1/2 Price Sale: Rent vs. Buy

Do people who can afford a 700K down payment actually read (or, worse, take advice from) Streeteasy?

That's the standard in Manhattan - twice the cost to buy as to rent.

Which is why prices must fall 50%.

"Do people who can afford a 700K down payment actually read (or, worse, take advice from) Streeteasy?"

Wrong question.

Right question: "Are people who can afford a $700k down payment actually stupid enough to invest it in an asset that will likely lose 50% of its value?"

Not anymore.

A 2.8M mortgage with 10% down? 2003 called, they want their mortgage calculator back.

"Do people who can afford a 700K down payment actually read (or, worse, take advice from) Streeteasy?"

Read? Yes, I know of at least one person. Take advice? Since there is no agreement on anything here (other than Chicago sucks), I suspect Streeteasy is used as an information source to derive their own conclusions.

I got made fun of for the ROB function on bloomberg but it is pretty extensive... You've got to make a few assumptions (that you're missing):
Inflation rate/year (i assumed 2.5)
Alternate interest rate (i assumed 3.5)
appreciation rate of property (I assumed 2.5)
closing costs rate (5%)
selling costs rate (6%)
marginal tax rate 33%
property taxes 7000/yr
maintenance 8000/yr
fire and hazard insurance 4000/yr

then discount the cash flows for 30yrs... the answer?:

Monthly payment: Rent (9000 vs 21504.62)
Total cash out: Rent (4741494.94 vs 8725513.24)
Net asset value pre-tax: Rent (7902689 vs 6116250)
Net asset value post-tax: BUY (7902689 vs 9082424.12)

so it all depends Apt_Boy...

AdamM: I'm guessing that calculation didn't account for the fact that only the first 1M of mortgage qualifies for the interest deduction?

You should take a look at www.housemath.us - it does pretty much exactly what you do, lets you configure all the same variables, and gives you a present-day rental equivalent price (assuming rent goes up exactly with inflation). It takes care of all the nitty gritty tax issues too.

A few of the default values are wrong in the standard NY-coop option, fyi (I don't know about condo). It assumes you're NYS but doesn't count NYC taxes. It adds property tax separately even though in a coop, that's part of the maintenance field. It includes the mortgage tax, which doesn't apply to coops.

broadwayron -- yes

Don't follow steve with anything that involves numbers or math. He is incapable of understanding basic mathematical concepts, but he's dangerous because he obnoxiously thinks he knows it all.