Then: http://www.nytimes.com/2006/09/17/realestate/17sqft.html?_r=1 It’s a Good Time to Be a Landlord Whitaker Photography; second and third photographs, Archstone-Smith Trust From left: There are 250 units in the Avalon Mission Bay in San Francisco; The 265-unit Archstone Chelsea in New York was acquired last year, and the Archstone Boston Common includes many luxury amenities. By VIVIAN MARINO... [more]
Then:
http://www.nytimes.com/2006/09/17/realestate/17sqft.html?_r=1
It’s a Good Time to Be a Landlord
Whitaker Photography; second and third photographs, Archstone-Smith Trust
From left: There are 250 units in the Avalon Mission Bay in San Francisco; The 265-unit Archstone Chelsea in New York was acquired last year, and the Archstone Boston Common includes many luxury amenities.
By VIVIAN MARINO
Published: September 17, 2006
THE once-sizzling housing market may be rapidly cooling, but not all residential property owners are worried — especially if they happen to own apartment buildings.
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Landlords are enjoying booming times these days as more people are choosing to rent. Apartment vacancy rates are at five-year lows, averaging 5.6 percent nationwide and only 2.9 percent in the New York metropolitan area, according to the latest data from Reis Inc., a research company. Meanwhile, rents are up nearly 4 percent, on average, over last year, the biggest rise in six years, the company said.
Fewer people have been eager to buy homes lately, in light of lofty prices and higher mortgage rates. What is more, industry analysts say, the supply of rental units is tighter, partly as the result of the conversion of rental apartments to condominiums at the height of the housing surge. And demand is intense as the children of the baby boomers, sometimes called the “echo boomers,” move out on their own.
“The apartment landlords have a lot of room to raise rents even more,” said Louis W. Taylor, a senior real estate analyst at Deutsche Bank Securities, who predicts the industry will continue to thrive in the next 9 to 12 months. (Rents, averaging $1,143 a month for a two-bedroom nationwide, according to Reis, could jump 5 to 9 percent next year, Mr. Taylor said.)
These strong fundamentals augur well for property owners. Many passive investors (those with little inclination to collect rents themselves) have been profiting, too, by investing in real estate investment trusts that hold large portfolios of multifamily properties and disburse most of their profits as dividends.
Apartment REIT’s are now outperforming all other REIT sectors, after trailing in recent years. In fact, companies that focus on multifamily homes (there are 17 in all) accounted for 10 of the 25 top-performing property REIT’s as of last week, according to SNL Financial, a real estate research company. Total returns so far this year through Thursday averaged 34.4 percent, compared with 23.2 percent for all equity REIT’s, data from the National Association of Real Estate Investment Trusts showed.
So, how long is this robust rally likely to last? While many analysts continue to recommend apartment REIT’s, particularly the so-called blue chips like AvalonBay Communities and Archstone-Smith Trust, which are expanding in tighter markets, some have been growing more cautious lately, suggesting that some shares are becoming pricey and may even be overpriced.
Many share prices, they noted, may reflect speculation that multifamily REIT’s, because of their strong cash flow and collection of prized properties, could become takeover targets.
In the last 12 months alone, three REIT’s in the sector have gone private at rich premiums, including Gables Residential Trust, which sold to a unit of ING Clarion Partners in a transaction valued at $2.8 billion. And in a pending deal, BNP Residential Properties announced at the end of August that it had agreed to merge with a unit of Babcock & Brown Real Estate Investments in a transaction valued around $766 million.
“The question now,” said Ross L. Smotrich, a senior managing director and REIT analyst with Bear, Stearns & Company, “is whether the REIT’s will continue to appreciate or whether there is a downside risk. I think the prognosis is mixed. You have to be selective because of fairly rich valuations.”
Several factors, he and others say, could work against apartment REIT’s down the road. Higher construction and labor costs could cut into profits for trusts that develop properties. Demand for rentals could abate if the economy starts to soften and rates of job growth decline, while a sharp increase in supply would raise vacancies. As the for-sale market weakens, some new condominiums and condo conversions could end up in the rental pool, particularly in overbuilt areas like South Florida, Las Vegas and parts of Southern California.
“It will be interesting to see how things in condoland shake out,” said John J. Kriz, a managing director for real estate finance for Moody’s Investors Service, who remains bullish on the apartment rental market. “It could be good for the renters but bad for those in the rental apartment business.”
For now, analysts think that some apartment owners may be better positioned than others.
When it comes to REIT’s, Mr. Smotrich favors companies like Archstone-Smith and Camden Property Trust, which have myriad developments in the pipeline, and what he calls “reasonable valuations.” The Apartment Investment and Management Company and Post Properties, which has moved into the condo market through conversions and new development, “have less upside potential,” he added.
Archstone-Smith, whose share price recently hit a 52-week high, has luxury rentals in markets like California and the Northeast and has been steadily expanding its portfolio. Its funds from operations (a financial measure used by REIT’s to define operating performance) for the second quarter rose 28 percent from a year earlier.
In 2005, Archstone-Smith spent $2.5 billion to acquire apartment communities, including the purchase of a $1.6 billion portfolio from Oakwood Worldwide, one of the largest providers of corporate housing. And this summer, it acquired, among other things, a seven-building apartment complex in San Mateo, Calif., and a high-rise building in San Francisco, while also breaking ground recently on several developments, including the Archstone Clinton in Manhattan’s West Side.
Camden Property, which started out in Texas and has focused on the Sun Belt states, has been expanding nationally as well. “The Sun Belt tends to be volatile, and our sense is Camden knows how to operate in those markets,” Mr. Smotrich added.
Mr. Taylor has “buy” recommendations on Archstone-Smith and Camden Properties, along with a handful of other apartment REIT’s, including AvalonBay and BRE Properties, which also focus on high-end rentals in pricey markets.
AvalonBay, whose share price recently hit a 52-week high, has seen its per-share funds from operation increase by 6.2 percent in the second quarter. The company has 17 apartment rental communities under construction, including Avalon Bowery Place in Manhattan, a 206-unit project slated for completion early next year.
“We have more under construction now than we ever have had,” said Bryce Blair, the chairman and chief executive of AvalonBay, adding that he was not worried about an eventual oversupply. For one thing, he said, high construction costs have kept new development in check. “It’s difficult to build apartments today,” he said, “and on top of that, long-term factors are in our favor.”
DEMAND remains strong because of the high prices for condos and houses, Mr. Blair said, noting that occupancy rates in AvalonBay properties now average 96.5 percent, up from 95.7 percent at the same time last year, and with far fewer concessions (like free rent for a month) than last year. Even those who could afford to buy are finding more value through renting right now, he said, adding that AvalonBay apartments provided many high-end amenities.
R. Scot Sellers, chairman and chief executive of Archstone-Smith, where vacancy rates companywide are also around 96 percent, agreed. “With the reduced appeal of the condo market, more and more of our clients want to rent rather than buy,” he said. “There are neighborhoods where housing prices have tripled in the last five to seven years,” while rents have gone up only modestly.
Mr. Sellers, meanwhile, dismissed conjecture that the apartment sector was overvalued, saying that share prices were “still below the value of the assets.” The prices of those REIT’s taken private, although rich, show their true value, he added.
Both he and Mr. Blair, though, predicted that the sector would continue to consolidate through future acquisitions. “There may be fewer players, but bigger ones,” Mr. Blair said.
[less]
The housing downturn started out as a boon to apartment landlords as troubled homeowners became renters again. But as the recession deepens, the good times for landlords are ending and many are offering concessions and discounts.
[Archstone Chelsea] Richard B. Levine/NewsCom
The Archstone Chelsea apartment building in Manhattan advertised offers in December that included no security deposit for qualified tenants and one month's free rent.
Figures to be released Wednesday by New York-based research firm Reis Inc. show that effective rents, which includes free rent and other landlord concessions, fell by 0.4% in the fourth quarter of 2008, the first time that rents have fallen since early 2003. For 2008, rents increased by just 2.2%, down from 4.6% last year, and the nation's apartment-vacancy rate rose nearly one percentage point to 6.6%.
"It's now clear that apartments are going to take a much bigger hit than what most people initially expected," says Hessam Nadji, a managing director at commercial real-estate brokerage Marcus & Millichap, which is set to release a separate report Wednesday projecting no growth in apartment rent for 2009.
Even cities that posted healthy rent increases in early 2008, including San Francisco, Seattle and New York, are no longer immune from the chill as job losses in the professional-services sector reduce demand for apartments. In periods of rising unemployment, would-be renters double up in apartments or move in with friends and families.
Revenue growth is "going to be materially worse than it has been" over the next two years, says Andrew McCulloch of real-estate consultancy Green Street Advisors Inc. Rents stayed flat or declined in 59 of the 79 markets tracked by Reis last quarter, and vacancies decreased in just 10 markets.
Girding for Tough Times
Already, publicly traded real-estate investment firms are battening down the hatches. AvalonBay Communities Inc., an Alexandria, Va.-based REIT, said last month that it would halt all new construction in the first half of 2009, incurring a noncash charge of $55 million to $65 million for eight land parcels that won't be developed. Also last month, Atlanta-based Post Properties Inc. cut its quarterly dividend to 20 cents, from 45 cents, to save about $43 million annually.
While New York City's vacancy rate, at 2.3%, remained the best in the nation, rent growth fell by 1.9% in the fourth quarter from the third quarter, the worst decline in the country. Rents gained just 0.6% for the year in New York, a sharp reversal from just two years ago, when rents posted 8% annual increases. Heavy job losses are likely to curb Manhattan's appetite for luxury housing that spurred the construction of gleaming new apartment towers in all corners of the city.
As financial-services firms shed jobs, owners also are relaxing upfront fees and offering one or two months of free rent. In December, Archstone Apartments, a privately held owner of 70,000 units, offered one month free rent on one- and two-bedroom apartments in Manhattan priced between $3,000 and $5,500 at several properties, while others waived security deposits for qualified tenants or gave away $3,000 Visa gift cards.
"Owners are concerned. They have more vacancies than they care to admit ... and will do anything it takes to fill them," says Daniel Baum, chief operating officer of the Real Estate Group of New York, an apartment broker.
New luxury rentals in New York's financial district have been particularly hard hit. Jake Dardashtian moved into a one-bedroom apartment at 10 Hanover Square, a luxury high-rise, with a roommate in November after being offered one month's free rent and a free gym membership valued at $75 monthly. The building also paid his broker's fee, which was equal to the $3,500 monthly rent.
[Apartments for Rent]
The 22-year-old money manager, who moved in with his parents after graduating from college last year, says that without the concessions, "I definitely would have lived at home for a couple more months to save money."
Other owners are simply reducing rents. At Post Properties' Post Forest community in Fairfax, Va., two-bedroom units are renting for $1,350 per month, down from $1,480 last year.
Other storm clouds loom for apartments. The industry continues to be battered by a "shadow market" of condos and single-family homes being rented at big discounts by homeowners and investors unable to sell. That excess inventory, estimated at around 1.2 million housing units, showed no signs of easing during the first nine months of 2008, even as housing construction declined sharply, said Ron Witten, a Dallas-based housing analyst.
In some of the hardest-hit markets, falling home prices also could lure potential apartment tenants with good credit and savings. In Fort Lauderdale, Fla., for example, rents during the third quarter averaged $1,125, according to CBRE Torto Wheaton. With 20% down on a $134,000 home -- the median price for the region -- monthly mortgage payments before taxes average just $820.
Positioned for Future
Longer term, however, some analysts believe that apartment companies will likely benefit from the limited amount of new apartment construction that took place over the past five years. For example, the number of new apartments completed last year -- less than 100,000 units nationwide -- is about half the number that was completed in 2000 and the lowest in 15 years. The constrained supply, coupled with favorable demographics, won't blunt the current downturn, but it should boost the industry when the economy recovers.
The financing options also are more favorable for apartment companies than most other sectors in commercial real estate, where owners are struggling to refinance debt. That is because the industry is buoyed by government-led Fannie Mae and Freddie Mac, which provide liquidity to the housing market.
Fannie and Freddie provided 80% of new multifamily financing in the 12-month period ending in August, nearly double the 40% financing that the firms provided in the previous year period, according to analysis of Federal Reserve data by Gleb Nechayev, senior economist at CBRE Torto Wheaton Research.
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Response by stevejhx
almost 17 years ago
Posts: 12656
Member since: Feb 2008
Dude, this article is from 2006.
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Response by HudsonG
almost 17 years ago
Posts: 1
Member since: Jan 2009
Steve, remember, when putting your foot in your mouth, best to wash it first otherwise you have to taste all that dirt.
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Response by anonymous
almost 17 years ago
First article labeled THEN, was from 2006
Second article labeled NOW, was from TODAY's Wall Street Journal.
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Response by demosthenes
almost 17 years ago
Posts: 17
Member since: Sep 2008
Y, I been tracking Manhattan rentals (looking to move). Prolly off 15-20% (net with free months, visa cards, etc) just since September. I track BPC most closely (live here) and some (old...'07) list to current asks (say in the same line of a building) are off 30+%. Just obliterated. For the very best deal, it is cheaper $PSF in some cases now to live Downtown than it is in Scarsdale, Rye or Bronxville (where I also track). Gateway (eg) went from 10 listings to 40+ in a few months....and thats just what they publish. The Solaire and Verdesian must be getting *destroyed*
Questions to the community:
1) How low do we go? If we have deflation with deleveraging, then for historical comparison, a 2BR/2Ba was about 1,900-2,200 in the mid 1980s and didnt get to 3,000 until late '90s....again, Ive studied BPC so this may not represent all Manhattan (plus there are spikes and drops running up to 87 and 00), but you get the idea....eg housing medians (though flooded with foreclosures) are already off 4-8 years of gains leading to the 06-07 peaks depending upon what state you are in (per Case Shiller). What year/era do we go back to?
2) Does this lead to a cottage industry of lease breakers (& professionals who assist them)? Im sure a bunch of people are scratching their heads all across NYC if not the US seeing they could save a lot (thousands in Manhattan) per month by breaking (prolly after a trip to housing court)and relocating
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Response by rufus
almost 17 years ago
Posts: 1095
Member since: Jul 2008
People are finally realizing that manhattan rental buildings are garbage and not worth the insane rent they charge. Who wants to live in battery park city? The buildings there are mediocre at best.
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Response by oldbuyers
almost 17 years ago
Posts: 190
Member since: Dec 2008
rufus, why are you still on here? thought you would disappear after everyone showed the other blogs you lie on and exposed you as a fraudster not even living in NYC. Get a life already. Why would anyone want to live in Chicago with you? The city has zero architecture and the average building height in the city is 3 stories tall. Impressive! If you like flat landscape, single family homes that were built in the 1950s, overweight women, cholesterol, terrible public transportation, extreme weather, nasal accents, then Chicago is for you. Guess that's what you're all about rufus.
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Response by Wainley
almost 17 years ago
Posts: 45
Member since: Dec 2008
I rent from a condo owner, am in my 2nd year, told the landlord last month that I was going to leave early. Didn't use the word "break" or anything like that, played it very nice and polite, but of course I was also prepared if necessary to walk and let him go after me. It is just a private individual and that would be more hassle for him than to just suck it up and rent it. Again, didn't have to go that route, but I'm still terminating.
Funny thing though, it is harder to do that with companies. Related really goes after people, requires 2 months payment and other penalties. They have nice buildings, ok apartments, and good service but they'll go after you.
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Response by Sizzlack
almost 17 years ago
Posts: 782
Member since: Apr 2008
don't forget about the plethora of corrupt politicians in Chitroit
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Response by Wainley
almost 17 years ago
Posts: 45
Member since: Dec 2008
Sizzlack, oldbuyers, this could potentially be an interesting discussion about rental pricing. So let rufus do his thing and ignore him and then 95% of the discussion could be good. Instead, with responses to rufus and stevejhx for that matter (plus my admonition now) we are watering down the quality of this discussion.
Discuss rentals ...
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Response by Sizzlack
almost 17 years ago
Posts: 782
Member since: Apr 2008
Quality of discussion...thats rich!
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Response by TI1795SV
almost 17 years ago
Posts: 5
Member since: Jan 2009
Sizzlack, now you are worse than rufus
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Response by Sizzlack
almost 17 years ago
Posts: 782
Member since: Apr 2008
Are you serious? You clearly haven't been here very long.
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Response by TI1795SV
almost 17 years ago
Posts: 5
Member since: Jan 2009
me too. Anyway, I second the Wall St. Journal article. I've got friends moving and in a month it has gone from 1 month free to 2 months free.
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Response by rufus
almost 17 years ago
Posts: 1095
Member since: Jul 2008
oldbuyers, is that why 9 of the 17 tallest residential buildings in the country are in Chicago?
Get your facts straight before talking out of your ass.
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Response by Wainley
almost 17 years ago
Posts: 45
Member since: Dec 2008
Sizzlack, T1, OLD, refrain from responding to rufus
That's what I thought, oldbuyers. You are confronted with facts, and you are forced to shut up.
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Response by KLivren64
almost 17 years ago
Posts: 7
Member since: Jan 2009
In 2006, renting was for a very short term inferior to buying in that 2006-2007 period only, but since the purchase decision is long-term, we are seeing first hand the merits of renting vs. buying.
More long-term, here are reasons why renting is ALWAYS financially more beneficial over time than owning.
Let's make some financial assumptions that are borne out by decades of empirical evidence:
1) Real property prices and rents increase at the rate of income, or 0.7% per year adjusted for inflation.
2) The S&P 500 increases at a real rate of 8.0% per annum.
These being true, it is ALWAYS better to rent property than to buy, if you invest the down payment in the S&P 500. Watch:
Say you make $100,000. This implies that you can spend up to $2,333.33 per month in total housing expenses (28%).
An 80/20, 30-year fixed $375,000 mortgage at 6% gives you monthly mortgage payments of $2,248.31.
Assume that taxes and common charges amount to a VERY CONSERVATIVE 10% of total mortgage payments, or $224.83 per month.
A $375,000 mortgage implies a purchase price of $468,750, and a down payment of $93,750.
If rented an apartment for the amount of the mortgage payment, you will have paid $903,455.33 in rent over 30 years if it increases 0.7% per year.
If you invest the down payment in the S&P 500 for 30 years, $943,374.08 at the end of 30 years, for a total net profit of
$39,918.75. To that, however, add your yearly maintenance and tax payments $2,697.96, increasing 0.7% per year and accruing 8.0% per year over 30 years, and you will have earned an additional $330,084.36, making your total profit $370,003.11.
Now do the same thing for your house. If your $468,750 home appreciates at a real annual rate of 0.7%, at the end of 30 years you will have a home worth $577,863.68, for a profit of $109,113.68. Add to that the original loan of $375,000 - the rest of the equity you will have built - and you get a gross profit of $484,113.68. But you would have paid $434,393.21 in interest, so your real profit is $49,720.47. In addition, you will have spent $90,343.15 in tax and maintenance, making your GRAND TOTAL PROFIT a whopping NEGATIVE $40,622.68.
That's right! You rent for the amount of your mortgage, all values go up linearly in line with historic data over time, and you will wind up with a total profit of $370,003.11. Whereas if you buy a home you will wind up with a loss of $40,622.68.
This of course excludes special assessments and all the transaction costs associated with owning real estate: brokers' fees, conveyance tax, etc. It also ignores the tax effect on dividends. But dividends and capital gains tax rates are currently the same (and can't be predicted in the future). The only further benefit from owning is the $250,000/$500,000 tax exemption. But it is doubtful that $410,625.79, which is the absolute value of the difference between the owner's loss and the renter's gain.
Guys, it's indisputable: renting is FAR better in the long-term than buying. All the figures and assumptions I used are real and verifiable. Do your own calculations: rent for the price of your mortgage payment, invest the down payment and maintenance and property taxes in the S&P 500 at the real rate of increase of 8.0%, increase your property value, rent, taxes and maintenance payments at the real rate of 0.7%, deduct the mortgage interest paid, and you will see IT IS ALWAYS MORE BENEFICIAL TO RENT.
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Now:
http://online.wsj.com/article/SB123128398900958943.html?mod=googlenews_wsj
Apartment Landlords Find What Goes Up, Does Come Down
Housing Slump Stoked Rise in Tenants, But Now Rental Concessions Abound
By NICK TIMIRAOS
The housing downturn started out as a boon to apartment landlords as troubled homeowners became renters again. But as the recession deepens, the good times for landlords are ending and many are offering concessions and discounts.
[Archstone Chelsea] Richard B. Levine/NewsCom
The Archstone Chelsea apartment building in Manhattan advertised offers in December that included no security deposit for qualified tenants and one month's free rent.
Figures to be released Wednesday by New York-based research firm Reis Inc. show that effective rents, which includes free rent and other landlord concessions, fell by 0.4% in the fourth quarter of 2008, the first time that rents have fallen since early 2003. For 2008, rents increased by just 2.2%, down from 4.6% last year, and the nation's apartment-vacancy rate rose nearly one percentage point to 6.6%.
"It's now clear that apartments are going to take a much bigger hit than what most people initially expected," says Hessam Nadji, a managing director at commercial real-estate brokerage Marcus & Millichap, which is set to release a separate report Wednesday projecting no growth in apartment rent for 2009.
Even cities that posted healthy rent increases in early 2008, including San Francisco, Seattle and New York, are no longer immune from the chill as job losses in the professional-services sector reduce demand for apartments. In periods of rising unemployment, would-be renters double up in apartments or move in with friends and families.
Revenue growth is "going to be materially worse than it has been" over the next two years, says Andrew McCulloch of real-estate consultancy Green Street Advisors Inc. Rents stayed flat or declined in 59 of the 79 markets tracked by Reis last quarter, and vacancies decreased in just 10 markets.
Girding for Tough Times
Already, publicly traded real-estate investment firms are battening down the hatches. AvalonBay Communities Inc., an Alexandria, Va.-based REIT, said last month that it would halt all new construction in the first half of 2009, incurring a noncash charge of $55 million to $65 million for eight land parcels that won't be developed. Also last month, Atlanta-based Post Properties Inc. cut its quarterly dividend to 20 cents, from 45 cents, to save about $43 million annually.
While New York City's vacancy rate, at 2.3%, remained the best in the nation, rent growth fell by 1.9% in the fourth quarter from the third quarter, the worst decline in the country. Rents gained just 0.6% for the year in New York, a sharp reversal from just two years ago, when rents posted 8% annual increases. Heavy job losses are likely to curb Manhattan's appetite for luxury housing that spurred the construction of gleaming new apartment towers in all corners of the city.
As financial-services firms shed jobs, owners also are relaxing upfront fees and offering one or two months of free rent. In December, Archstone Apartments, a privately held owner of 70,000 units, offered one month free rent on one- and two-bedroom apartments in Manhattan priced between $3,000 and $5,500 at several properties, while others waived security deposits for qualified tenants or gave away $3,000 Visa gift cards.
"Owners are concerned. They have more vacancies than they care to admit ... and will do anything it takes to fill them," says Daniel Baum, chief operating officer of the Real Estate Group of New York, an apartment broker.
New luxury rentals in New York's financial district have been particularly hard hit. Jake Dardashtian moved into a one-bedroom apartment at 10 Hanover Square, a luxury high-rise, with a roommate in November after being offered one month's free rent and a free gym membership valued at $75 monthly. The building also paid his broker's fee, which was equal to the $3,500 monthly rent.
[Apartments for Rent]
The 22-year-old money manager, who moved in with his parents after graduating from college last year, says that without the concessions, "I definitely would have lived at home for a couple more months to save money."
Other owners are simply reducing rents. At Post Properties' Post Forest community in Fairfax, Va., two-bedroom units are renting for $1,350 per month, down from $1,480 last year.
Other storm clouds loom for apartments. The industry continues to be battered by a "shadow market" of condos and single-family homes being rented at big discounts by homeowners and investors unable to sell. That excess inventory, estimated at around 1.2 million housing units, showed no signs of easing during the first nine months of 2008, even as housing construction declined sharply, said Ron Witten, a Dallas-based housing analyst.
In some of the hardest-hit markets, falling home prices also could lure potential apartment tenants with good credit and savings. In Fort Lauderdale, Fla., for example, rents during the third quarter averaged $1,125, according to CBRE Torto Wheaton. With 20% down on a $134,000 home -- the median price for the region -- monthly mortgage payments before taxes average just $820.
Positioned for Future
Longer term, however, some analysts believe that apartment companies will likely benefit from the limited amount of new apartment construction that took place over the past five years. For example, the number of new apartments completed last year -- less than 100,000 units nationwide -- is about half the number that was completed in 2000 and the lowest in 15 years. The constrained supply, coupled with favorable demographics, won't blunt the current downturn, but it should boost the industry when the economy recovers.
The financing options also are more favorable for apartment companies than most other sectors in commercial real estate, where owners are struggling to refinance debt. That is because the industry is buoyed by government-led Fannie Mae and Freddie Mac, which provide liquidity to the housing market.
Fannie and Freddie provided 80% of new multifamily financing in the 12-month period ending in August, nearly double the 40% financing that the firms provided in the previous year period, according to analysis of Federal Reserve data by Gleb Nechayev, senior economist at CBRE Torto Wheaton Research.
Dude, this article is from 2006.
Steve, remember, when putting your foot in your mouth, best to wash it first otherwise you have to taste all that dirt.
First article labeled THEN, was from 2006
Second article labeled NOW, was from TODAY's Wall Street Journal.
Y, I been tracking Manhattan rentals (looking to move). Prolly off 15-20% (net with free months, visa cards, etc) just since September. I track BPC most closely (live here) and some (old...'07) list to current asks (say in the same line of a building) are off 30+%. Just obliterated. For the very best deal, it is cheaper $PSF in some cases now to live Downtown than it is in Scarsdale, Rye or Bronxville (where I also track). Gateway (eg) went from 10 listings to 40+ in a few months....and thats just what they publish. The Solaire and Verdesian must be getting *destroyed*
Questions to the community:
1) How low do we go? If we have deflation with deleveraging, then for historical comparison, a 2BR/2Ba was about 1,900-2,200 in the mid 1980s and didnt get to 3,000 until late '90s....again, Ive studied BPC so this may not represent all Manhattan (plus there are spikes and drops running up to 87 and 00), but you get the idea....eg housing medians (though flooded with foreclosures) are already off 4-8 years of gains leading to the 06-07 peaks depending upon what state you are in (per Case Shiller). What year/era do we go back to?
2) Does this lead to a cottage industry of lease breakers (& professionals who assist them)? Im sure a bunch of people are scratching their heads all across NYC if not the US seeing they could save a lot (thousands in Manhattan) per month by breaking (prolly after a trip to housing court)and relocating
People are finally realizing that manhattan rental buildings are garbage and not worth the insane rent they charge. Who wants to live in battery park city? The buildings there are mediocre at best.
rufus, why are you still on here? thought you would disappear after everyone showed the other blogs you lie on and exposed you as a fraudster not even living in NYC. Get a life already. Why would anyone want to live in Chicago with you? The city has zero architecture and the average building height in the city is 3 stories tall. Impressive! If you like flat landscape, single family homes that were built in the 1950s, overweight women, cholesterol, terrible public transportation, extreme weather, nasal accents, then Chicago is for you. Guess that's what you're all about rufus.
I rent from a condo owner, am in my 2nd year, told the landlord last month that I was going to leave early. Didn't use the word "break" or anything like that, played it very nice and polite, but of course I was also prepared if necessary to walk and let him go after me. It is just a private individual and that would be more hassle for him than to just suck it up and rent it. Again, didn't have to go that route, but I'm still terminating.
Funny thing though, it is harder to do that with companies. Related really goes after people, requires 2 months payment and other penalties. They have nice buildings, ok apartments, and good service but they'll go after you.
don't forget about the plethora of corrupt politicians in Chitroit
Sizzlack, oldbuyers, this could potentially be an interesting discussion about rental pricing. So let rufus do his thing and ignore him and then 95% of the discussion could be good. Instead, with responses to rufus and stevejhx for that matter (plus my admonition now) we are watering down the quality of this discussion.
Discuss rentals ...
Quality of discussion...thats rich!
Sizzlack, now you are worse than rufus
Are you serious? You clearly haven't been here very long.
me too. Anyway, I second the Wall St. Journal article. I've got friends moving and in a month it has gone from 1 month free to 2 months free.
oldbuyers, is that why 9 of the 17 tallest residential buildings in the country are in Chicago?
Get your facts straight before talking out of your ass.
Sizzlack, T1, OLD, refrain from responding to rufus
Ok Dad. Will do.
rufus, you are a compulsive liar. Anything and everything you say is a lie.
You are pathetic and a typical Midwestern. FYI, 2 people were stabbed in your coveted Lincoln Park yesterday, 1 dead.
http://www.chicagobreakingnews.com/2009/01/2-stabbed-on-lincoln-park-street.html
No wonder Chicago continues to lose population, while NY gains. I heard Chicago is now being called the Gaza Strip of the U.S.
oldbuyers, I guess facts are a stubborn thing. Here's the list of the tallest residential buildings in the U.S. Chicago has more than NYC.
http://www.highrises.com/Tallest-Residential-Buildings.php
That's what I thought, oldbuyers. You are confronted with facts, and you are forced to shut up.
In 2006, renting was for a very short term inferior to buying in that 2006-2007 period only, but since the purchase decision is long-term, we are seeing first hand the merits of renting vs. buying.
More long-term, here are reasons why renting is ALWAYS financially more beneficial over time than owning.
Let's make some financial assumptions that are borne out by decades of empirical evidence:
1) Real property prices and rents increase at the rate of income, or 0.7% per year adjusted for inflation.
2) The S&P 500 increases at a real rate of 8.0% per annum.
These being true, it is ALWAYS better to rent property than to buy, if you invest the down payment in the S&P 500. Watch:
Say you make $100,000. This implies that you can spend up to $2,333.33 per month in total housing expenses (28%).
An 80/20, 30-year fixed $375,000 mortgage at 6% gives you monthly mortgage payments of $2,248.31.
Assume that taxes and common charges amount to a VERY CONSERVATIVE 10% of total mortgage payments, or $224.83 per month.
A $375,000 mortgage implies a purchase price of $468,750, and a down payment of $93,750.
If rented an apartment for the amount of the mortgage payment, you will have paid $903,455.33 in rent over 30 years if it increases 0.7% per year.
If you invest the down payment in the S&P 500 for 30 years, $943,374.08 at the end of 30 years, for a total net profit of
$39,918.75. To that, however, add your yearly maintenance and tax payments $2,697.96, increasing 0.7% per year and accruing 8.0% per year over 30 years, and you will have earned an additional $330,084.36, making your total profit $370,003.11.
Now do the same thing for your house. If your $468,750 home appreciates at a real annual rate of 0.7%, at the end of 30 years you will have a home worth $577,863.68, for a profit of $109,113.68. Add to that the original loan of $375,000 - the rest of the equity you will have built - and you get a gross profit of $484,113.68. But you would have paid $434,393.21 in interest, so your real profit is $49,720.47. In addition, you will have spent $90,343.15 in tax and maintenance, making your GRAND TOTAL PROFIT a whopping NEGATIVE $40,622.68.
That's right! You rent for the amount of your mortgage, all values go up linearly in line with historic data over time, and you will wind up with a total profit of $370,003.11. Whereas if you buy a home you will wind up with a loss of $40,622.68.
This of course excludes special assessments and all the transaction costs associated with owning real estate: brokers' fees, conveyance tax, etc. It also ignores the tax effect on dividends. But dividends and capital gains tax rates are currently the same (and can't be predicted in the future). The only further benefit from owning is the $250,000/$500,000 tax exemption. But it is doubtful that $410,625.79, which is the absolute value of the difference between the owner's loss and the renter's gain.
Guys, it's indisputable: renting is FAR better in the long-term than buying. All the figures and assumptions I used are real and verifiable. Do your own calculations: rent for the price of your mortgage payment, invest the down payment and maintenance and property taxes in the S&P 500 at the real rate of increase of 8.0%, increase your property value, rent, taxes and maintenance payments at the real rate of 0.7%, deduct the mortgage interest paid, and you will see IT IS ALWAYS MORE BENEFICIAL TO RENT.
Do your own calcs, or criticize the model.