People who bought

I bought early this year. I'm not worried - my monthly cost (after tax benefits) is significantly lower than renting an equivalent apartment. Now that I just refinanced, we're talking 25% cheaper. I just don't see real estate crashing for a prolonged period of time when the rent vs. buy math is so favorable to buying.

So go ahead, tecchie, give us the deets.

b/f I go... tech-guy..... I know it's much cheaper than rent.... but had you waited... you coulda woulda shoulda had a V8.. I mean an apartment that was 20% bigger for the same price.... think about it... think about it..... wait think a little more.....

no not yet... think a little harder.....

no seriously,,,,,,,, think a little more....

got that sinking feeling....... now tell me I'm a schmuk :) Cheers

if your apt, condo, co-op or house works for you and it's affordable, enjoy.
if renting is more your style, enjoy.

both renting and purchasing contribute to the local economy.

buying or renting is not just a financial aspect, it's a personal decision as well. if renting is more your comfort level then enjoy. you shouldn't regret your purchase. if you love your home and can afford it that's what you should focus on. not what your home, condo, apt is worth right now.

I closed early last year and I'm not worried. I got a good deal based on what I was looking for, and it made more sense than renting given my situation. I'm in it for the long haul, so even if the value dips, I'll only feel the impact if I try to sell.

TomS, unless you're looking to sell now or take out a home equity loan, you shouldn't be concerned with losing equity on your home because it's not realized.

If you fret that you could've/would've/should've waited to get a better deal, you still would have had to pay your living expenses/moving fees/rental broker fees during all of that time. Or you could just appreciate the home you have.

and the strange cast of characters here that actually take joy in seeing RE values plummet is odd.

some people are into seeing other people falter. it's usually the loaners and disturbed that enjoy this.

and there is no formula, manipulated data or rebuttal if you enjoy living in your home. that's the most personal decision only you can decide.

generally renters are happy renting. homeowners are happy owning. period. regrets are a waste of time in life. you can't change the past. hopefully Toms you can afford your home in Astoria. And I hope you enjoy it. Best of luck to you, and don't worry about what it's worth now. I wish you the best.

w67th: No I couldn't. Even if your predictions are true... my portfolio was (always has been, still is) 50/50 stocks and bonds. By pure blind luck, I sold a significant amount of stock (and bonds) within 5% of the stock market peak, put it in a money fund, and started looking to buy. Had I done that a few months later, I'd have much less money to work with.

Which is the fundamental flaw with market timing. Despite everybody's claims to the contrary here, I don't believe I can do it, and I certainly don't believe any of you can do it.

stevejhx: What's the point? First, I don't trust you with any details that can be used to identify me. Second, even if I did give you everything, you'll go off on your 10-page tirade about how the tax benefit isn't real.

tech_guy, I think we just got to the heart of your optimism: you feel LUCKY that you sold stock near the peak of the market and you feel genuinely fortunate that you rolled that cash into a tangiable asset. Enjoy your home! Just don't try to sell it anytime soon.

tech_guy, why do you ever entertain his antics? He just publicily announced that he was going to NJ to the driving range. Can you get more pathetic than that? He is just desperate for human interaction. He probably somehow strangely considers this website his family and friend.

Enjoy your purchase. Even if things are cheaper now, your particular apt would not have been available. You should just enjoy it and stop trying to convince others on here that you are happy.

Anyone who starts a thread on an anonymous website to announce they are going to the driving range and that they will be back is not stable or normal. That is the strangest thing I have ever seen.

Enjoy your condo, whatever your bought, and enjoy your life there. They get off on throwing numbers at you. Probably they are jealous of you. But I'm sure you're not low enough that you would start a thread announcing you are going to hit golf balls, but you'll be back. That's when you know you have hit bottom in life.

i bought a property in washington heights in may 07. it was single unit about 1400 sq ft on 157th st. i got it for $385/sq ft. renovated it fully, bringing total sq. ft. costs to, approx. $450 sq. ft. i rent it to a family for $700 beyond my carry costs. once the refi kicks in, it will be $900 below my carrying costs. it's a decent profit. not as good as my other properties in the area but i do not regret my decision.

I bought in Brooklyn a few months ago, and was able to negotiate in part because there was at least some agreement that the market was heading for some unpleasant times. I love the building and neighborhood and could cover my costs by renting it, though I have no intention to do so. I'm most likely in an unusual situation as I'm sure there are quite a few folks out there who are a bit stressed now, but this thread makes it clear that there are people out there who are comfortable and enjoying their new homes.

w67th is showing a little anxiety in his posts lately. Yes with the VIX down, Ted down, market up and fear going away he should be....cheers!

exit2: Thanks for the kind words. I do follow the bulk of what said, but I'm here not to convince others that I'm happy. I'm here to both learn more about my investment (even though I consider it a home first, and an investment a distant second, its still a significant investment), and to help share information with others.

Despite all the arguing, I have learned quite a bit. I think others have learned from me too. Its an interesting break while I'm waiting for my code to compile.

As I've posted on other threads, I bought in summer '07, and I think we're still on record as having paid the top price for a two-family in my neighborhood. Woo hoo! We would win the Biggest Sucker award. Except there is no award, sadly.

But: we only put 10% down, and our primary mortgage is of an exotic and extinct type, at a great fixed rate for the next 8.5 years. With the same money we put into this place, we couldn't buy anything we'd want to live in today. Even at 20% off today's comps. Even if we could, the rates on Jumbos are through the roof, compared to ours. Houses may be cheaper, but they're not more affordable for schmucks like me with mediocre credit and few assets. And our monthlies - even before you factor in the tax deduction - are LESS than they were when we were renting. So I count myself among the lucky - when the music stopped, I was in a very comfortable chair.

"I don't trust you with any details that can be used to identify me."

Why would I want to do that? Far too much effort.

"Second, even if I did give you everything, you'll go off on your 10-page tirade about how the tax benefit isn't real."

No one ever said that. What I said is that you need to include the opportunity cost, which not only do you make up your own definition for, and you deny.

And you don't get a tax benefit if you don't pay taxes.

But notwithstanding that, I'm sure you can give us enough information about what and where you bought for how much, so we can take a look and do the calculations ourselves. Otherwise, how do we know?

If you buy within your means and prepare yourself for worst case scenarios, there is little to worry about.

JuiceMan - what's a worst case scenario, though? Ours is my husband loses his job, we try to sell the house, fail to do so, rent it out at a loss for a year while we live in my parents' guest room in Florida while my husband tries to get work as a fishing guide...
Actually you're right - sounds okay!

Watch the video

http://www.youtube.com/watch?v=5IeixTAzhjE

Manhattan is not even finished with the first inning. Just like in the 90's, last to fall, last to recover.

tech_guy: http://xkcd.com/303/

All I know is, with every lease signing I've done in the last few years - I do yearlies - I do the calculations. I have simply found nothing that didn't require an almost double the monthly outlay...

To folks who got in at lower purchase prices, cool, but I'm talking about "spot" prices. Hasn't even been close for years.

The fact that things are suddenly 20% cheaper just makes the calculation even more lopsided after the fact...

Another one of those disturbed individuals - MMafia

Hope everyone enjoys their purchase and don't regret it.
Renters, continue renting if it pleases you and enjoy.

"And you don't get a tax benefit if you don't pay taxes."

And if I rob Fort Knox, I don't have to worry about money at all. Whats your point? I get it, I may lose my job, then the cost is suddenly higher. Trust me, if I thought there was any possibility of that, I wouldn't buy.

"No one ever said that. What I said is that you need to include the opportunity cost, which not only do you make up your own definition for, and you deny."

You've got about a dozen fundamental flaws in your math that you'll go off on 10-page posts about. My apologies for implying that the tax benefit was the only one. I'll discuss these in great detail with anyone else, but not you.

"Otherwise, how do we know?"

You have no reason to believe me, nor do I care if you do or not.

tina24, cash reserves is what I mean by preparing for worst case scenarios. I like having two years of mortgage payments in a money market.

tech_guy, he probably never leaves his apartment because he's afraid he may get hit by a bus when he crosses the street. That's why he's trying to take on the role of the Mighty Wizard, all knowing all powerful, but is just an insecure man that's afraid.

anybody in this thread own in the Hamptons or another second home destination? If so, how are you feeling about that property as an investment right now?

"and the strange cast of characters here that actually take joy in seeing RE values plummet is odd."

give me a break, i don't see anything wrong with that. affordability is great for the economy, not a bad thing. we should have complained while prices were going up, not the other way around.

> we should have complained while prices were going up, not the other way around.

Some did.... unfortunately too many idiots didn't listen.

you are right nyc10022, shiller wasn't alone. the amount of economic dislocation that lack of affordability causes (like huge commutes for public employees and those with a normal salary, small businesses moving to a cheaper place).

i mean, is that something to celebrate? i understand if you just bought a house you like the idea of earning $ doing nothing. but there's a limit to that cause it backfires on the economy.

nyc10022, in a bubble, the idea is there is always a bigger sucker to sell to... as the bubble approaches popping-time, only the biggest suckers are left to sell to.

that is the definition of a manic bubble, which is what we just saw implode around the country, and are seeing it beginning to implode here in Manhattan.

Peter Schiff was screaming from top of his lungs, idiots at fox news were laughing at him at the time...

Peter Schiff

but he's accused of being a permabear, disappointed bulls have a hard time saying "you were right, i was wrong".

Peter Schiff is an idiot who is wrong 5 out of 6 times. See below:

http://seekingalpha.com/article/106824-being-wrong-for-five-years-makes-peter-schiff-right-now

From the above link:

Well as a real Europac client I can tell you the guy has steered me into 70% loss in my account. This was with a "diversified"... account.
I hear from the Schiff fans, well these are only temporary downturns and besides you are getting the dividends.
Well researching these companies he got me into I so far this evening can identify 3 that look like they could go under. Try Babcock & Brown Power for example.
All he did was call the US downturn right. He didn't expect deflation, commodites being worse than any other assest class, that decoupling wasn't going to happen for many years to come, ect... And the guy goes on the tv tooting his horn like he is some kind of oracle. He lost his clients a ton of money. If he truly believes in capitalism his brokerage will be out of business based on performance.

You can give enough information about what you bought without giving away your identity. I'm not sure what you're worried about anyways. This is a real estate blog not a suicide hot-line. The fact that you aren't even naming the neighborhood, comparable rentals, price, and yet you spend an inordinate amount of time convincing people that you got it for under what it costs to rent just seems a little disingenuous.

wow alpine, thanks for the link!

Yes Schiff clients were driven into a ditch vis a vis commodity stocks and emerging market stocks, both underperformed the broad US market. In fairness, if you had been following his playbook since say 2004, your emerging market stocks and commodity stocks simply round tripped, and your gold is up substantially. All in all, people forget that in order to actually make money you need to both buy and sell. Schiff never said take profit on energy or emerging markets, and as such he was just a clock that was right for a time.

jgr: I said the purchase was a 1 bedroom for a roughly 18x price to rent ratio in prime Manhattan. Why do you need more detail than that? I gave very detailed math proving generic 18x price to rent ratios are sustainable, and not a single person has even attempted to argue the math.

Because you are trying to sell us that your purchase was such a great deal. Without knowing details like...oh...say...the price...or the neighborhood to compare against real rentals we have no idea what kind of data you are plugging into your model.

Garbage in => model => Garbage out.

It's cool if you want to be anonymous and all, I don't talk about my own financial reasons for renting vs. buying, but you are the one putting yourself out...

wishhouse: Just saw your post now. I love that comic :) And yes, it describes my posting habits here perfectly.

Tech_guy everyone has argued. History has demonstrated that after-tax rent equivalence (which is what 18x is at the prevailing rates and rents) has never been support. Sustainable? What does that even mean in this context? Because we saw it in 2007-2008 doesn't mean its sacrosanct. In down markets, buyers want to save hundreds of dollars a month for the risk of their investment (yes, risk). Even if interest rates do nothing, ratios of 12-15x are "sustainable". If interest rates go to double digits, look for single digit ratios.

jgr: My point is to say deals are out there. 18x price to rent ratio is not hard to find. If you don't believe I pulled the trigger on one, don't believe it. This is about the market, not my personal situation.

stevejhx thinks I live in LIC. petrfitz thinks I rent a studio. Join the club - think whatever you want about me, but look at the 18x math and argue it. Either that 18x can't be found so its a strawman argument, or that 18x math doesn't actually work.

"History has demonstrated that after-tax rent equivalence (which is what 18x is at the prevailing rates and rents) has never been support."

Every other post by the bears includes a link to a property and a comment about how much you can rent it for. You're alone in thinking comparable purchase and renting prices are the sustainable equilibrium of the market. Will prices go lower due to temporary fear? Possibly, but I can't time the market (as I said earlier). I'll stick to fundamentals, and saving money compared to rent every month.

If your point is that I'm making a little bit of money now, but I could have made a lot of money if I waited... eh. I'm happy, and market timing isn't for me.

It worked fine in 2007-2008, the market transacted there, its just the high end of the historical range, and therefore definitionally there is a lot of downside potential in the market.

"You have no reason to believe me, nor do I care if you do or not."

As I thought, it's made up.

"I'll stick to fundamentals, and saving money compared to rent every month."

Yes, the fundamentals of falling rents and falling disposable incomes. Those are the two factors that will lead Manhattan real estate to rise forever.

By definition, tech_guy, the "mortgage interest deduction" is taken into account as higher property prices. Get rid of it, and prices will fall, precisely to where carrying costs equal rent. It's a market distortion that has the uninformed convinced that it's a good idea to buy real estate.

You do fall into that category. All the money that you're "saving" on your taxes will be gone as the value of your home deflates. I know that you seem happy that you bought at the top of the market, but you will soon watch it all go away.

As it always does in bubbles. A sevenfold increase in property prices in ten years qualifies as a bubble.

"This is about the market, not my personal situation."

"I bought early this year. I'm not worried - my monthly cost (after tax benefits) is significantly lower than renting an equivalent apartment. Now that I just refinanced, we're talking 25% cheaper. I just don't see real estate crashing for a prolonged period of time when the rent vs. buy math is so favorable to buying."

You're point was bragging about the great deal you are saving by owning. I'm calling bullshit and I'm asking you to back up your hypothetical purchase with the price, common charges/taxes, sq footage, APR, and neighborhood to get comparable rentals - not rentals you cherry picked to make your magical 18x figure work. Otherwise no one is going to "do the math" as, again, garbage in = garbage out.

"Those are the two factors that will lead Manhattan real estate to rise forever."

I did all my buy vs. rent math assuming prices remain flat, or at best meet inflation. I've never said (or expected) otherwise.

"By definition, tech_guy, the "mortgage interest deduction" is taken into account"

I told you earlier that you were going to tell me my tax benefit isn't real! You denied it before, but I'm glad to see you're just as predictable as always :)

jgr: You don't seem to be able to separate 2 very simple concepts. I invited you to debate the 18x math I posted in another thread. You ignored that and are fixated on my personal life. I don't know how I can make this more clear to you: I couldn't POSSIBLY care less if you believe my personal story or not. Tell yourself I live in the south Bronx if it makes you happy. Tell yourself I paid 2 million for a 300sqft studio. I really don't care.

18x rent = 20 p/e on stocks. Top of the range. Sure its been seen, but it mathematically unfavorable in terms of return expectation.

Great video, MMAfia.

People who have never seen a real-estate downturn before don't know what it's like. I remember the early 1990's in London, then Madrid, then Miami - you couldn't give real estate away.

All these finance people losing their jobs in New York are not getting new jobs in finance, nor will they ever find another job that pays as much because no jobs do. Those who keep their jobs will see their incomes halved because commercial banks cannot and do not pay large bonuses, and leverage is cut back, regulation is back in style. So you overpay for an apartment and keep your job, but see your bonus cut back - you can't pay the monthlies, you have to sell. And you have to sell at a loss because you bought during the boom.

It's more than the Miami bubble - I was there. Prices have fallen in some cases 50% - I posted a link to a $5 million short-sale. The exact same thing is going to happen here.

Just look at rents. Falling precipitously. In 21 Chelsea there is a 1,200 square foot 2-bedroom 2-bathroom they just slashed from $4,900 to $4,100. Indigo across the street has a similar apartment (better appointments, admittedly, but worse views) across the week with carrying costs twice that, which will only rise as the tax abatement amortizes. Pay $1.2 million for it - it will be worth $600,000 in a year, because how many people can afford $8,000 a month to live?

Not many. And thanks to the stock market crash, fewer have enough money to put down & keep a safety net in savings.

The fundamentals do not support these prices. Period.

Schiff is an idiot.

across the week - across the street (though it is duplicated - I'm a crappy editor)

"18x rent = 20 p/e on stocks. Top of the range. Sure its been seen, but it mathematically unfavorable in terms of return expectation."

Except the returns are tax free. I don't pay tax on the rent I'm "collecting" by not paying rent. Yet I do pay tax on stock earnings (dividends, capital gains)

I could care less about tech's personal life but I'm calling complete bullshit on this - there isn't an apartment available for sale in manhattan that's cheaper to buy than rent. It's just a fact. Stop cluttering up these boards.

NYC10013: Because you believe my math on 18x is wrong, because you believe 18x can't be found, or because you're relying on hope?

techhie, you really need to stick to writing code. MMAfia has repeated posted the chart that shows the increase in home prices since 2000. It is a classic bubble.

Prices CAN rise like that if there's a fundamental reason, but there isn't. Housing does not produce income. It is an expense. It does not have a high "rate of return" over time because all things equal, prices are 100% correlated to incomes. What happened here was:

a) Leverage was increased from 4:1 (20% down) to up to infinite (0% down).

b) The cost of money was reduced to negative in real terms.

c) Borrower risk was increased through variable-rate mortgages.

d) Disposable incomes soared due to Wall Street bonuses.

Working backwards, disposable incomes in Manhattan are in a free-fall. Variable-rate mortgages still exist, though mortgages, in general, will no longer be issued on bonus income. The cost of money is negative in real terms, but not generally available. Leverage has collapsed to 3:1.

You may be happy with your little purchase and what you perceive to be a reduction in your housing costs when what it is is a reduction in your taxes already baked into the price of your house, but you are about to lose 50% of your investment, you will be underwater very quickly, and screwed if they export your job to India.

Sorry about that. NOTHING supports a price-to-rent ratio of 18. 18 is supportable using owners' equivalent rent, but I wouldn't expect you to understand the difference. Using the imputed rent model, you're better off walking away from your property than continuing to pay off your principal.

I purchased my first Manhattan property in 1998. I paid less than the original owner on conversion, in 2008. 25% less in nominal terms, far less in real terms. What we are about to go through is far more serious than that.

Sorry.

I'm backkkkk. My swing was fixed and now it's broken again... .I just couldn't concentrate with all my out of banker friends asking me advice if they should sell their apt in NYC.

exit2.... wahhhh wahhhhh wahhhhh! You started it so here's a can of whoopass for you. Like tupac said... "f--k yourself".... now let's get to business of your feeble attempt to attack me. If you see my messages you will note I have taken pains to create an artificial version of myself on-line... I've got $1.2MM cash, wife is a doc making $375K/yr (guaranteed), my income is $350K/yr (nice how it worked out that way), I've bid $3MM on a GM apartment in 2004, I've flipped a ton of NYC RE and continue to hold a commercial unit in Lower east side (I paid $312.5psf), I belong to a yacht club, both me and my wife are ivy leaguers, I did a stint in I-bank, commercial banking- work-out dept), owned Porsches all my life (928S4, Cayenne, Cayenne Turbo(current car), RR HSE (current car)), bought a small boat this month, go to 4seasons maui 3 times a yr, two kids 5 and 3 (both in private school), and yes wife just said pull the trigger on 997T 2007 (maybe I'll get a vanity plate that says w67).... exit2... the only people that are bitter in this board are RE Brokers (some) and people who's net worth is extremely tied into NYC RE.... so I gather you scrapped and saved to buy that little apartment in NYC and your husband/wife is giving you the hairy eye for buying tulips at the TOP....

Other tid-bits about me, I went to a grammar school in Hell's Kitchen, went to one of the specialized schools in ny (brooklyn tech doesn't count), did undergrad in NYU (dble majored in Finance/Econ... TA in econ)... MBA in a ivy (school), can bench press 275lbs, squat 585lbs (6 plates on a side plus bar), have 85 friends on facebook (i'm sort of selective) and have a 36 inch penis --- only one of these things is false....

Given all this - I read the tea leaves correctly and decided to rent for the last 5 years... my co-op (1bdrm) I bought for my mom/dad (they use it most of the time to visit the growing fam) - and my cost basis for the 1bdrm co-op.... drum rolll is $100K... I kept flipping left and right till it is what it is.

Honey get me some more of that whooppppass.... exit2... your posting is neither fun, interesting nor informative.... so pls do me a favor and post something that is or just read it from afar... your boring way of just trying to console techie over here makes make want to puke.... uggg....uggg.... m'okay. And look i type these things on the fly and it still makes sense... exit2 if you proof read all you write more than once then you are pathetic, no you are... no you are... no you....

exit2's version of a blog that is started.... "if you enjoy living in your apartment and don't care about where NYC RE, pls post here :) "
what a dumbass...... curiously what's your made up gig on SE? Big boobs, small penis, transvestite, homeless once or twice, .... just some info. that I can make childish insults against.... come on drop me a little 411

in 2008 = in 1998.

Ooops!

Ooops again!

in 2008 = in 1998 really = in 1988.

25% less in nominal terms 10 years later.

Tech - Show me one apartment in Manhattan that's cheaper to buy than rent. I'll gladly admit I'm wrong if you can.

stevejhx: I'm still not going to debate you. You have too many fundamental flaws in your understanding of simple math to make debating worthwhile. I appreciate you worrying about my job moving to India and all, but really you shouldn't. There's no need.

nyc10013: I already threw out the math on 18x. The ball's in your court now.

ohhh I forgot... exit2...One of my best characteristics is that I can usually sum up a person in the first 2 minutes that I meet him/her... you are a broker. Good luck with that career choice.... by Lawrence Yun... "it's always a good time to invest in RE, the tax benefits... and if you enjoy living in your place then who cares what the value is"

SteveF... I'm actually getting into this blog thing... .and the nyquil sleep is just fantastic.... my wife keeps looking over my screen and shakes her head... i think she's getting annoyed... better look at that tiffany catalog..... OMFG... exit2... in lieu of buying an apartment I bought her an $85K 3 carat tiffany cut ring ask Alan Orsid on the 2nd fl in 2004.... beats taking that $500K hit in the GM....

exit2..... exit2... r u there.... or are you busy listing your apartment right now?

techie.. you young kids make me laugh... I'm a gonna edumcate you. When a girl asks for money bf sex... she's a prostitute... if she asks for it after.. .she's your girlfriend/wife....

Ever hear of jumping out of the wok and into the fire? So you were lucky enough to take all your hard earned 401K and IRA and savings and with the 1st time home purchase exemption pulled all your appreciated money and dumped it into NYCRE.... let me ask you... i think you have 6 momths to a year to purchase (I may be wrong)... if you waited 6 months you think you coulda woulda gotten a bigger place?

You see all these hedge funds.... it only works if you can market time. I believe I just market timed the NYCRE... hmmmm..... hmmmm where is that pdf... oh here is it... "my clients are pleased to make an offer of $3MM (USD) without a financing contingency on your unit...." that was in 2004... thank GOD I didn't get that apartment!

If you look on cars.com there was an 2007 997 Turbo with 19K miles and PCCB with list price of $140K that just went for $89K.... I just F---KIN missed it b/c I was writing exit2.... it's okay though... the 2010 are coming along with PDK and increase in HP and like Manhattan RE... the market is coming towards me....

exit2..... oh bf you write "w67th..... whaaa....whaaaa----whahhh... he's got nothing better to do... no life... (say it with attidtude.... like from brooklyn)... he's on this board 24/7..." I just made $500K waiting 3.5 yrs.... so just let me gloat a little (it'll be close to $2MM in 2 more years) - That'll buy you some bagels exit2... how's that open house going for you.... it's lonely in an apartment by yourself, no?

No one else get on my s---t list pls... I'm blistering from the typing....

Meh. I'm an owner. Always nervous about market value, loss of equity, etc. At 2005 price levels, I've preserved the cash I've made in NY RE with my current place; break even at 2004 levels. At 2003 levels, I will start to feel a little ill. Truthfully, not a lot of comparable product out there to my place.

W67th - wah, you're a big spender. We try to to be frugal - no expensive hobbies or trips. Biggest expense (aside from mortgage) is eating out at nice places every Saturday night. Would not be happy with my spouse if he came home with a 85k ring.

w67thstreet - someone slip you some black beauties?

"You have too many fundamental flaws in your understanding of simple math to make debating worthwhile."

If you can't tell us even the BASICS of what you claim to have "bought" - 1 bedroom, $100,000, 80/20 mortgage in Hells Kitchen - then we have NO REASON to believe a word you say.

Not a word.

"techie.. you young kids make me laugh"

BTW I love what comes next.

Tecchie, you've NEVER seen a real-estate bust. I'm into my 4th one. Now I will admit - unlike you, who admits nothing - that I was caught unawares after Lehman because a) I never thought they'd let a bank go bust; and b) I wasn't alive in 1933 last time they did, although c) I kept plenty of cash, but I can assure you that when property prices increase sevenfold in 10 years and incomes have fallen in 10 years, real estate can do nothing but collapse.

No theory, no calculation, NOTHING can sustain that.

"You have too many fundamental flaws in your understanding of simple math to make debating worthwhile."

Yes. You're right. I think that tax benefits should be calculated as a function of taxes, not of mortgage payments. I think that if real-estate historically has traded at 12x annual rent, that it will revert to that mean. I think that it's stupid to pay more to buy an apartment than it would cost to rent it on a cash-flow basis. I think that spending more than 30% of your gross income on housing is unsustainable. I think that anything that increases sevenfold in value in 10 years with no fundamental reason to do so will crash. I think that when disposable incomes fall, rents and prices fall. I think that the mortgage interest tax deduction is baked into prices through higher prices. I think that the sun rises in the east.

Those are my beliefs. You share only the last one.

You have never seen a real-estate bust before. I've seen 4 now, 5 if you count the 1970's when, though I was young, I remember buying gas based on whether your car had an odd or even license plate number. I remember graduating college in 1982 and trying to find a job when interest rates were 21%. I remember lots. You don't know what you're talking about.

pwned.

great video thx Mafia.
WOW, I mean freaking hell WOW,,,,,,,
I wonder how many altA and optionArms mortgage were sold in NYC. I doubt it will be too high, but very interested to know the number.
anyone ventures a guess??

Back to the OP's original question:

TomS - I know a number of people who bought within the last couple of years. You're not going to like this, but they are kicking themselves. I'm very sympathetic with them (they're friends, not Spunky or tech_guy), but they're smart, well-educated professionals who don't need me to tell them they bought at the very top of the market and that the market has only one way to go - down. They get it themselves and they're just trying not to think about it, that's all.

Their apartments are nice enough, but they realize they could've gotten more by waiting. We all torture ourselves over sub-optimal investments. Buying real estate at the top is another such suboptimal decision, but the solution is simply not to think about it, or to avoid real estate websites, etc. Don't torture yourself over it.

:) blk ones... never tried those... it's not about the money... exit2 got my blood boiling... she must've triggered some deep rooted issues with my psychi.... :)

W67th... It's just a blog about NYC RE... repeat it a hundred times ....... ummmmmmmmm...(that's me meditating"

I don't know. If I buy a pair of shoes for $79.99 during a tax holiday, or if I buy a pair of shoes for $79.99 with 8% sales tax, the price of the shoes is the same. What changes is the tax.

Tax is tax. Mortgage payments are mortgage payments. Apples are apples. And oranges are oranges.

"If I buy a pair of shoes for $79.99 during a tax holiday, or if I buy a pair of shoes for $79.99 with 8% sales tax, the price of the shoes is the same."

You're wrong. Its just that simple.

"You have never seen a real-estate bust before."

If your best argument is "I'm older than you", yes you are, but that also shows just how desperate your argument has become.

"If I buy a pair of shoes for $79.99 during a tax holiday, or if I buy a pair of shoes for $79.99 with 8% sales tax, the price of the shoes is the same."

"You're wrong. Its just that simple."

Really? Just that simple? I'll tell you what. Do an experiment. Eliminate sales tax for a week without advertising it, then compare sales. It makes NO difference. Tax is tax, price is price.

Sorry, Dodo Bird. You lose.

Unless you'll post some deets about your "purchase,' which you can't since it doesn't exist.

"your best argument is "I'm older than you""

No. My argument is that you've never seen real estate crash. I have 5 times.

Difference!

MMFia, I say tecchie's new name should be Dodo Bird. Especially after he loses 50% of his fictitious investment. What say you?

go to sleep guys!

I regret buying. My apt is not underwater yet, but it most likely soon will be. I wish I rented and didn't have to deal with the stress of knowing all the money I've lost and soon will lose money. IMO its too late to sell, and I have to live somewhere right.

"Eliminate sales tax for a week without advertising it"

The fact that you require I not advertise it shows that your argument holds no water.

"Unless you'll post some deets about your "purchase,' which you can't since it doesn't exist."

At the risk of sounding like a broken record, I couldn't POSSIBLY care less if you believe me or not. You can believe I bought a chunk of ice in Antarctica for 5 million, 0% down, negative amortization loan. I won't make any attempt to prove differently.

18x is the best anyone could find in a bubble?

I think that proves the point...

tech_guy,

here's the problem with your "i moved it all into cash" argument. i assume that what you "moved into cash" was the money needed for down-payment, transaction costs, and maybe a year of monthly payments. if you moved more than that into cash, that would really have nothing to do with your decision to buy a home and can't be attributed to it. so if your new home cost $10 (you refuse to give even a ball-park for what it cost, so $10 will have to suffice), let's be generous and say you moved $3 into cash. if you did that at 5% below the top of the market you saved, as of today, approximately 40% of that, or $1.20. Good for you.

But at the same time, you invested an entire $10 in an apartment. Whether you paid cash or not isn't the point: an entire $10 is at risk. As of today, that $10 is worth at most $8. So even with the rosiest possible view of your purchase here you have lost $.80 on this deal--even with what you admit was the "blind luck" of selling assets when you did. This is the problem with justifying the purchase of a home by looking at monthly costs alone. even if your math was correct (which i have, obviously, repeatedly disputed), rents can stagnate or go down. and even if rents don't go down home values can decline. we had a bubble in rents too--not as big as in sales, but it was still a bubble.

people make the mistake of thinking that because they use leverage to buy their home they have only risked the down payment. not at all: you spent a full $10 on your home, and you've lost 20% of that (and counting) in one year. if you like your apartment, enjoy it, be happy. but stop claiming it was a good investment. the monthly cost comparison, no matter what math you use, certainly can't compensate you for losing so much money.

"The fact that you require I not advertise it shows that your argument holds no water."

Really?

But not. It eliminates the psychological difference between the actual price and the perceived price.

And still - no deets on that "place" you "bought" = no place.

i'd like to see comps as well. there's no way in hell anybody is paying less on owning than renting unless you bought once-ina-lifetime prop or got in really early.

w67...ahhh...ya...good luck with all that(slowly backing away)...have a nice life..

"even if your math was correct (which i have, obviously, repeatedly disputed)"

It doesn't count as "repeatedly disputed" if all you do is say I'm wrong but not say why. The numbers are right there, and you haven't shown any reason why any part of the math is wrong. Or, if you have, link the thread - I must have missed it.

"As of today, that $10 is worth at most $8"

I bought 5-10% below the peak, so not quite. I have also yet to see any evidence that my property is worth even 10% lower than what I paid for it, nevermind 20%. I watch comps. But no, I won't prove that to you. If you want proof, stick to the math above.

> I have also yet to see any evidence that my property is worth even 10% lower than what I paid for
> it, nevermind 20%.

The true value of a thing is what someone else will pay for it.

Per the stats, fewer people are willing to buy, and even those folks are willing to pass 20% less overall.

No one is going to be able to "prove" anything with a particular apartment.

But, clearly there are MUCH bigger bargains out there than 5% off.

Your math isn't proof of anything. It's a model based on false assumptions - I bought for 5% below peak, homes are worth the same now as when I bought it, blah.

We're all talking ourselves in circles. The 18x number is generic. Forget I ever bought - I mentioned it for psychological support to the original poster, not to argue math with others. Forget I ever said it. Pretend I never bought and never will.

Now, I show the 18x number as having buy vs. rent support, and thus far I only see 2 classes of arguments against it: "history shows 12x in NYC" - yet history shows 15x nation wide. Why is NYC lower? Could it be... a big part of the runup was due to fundamentals, not a bubble? Why was 15x right historically and 18x right now? Because interest rates are at historical lows - if mortgage rates jump to 8%, the ratio probably will go down to 15x again.

The other class of argument: but because of the downturn, you need to expect less. Sorry, but no matter how many times you repeat it, it doesn't change the circular logic. You can't use a downturn as reason for the downturn.

"The true value of a thing is what someone else will pay for it."

Dude that's deep.
If person A is willing to pay $5 for your "thing", person B is willing to pay $10, and you don't know what the 5 billion + other people will pay, what's the value of your "thing"?
Want to try again?

Don't be a dumbass hvd_free. That kind of statement isn't referring to a single buyer, it's referring to what the market is willing to bear. What are you saying, that you can't value a home in a down-market? Want to try again?

i think techie just admitted defeat... so we'll count him as a bear and be done with it.... jgr - dumbass and boob are my area of expertise... where's exit2?

Leverage... the analogy to medicine is (most ER docs when they see a failed suicide) if you're gonna kill yourself don't use a .22 and put it to the side of your head (as the natural instinct is to flinch and you just take off enough to be a pain in the ass but never get the job done).... geta .45 and put it the back of your throat.,... that way even if you flinch you got yourself a nice hole... in personal finance... home leverage at 10x is pretty decent to do the job.... 20x... you're looking at an grenade in a studio bathroom (and yourself).

Where's that black pill?

jgr, so you voluteered to try for nyc10022. Now "someone" actually means the "market". Nice try indeed.

The entire banking system has been trying to figure out how to value illiquid assets as marlket dries up. All of a sudden not one, but two geniues pop up on Streeteasy and claim to know exactly how to. Must be a luck day for mandkind today.

"i think techie just admitted defeat..."

I say this again and again... you can think WHATEVER you want about me if it'll make you feel better. People think a lot of pretty stupid things about me - I take them as compliments. Still, nobody has yet to refute the math that 18x is cashflow positive, and break-even when counting opportunity cost.

tech-guy - if you rob Fort Knox you cannot take the tax deduction on that money either.

"Still, nobody has yet to refute the math that 18x is cashflow positive, and break-even when counting opportunity cost."

Rookie mistake. Cash-flow positive losses are still losses. When the cash that comes out is significantly lower than the losses you're taking on to generate it... thats not really an asset anymore.

nyc10022: I know you consider the downturn to be gospel and beyond debate, but humor me: if the rent vs. buy math doesn't support it, why will the downturn happen?

It would HAVE to be humor, because you're working off crap assumptions.

The rent/buy math does support it. I've been watching for quite some time, and it hasn't even been close. I've done the calculations on probably 100 apartments over the last few years, and it was so overwhelmingly lopsided that it WAS funny. And that was before factoring in declines.

Of course, with a 20% decline, the ratios start shifting (with a smaller rent decrease).

But, I'm still seeing tons of apartments way overpriced on the ratios.

> why will the downturn happen

Dumb question to be asking now.... better "why DID it happen". Or "how much more to go".

Or, better yet "what to do about it".

In most cases, i'd say "get out if you can" would probably be the answer.

"But, I'm still seeing tons of apartments way overpriced on the ratios."

You have a lot of handwaving, and not a single number. What ratios are you seeing all over?

lol tech_guy asking for specific numbers. Try providing some yourself buddy.

> You have a lot of handwaving, and not a single number

You certainly do a whole lot of talking about things you know nothing of. Read the threads. I've posted QUITE a few here. As have many other folks. Last one, I saw in the window of a RE office.... they posted rent and buy price, and it was 25x. I also did a whole 20 pine thread on this.... we're talking 30x there. Don't ignore what is there and then say it isn't there.

I just haven't felt the need to do calculations in the last month or so because the decline is now in, and calculations will only be necessary after the huge drop starts to slow... no need to watch 20 pine, for instance, because its all coming down. Ratios will clearly look funky for a bit.

jgr: Here's the math I posted in another thread (and copied several times in other threads). Nobody has yet to argue that there's a problem in my math.

"Here's a rough 20x support: Rental costs $1/year, purchase costs $20, annual maintenance $0.40 (scale up figures appropriately, of course). $4 down payment, $16 mortgage, at 6% (I never unsubscribed from Manhattan Mortgage's daily rate emails, and thats roughly what they quote for an agency-conforming coop loan, up to about 700k loan value I think).

Annual interest on that $16 is $0.96. Lets say half the maintenance is tax deductible, for a total annual tax deduction of $1.16. At roughly 40% marginal taxes (federal and local), that's really only $0.696/year out of pocket. Ignore principal payments as that all adds to equity. Add in the $0.20 maintenance that's not deductible, you're at $0.896/year. Add in the opportunity cost of the down payment - I personally use 8%, taxed at 25% (15% federal cap gains, 10% local) and you get $0.24 opportunity cost, for a total cost of $1.136. 13% more than renting. Keep in mind my opportunity cost is probably on the higher end of what others use.

Bring the ratio down to 18x, and you're doing just fine."

"As have many other folks. Last one, I saw in the window of a RE office.... they posted rent and buy price, and it was 25x. I also did a whole 20 pine thread on this.... we're talking 30x there. Don't ignore what is there and then say it isn't there."

You talk about ignoring... I've said this before. If you see 25x, I see a place needing at least a 20% cut. If you see 30x, I see a place needing at least a 33% cut.

You call for what, a 40% cut across the board? Do you really believe the cuts to an 18x property will be similar (percentage-wise) to the cuts in a 30x property?

jgr or nyc10022, either you disagree with tech_guy's numbers (and if you do point out where his logic is flawed) or stop bitching about it. I don't get it. He has posted these numbers 50 times yet you keep asking him to post them over and over again. Why don't you geniuses tell him why he is wrong?