Hmm, steve's theories are misapplied and wrong. Interesting . . .

"How can you dispute that?"

I never disputed it. I said it was unquantifiable. I limit myself to accepted economic theory and proven data.

You are discussing quantum decisions. I am discussing relativistic decisions. In the aggregate, people make decisions according to the formulas I have discussed, and the data I have posted. This is indisputable. That any particular individual may make a different decision is unquestionable. That there are things that economics can explain is also indisputable. Psychiatry cannot fully explain insanity. Why should economics?

Uh oh! tech_guy is talking to himself as LICC again. Let him/them post any economic theory or data that support his/their opinions, and someone can alert me, since they're ignored.

Property taxes for apartments are taxed not on their value, but as imputed rent. Therefore, imputed rent is taxed. The property owner pays it, whether he is a landlord or an owner-occupier.

ccdevi - I'm still waiting on the name of that bank.

Erratum: "That there are things that economics CANNOT explain"

steve, I'm still waiting for my cash, I can meet you anywhere b/w 14th and 59th and 3rd and 7th.

your response to other thing was ridiculous. "I limit myself to accepted economic theory and proven data." You really didn't write that, pause, and thing about what an incredible tool you are?

You clearly are ignoring the non-monetary benefits of owning because you do not value them. You are horribly biased.

"I'm still waiting for my cash"

cc - all you have to do is tell us the bank. Bets are illegal.

"I limit myself to accepted economic theory and proven data."

I've provided my sources. Where are yours? Quantify the non-monetary benefits of owning. Show me your theory.

"You clearly are ignoring the non-monetary benefits of owning because you do not value them. You are horribly biased."

Wrong. I both own and rent currently, and I have owned 3 properties before the one I currently own. I appreciate the monetary and non-monetary benefits of both. They offset each other, depending on the particular circumstances. And the facts bear me out - no one will long pay in excess of market rents to own. Just ask Case-Shiller.

"Bets are illegal."

Seriously, you really don't pause?

All you have to do is meet me. Although I'm adding a condition, afterwards you have to start a new thread about how you were wrong every day that you post forever.

"I've provided my sources. Where are yours? Quantify the non-monetary benefits of owning. Show me your theory."

Sources for what? The idea that some people attribute value to owning?

"no one will long pay in excess of market rents to own"

apparently thats not true given everything you've ever told us, how then did we get here where buying is so much more expensive then renting. the fact is lots of people do and will because again they attribute value beyond $ to owning. you believe that illogical, that's your value judgment.

Hi Steve,
I have two young kids and a dog that they adore. I need to stay in the ps234 school zone and am having a tough time finding a rental in that is at least 2000 sqft, has 3 bedrooms, doorman, elevator, lots of storage already installed by owner (because owners will not let me do my own built ins), ability to paint kids rooms to look like the ones that they are leaving, and the biggest sticking point; an owner that will allow dogs. Any ideas for a renter like me? As you can see I did not mention price. I can afford a big space but am having trouble finding one to rent that meets my family's needs. If I bought it would be a lot easier. Thoughts?

Whenever steve says he is basing his analysis on something "proven" or "indisputable", that means he has no rational basis for his conclusions and he is pushing nonsense and saying it is "proven" to justify it.

ccdevi, you already admitted on another thread that your loan was agreed to in May.

Case closed.

It's November.

The world has changed.

"Sources for what? The idea that some people attribute value to owning?"

The sources for how you quantify it.

"no one will long pay in excess of market rents to own" apparently thats not true given everything you've ever told us, how then did we get here where buying is so much more expensive then renting.""

No. That's why prices are currently crashing.

Read carefully: "will LONG pay."

happyishrenter, ask LICC.

But Steve, I'm asking you because you do have a lot of answers.
I happen to think that my family is not alone in basing our housing needs on lot's of non-financial factors especially when children are involved.
But you knew that didn;t you. And you knew that my post is a strong argument against simply focusing on cost of rent vs cost to own. I was hoping for at least a spirited argument but you just gave up.

"you already admitted on another thread that your loan was agreed to in May."

nah, thats another lie. I said my original commitment was made in May and that it expired in August. And yet they still closed at the same rate in October. Hmmm. Oh yeah, and rates on the whole have decreased significantly since I closed. Case is most definitely closed. when are you going to pay me my money?

"The sources for how you quantify it."

Maybe you really are just stupid and not just being difficult. One way to look at it is you quantify it by how much extra the person buying paid then would have been an equivalent rent, the buyer valued owning at least that much, maybe more. But thats kind of silly except in a world where someone would actually admit they almost moved because their rent went up 1%. The reality is you dont quantify in terms of $, just like I don't quantify in $ how I feel when I hit a perfect golf shot, or see my daughter smile, or take the first bite of an in and out burger when I'm in Vegas. I can't tell you what those are worth, I just know they make life worth living, I guess I might say they're priceless.

"will LONG pay."

yeah I got it. when someone buys an apt that they plan on staying in for a long period of time and they're paying a lot more then it would cost to rent, something that happens everyday, what are they doing?

happyirish, good stuff, you did it the right way but he won't understand. I don't want to be cruel but I long ago mentioned the possibility that some of this debate (not all mind you) may have something to do with married with kids versus single. steve doesn't value stability, doesn't care where he lives or how, one roof is the same as another. thats why he's always comparing these crappy rental buildings to beautiful new condos.

Now there is a happyish renter? jeez! first happyowner cribbed my name and now this?!?!

"I said my original commitment was made in May and that it expired in August. And yet they still closed at the same rate in October."

You got a rate in May at May's rates. Whether they honored that commitment or not was their business. That is not today's rate. Which is why you won't reveal the bank's name.

Overnight LIBOR was 0.9% last night.

"The sources for how you quantify it."

Not made up sources. Real sources. Show me the economic theory. There isn't any.

"thats why he's always comparing these crappy rental buildings to beautiful new condos."

No, actually, look above, at the very same condo for sale and rent - 3x the cost to own it than the income you could get to rent it.

happyishrenter - "lot's" = "it's" = nyc10022.

Yeah I saw that typo. Never mind.
nyc10022 generally agrees with you stevie. Guess again. And how about admitting you are wrong to simply focus on numbers? You said you always admit when you're wrong.

happyishrenter = ccdevi!

How about this, happyishrenter:

1) If you are in the same school district it makes no difference whether you buy or rent because your kids go to the same schools. Therefore the decision is a purely economic one.

2) There is no economic theory that I am aware of that accounts for irrational "bubble" behavior. If you have one, post a link so I can read it.

3) Buying real estate is a hedge against rent risk. Though out of ignorance or insanity they might, no one would rationally pay more for a hedge than the thing they're hedging against. So if the amortized cost of buying exceeds the cost of renting, it makes no sense to buy.

4) There may be externalities that figure into the equation - the ability to paint your bathroom purple, for instance - but those are not the principal factors that go into the decision of whether to buy or to rent. They can't be, as the purpose of buying is to hedge against rent risk.

5) The output of buying and renting is the same - a place to live. Therefore, the goods are identical, and they should cost the same.

6) Accepted economic theory states that all input factors are discounted into the price of a good. Therefore, all tax benefits, leverage, maintenance, etc., costs are included not only in the purchase price of an asset, but in the price to rent that same asset.

7) It makes no sense to buy something if the expectation is for prices to fall in the future. That, in fact, is the danger of deflation that we're hearing so much about. It's a very difficult hole to dig yourself out of.

steve couldn't even admit he was wrong when he insisted on measuring the mortgage interest deduction benefit by a person's effective tax rate rather than their marginal tax rate. How obtuse is that?

Sorry Stevie, that does not address my needs.

You are telling me what buying is for but for me, that is not why I would buy. For you and a lot of people, buying is a hedge against rent risk. Not for me and many others. So any argument to me based on the premise that I want to buy to hedge against rent risk is not relevant to the points I am making.

We need all the factors to be satisfied but I cannot find a rental that meets those needs while staying in the same school district so how can I rent something that does not exist? If I can buy the same thing but cannot rent it then why would I not buy? No rent vs buy amounts are relevant if I cannot find the place I want to live in. Of course rental exist, and they will be cheaper to buy but there are too many limitations when it comes to kids and a dog.

Buying for me is not a hedge against rent risk. I have never thought of it that way. My family's needs are the priority.

"You got a rate in May at May's rates. Whether they honored that commitment or not was their business."

First off, they had no obligation to give me that rate in October but they did, so calling it a May rate is ridiculous. More importantly, you've been saying way before May that rates were in the 7s or 8s. So you now admit that was a lie?

"Show me the economic theory"

Why do I have to keep asking the same question? Economic Theory for what? and what made up sources?

"No, actually, look above, at the very same condo for sale and rent - 3x the cost to own it than the income you could get to rent it."

Well thats not responsive to what I said but wow thats a double lie (for one you did compare the Westminster and Archstone to the Oculus see first post in thread, you also have made similar comparisons dozens of times on this board, and two, where did this 3x come from? answer you made it up and its contrary to the data you yourself posted above). You lie about things you've posted in the same thread. Absolutely bizarre. I just can no longer believe you're posting in good faith.

When are you going to pay me the money? After that I'm done with you.

ccdevi: He's not posting in good faith. In a prior thread - the one LICC alludes to about the mortgage interest deduction - he used extremely cherrypicked numbers to "prove" his point. The numbers he chose "coincidentally" result in the exact same benefit under both his incorrect theory, and the way the IRS really works.

At the time I thought it was pure coincidence, but now I'm realizing he chose them as such. Which means not only does he understand he's wrong, he understands it so well that he can find numbers that work the same under both systems.

The thread in question:

http://www.streeteasy.com/nyc/talk/discussion/6009-same-apartment-for-rent-and-for-sale

"they had no obligation to give me that rate in October but they did, so calling it a May rate is ridiculous."

Then tell me the bank and I'll get a current quote.

"More importantly, you've been saying way before May that rates were in the 7s or 8s"

Never. In May jumbo mortgage interest rates were around 6.5%.

Here are the average national rates for conforming mortgages according to Freddie Mac:

http://www.freddiemac.com/dlink/html/PMMS/display/PMMSOutputYr.jsp

"You lie about things you've posted in the same thread."

Yawn. All the figures are there. Add the abated tax back into the figures - as its coming back - and you have 3x the carrying costs.

"Economic Theory for what?"

Economic theory that can account for the value you assign to all the externalities of owning, which would lend credence to your theory that people are willing to pay significantly more to own than to rent.

"that does not address my needs."

My purpose in life is not to address your needs.

"that does not address my needs."

My purpose in life is not to address your needs.

- You just can;t get your head around the fact that people have housing needs that are more than simply a function of a rent vs buy calculation.

Let's try another example.
No one living in Manhattan should buy a car unless the total monthly cost of ownership (including cost to park) is less than the cost of renting the car whenever it is actually needed.

In your case, working from home and using your Lexus to drive to Fire Island every weekend in the summer, it makes no sense to own your car. It makes even less sense to own a Lexus when a much cheaper car does excatly the same thing. You should not have bought your car because the only reason to buy a car is as a hedge against car rental costs.

"2) There is no economic theory that I am aware of that accounts for irrational "bubble" behavior. If you have one, post a link so I can read it."

Sure there is. There is an entire field. Its called behavioral economics.

Not sure how to "link" you to an entire school of thought. Perhaps college might do it.

> My purpose in life is not to address your needs.

Ha.

> nyc10022 generally agrees with you stevie

Not since he started with the awful stock market predictions. We agreed on the direction of the RE market, but I figured that was a pretty easy one to spot in the first place...

"Sure there is. There is an entire field. Its called behavioral economics."

Ha! I had the exact same thought after reading through this thread! I completely agree - as much as I love econ, stevejhx is a bit too married to "proven economic theory" for my tastes. There are too many things it just doesn't explain satisfactorily, or even at all, and that a whole new field sprung up is telling. I took a behavioral econ elective, really interesting stuff once you get into it. Anyway, excellent point nyc10022!

"Not sure how to "link" you to an entire school of thought. Perhaps college might do it."

There's no proven economic theory that college exists. You haven't shown a single calculation to support your claim.

"Its called behavioral economics."

Yes it is. And tell me how it quantifies what we are discussing. It does not. It is a posteriori, not a priori. That is, it is not predictive, but explanatory.

Behavioral economics (and finance) seek to find why markets are irrational. In the short-term. But very rarely are markets irrational in the long-term. If they were, nothing would work.

"There's no proven economic theory that college exists. You haven't shown a single calculation to support your claim."

Yes, but see, I have a liberal arts education...

As for steve's last response, notice he changed the question. He got exactly what he originally asked for, and now has new reasons he was apparently looking for something else. Its getting fairly old...

> But very rarely are markets irrational in the long-term. If they were, nothing would work.

You are confusing markets (that can't be rational or irrational) with people (which can be, short term and long term). Back to college (real or imagined) for you...

Actually, no, I have an undergraduate degree in economics. Behavioral economics cannot explain what you claim it can - it is not possible to quantify irrationality, first, and second, it does not explain why some people might want to own versus rent, at any cost.

If it does, please show me where and I'll look at it. Because all the data I've seen prove the opposite.

This is how clever nyc10022 is: claim that something explains something without showing how it explains something, denigrate the person who contradicts it, and declare victory.

Show me where behavioral economics proves what you say it does.

Or - back to college (real or imagined) for you....

And I am not confusing "markets" with "people": "people" are markets. Unless you're claiming that behavioral economics works on a micro level but not on a macro level (when, in fact, it's the other way around).

So Stevie, how about my latest theory, based on yours about owning a car?

You should not have bought your car because the only reason to buy a car is as a hedge against car rental costs.

and with the cost of renting so much lower than buying car (a Lexus no less) then you should rent

happyishrenter, you do not need a car. You need a place to live. A car is a durable good. A house is a real asset. Renting a car is a short-term transaction; buying a place to live is a long-term transaction.

The comparison is nonsensical.

However, you could compare owning a car versus leasing one. In which case you would see that in most circumstances it makes little sense to lease, though it does make sense in some cases.

Oh, BTW: "Ignoring comment by nyc10022"

A new necessity as he insists on claiming that I make claims that I do not. Projective identification is very annoying.

But why can't we apply your rules to everything that costs us money?
I want a car but don't need one, granted.
Wy would I not want to make the best decision in terms of renting vs owning a car based purely on financial calculations? If I get the same utility out of both and improved convenience with both over and above only taking public transportation then why is not a purely financial decision the only valid way to make that decision?

As I said, we should not stop at cars. Why should we not use your theory of obtaining something with the cheapest method for everything?

happyishrenter, you are dangerously close to getting on Steve's ignore list.

Don't worry, I've been on his ignore list for a while now, and he still reads everything I write. I was worried - steve believes the entire universe revolves around him, so if I really was ignored, my very existence was in jeopardy. I couldn't sleep, expecting to vanish overnight.

happyishrenter, as long as the terms of the transaction are substantially alike, you can: lease a car, not rent one.

You may obtain the theory of obtaining something with the cheapest method of everything. It's not "my" theory, though: it is rational economic theory.

"You may obtain" = "You may use"

If only stevie would admit that it is even more foolish to spend money on something that is not a need than spend money on a need.

"If only stevie would admit that it is even more foolish to spend money on something that is not a need than spend money on a need."

What?

Why spend money on something that you don't need?
Why waste money?
You are so concerned about wasting money on buying a place to live when it is cheaper to rent then why spend at all on anything that you don't really need?

Why do you own a car for instance?

Maybe steve will think that nyc10022 is me too, or tech_guy.

> A new necessity as he insists on claiming that I make claims that I do not

Except all I did is paste his quotes.

"dow 6500.... There is very little doubt now that that's where we're headed."
- Steve 9 days ago.

"Nor did I say that we would go to 6,500 on the Dow."
- Steve 4 days ago

Takes a LOT of balls to try and play this off as me making up stories.

> Maybe steve will think that nyc10022 is me too, or tech_guy.

All of which are Eddie Wilson.

2) According to bankrate.com, national averages:

30 yr fixed jumbo mtg

This week 7.36%
Last week 7.53%

ok, but steve, if you pay with cash the mortgage part of your monthly payment is irrelevant and should be replaced by cost of opportunity (very low for years to come, i think). it's still dumb to sunk $ into an asset that will (almost for sure) lose value. better to rent and sit on your cash.

"You are so concerned about wasting money on buying a place to live when it is cheaper to rent then why spend at all on anything that you don't really need?"

You seem to be frustrated that I recur to accepted economic theory, and you recur to, I don't know, fantasy.

"Why do you own a car for instance?"

Because I bought it when I lived in Florida, and it's paid for.

admin, your argument is sort of right. The opportunity cost must be taken at long-term historical values, not at recent (anomalous) values.

"Ignoring comment by nyc10022"

He misquotes everything I say, ascribes meanings to words in English that they don't have, chooses his start and stop dates, then declares himself right.

Ergo: "Ignoring comment by nyc10022"

"Ignoring comment by LICComment," as well.

I'm with stevejhx. i think ccedvi is a RE broker :) or is leveraged to the hilt in NYC RE. Good luck with that ccedvi!

This building is about to collaps@