Why Are These Renters Smiling?

Hey, I'm renting and I'm smiling.

Here's a listing where the broker seems to actually be pricing to sell in a falling market. I would take the under on 2006. I also know an apartment we looked at that was purchased for $740k in 2004 and the owners put about $150k into it was sold for $950k. Feel like we're 2005 easy, 2004 for one beds. It seems like the asks are at 2006 the few deals that are happening are lower.

http://www.streeteasy.com/nyc/sale/364607-coop-151-east-83rd-st-upper-east-side-new-york

You can get decent 2bds for 2k-2500 in this market. Would suck to be one of those guys that paid 2mil for a place he could rent for 2k.....things have changed. Prices made ZERO sense even at high rents, with this huge drop thing how much RE prices will have to fall. I see $250/sq foot at the end of the tunnel.

Lets keep the numbers real world. Right now, you can get a $4500/month 2-bed for like $900k... 16.5x. Assume the maintenance is $1500. In other words, its a 4% after-tax cash yield. Neither of those numbers (16.5x or 4%) is attractive, even though the $900k is down from like $1.3mm. Maybe a 6% cash return and a 12x multiple is thinkable, because the downside from there makes the 6% a less risky investment so to speak. That gets you to $650k, which is 30% down from here, 50% off from peak. Yes, 50% off only rises to the level of thinkable.... Where do NYC munis trade? I'm not sure but I'd guess its above that 6%.

Rhino - this is the real world - $4500/month for a 2bd is for suckers only at this point. Would not pay more than 2-3.5k depending on how nice, how many amenities, location etc. the place has.

and those prices are going down every day.

Honestly a $2k two-bed is for college buddies in a gross neighborhood at this point. Nice parts of Upper East / Upper West call for like $3500-$5000.

Rhino - just a streeteasy search shows 1,329 2bds in Manhattan that are 2+bedrooms. Some are in Harlem, didn't try to exclude them, but it includes close to 300 downtown alone. A search of craigslist will find even more as I think most on streeteasy are overpriced rentals. Tons of inventory out there in that price range.

here is the search:

http://www.streeteasy.com/nyc/rentals/manhattan/price%3A-3000%7Cbeds%3E%3D2

Don't get me wrong. I am not saying you can't get a perfectly decent 2 bed for $3,000 or even less. I'm just saying for instance if you want to live in Carnegie Hill in a nice building (like I do....FOR NOW!), a 2-bed does cost around $5,000. Yes, I could move to Murray Hill or Battery Park City... I could probably get more space on the West Side for $4,500 on a Park Block. I could move into a walk up east of where I live for $3,500. It just is what it is. Its not 'suckers' per se. Its like talking about a three bedroom house in the suburbs... The range is so big as to almost be meaningless. People paid as much as $7000 for the apartments I am saying now still command in the $5000s.

Yeah, it's a gross exaggeration to state you can get 2BR apts for under 2k. In Bushwick, sure. Elsewhere, no.

"Now, what I'd like to hear from JuiceMan, petrizitz, LICC = tech_guy, spunky (where's spunky?!) et al., is how they can ignore all these signs:"

That's an easy one steve:

1) With the killer rates available I was able to refinance my Manhattan pad and am currently spending less per month to own than I would to rent. Not to mention I have locked in these great rates for the rest my life
2) I'm about to put new crown molding in my pad and thinking of a kitchen renovation
3) I love my neighborhood, the proximity to the park, and my neighbors
4) With these killer rates I am also able to refinance my second home which is in a lovely area far from NYC in a stable, rock solid market. These rates will also be locked in for the rest of my life
5) Business has never been better
6) I’m in the airport heading to a lovely vacation in the Turks
7) I have a baby on the way

How does one ignore the signs you ask? Buy smart, buy something you love, buy in great neighborhoods, and buy for the long term. Also, appreciate all of the good things you have and don’t sweat market cycles. If you follow these simple steps, the world is your oyster. Is that a good enough answer steve or were you looking for something else?

Talking about two-beds generically is pretty much a waste of time. Yes in the five boroughs you can find them anywhere from $1200 to $10000.

JuiceMan what's your point? If you are paying less than rent, that means you bought at a time that made sense, to Steve or any bear. The only point is we're not there yet now, not even with the now seemingly 30% peak to trough decline. Your points are meaningless.

I love this one:

"5) Business has never been better"

Juiceman, are we in a bull market for dental work?

"You can get decent 2bds for 2k-2500 in this market."

And yet, you still cannot provide even a single example of a TRUE 2 beroom for $2k in prime Manhattan.

Meaningless? What happened to the statement that everyone that bought in the last three years was an idiot? More importantly, steve asked a question "how can you ignore the signs" and I answered it. Your response is meaningless because you obviously don't get it.

Yeah I don't know why Anon took that stand. I'd say decent means $3000+.

If your definition of a 2 bedroom is converting the living room in a 1 bedroom into a second bedroom, then yes, you can get a 2 bedroom in the Village for $2k. No arguments from me.

Everyone that bought in the last three years did not care about paying more than rent and they are out of the money if they need to sell...and there is a link between those two conditions. Your statements are meaningless. You basically said "I am doing ok". Good for you, but it doesn't really add anything.

Steve says you are ignoring the signs if you think the market can hold this level. I don't think he is asking why you don't care that the market is falling. No one is asking about your circumstances.

Hey Juiceboy; The question wasn't posed as an opportunity to gloat about your trip to the Turks--we're discussing macro-issues about the market. Talk to me in 2 years and we'll discuss further the elegance of your crown moldings vs. your underwater status

juiceman,

it's great that you are having a baby, going on vacation, and doing well in your career. and also irrelevant. would those things not be happening if you rented?

as for loving your neighborhood and your apartment...i do too, and i rent. again, irrelevant.

if you bought within the last three years then unless you had some sort of insider deal you do not pay less per month than you would to rent a comparable apartment. in fact, if you bought within the last five years or even, with the fall in rents, the last seven years you don't pay less per month to own than you would to rent.

if you bought during the bear and then flat market in new york city real estate that lasted more or less from 1989-2000 then you are most likely still ahead of the game--particularly if you bought before 1997. but that's the point: there are good times to buy and there are bad times to buy. why is it that so many owners insist that all times are good times to buy and all prices are good prices to pay? it just doesn't make sense.

Alpine, with over 1300 listings for less than 3k in Manhattan that are 2beds, there are MANY decent ones out there. Keep up the delusion, your overpriced condo will just rent for less next month, no loss to anyone but yourself. Better to face reality - rents are going DOWN FAST and prices have to follow.

Can we take it somewhere that matters? Where do people think price would adequately reflect risk? It seems like 11x rent would be another 30% down from the 70c of peak dollar we've already sunk to... My hesitation with the 11x is that its so much higher than the trough multiples of the 1990s (which suggests we need to drop 50% from the 70c). My guess is interest rates are the answer. If they hold interest rates here, then it would be tough to see 1990s price/annual rent multiples.

Seems like when rents just start to go up, that's the time to buy. Rents should lead both going down and coming back up. True? If so, then sales prices will come down further, but I guess almost everyone thinks that.

Then again, when everyone agrees, that's usually a contrarian indicator...

My question: where/when do rents stop falling? When the new condos all get rented? $2K for a "decent" 2br?

The whole contrarian wisdom is a myth. For one, not everyone thinks real estate will continue to go down. Secondly, everyone thought it would keep going up in 2004 and everyone was right for 3 years. And no, rents don't lead. Rents went down in 2002 and the purchase market continue to rise. Purchasing a function of lending and incomes, rents are just a function of incomes. Also rents are not as ridiculous as apartment values if you look at history. They don't need to fall as much.

"rents are just a function of incomes" and vacancy rates

Vacancy rate is a function of demand, which is a function of income.

Congratulations, JuiceMan. Best of luck to you and the Mrs.

"rock solid market" where is that?

by "rock solid" I would imagine Juiceman is talking about the only markets that are not plummeting... i.e., the ones that never went up to begin with. Such markets do exist: they are Albany, Rochester and Buffalo.

lol, i don't think he's talking about rochester, i heard there hasn't been a transaction there for the last 15 years.

"Rock solid" was his meaningless phrase inside his meaningless self-congratulatory post. What exactly is a rock solid purchase other than one that has some mathematical basis for being opportunistically cheap. At the same time, he tells us not to worry about market cycles. Yes, you need not worry about market cycles if you buy something cheap as defined reasonably. His statement not to worry is like the buy and hold stock market myth. Bought expensively, stocks are a shitty buy and hold investment - FACT. Bought expensively, real estate is a shitty buy and hold investment - ALSO FACT. The only debate worth having is what qualifies as cheap. If interest rates are low, there is some argument that the 'dividend' savings from owing vs renting offsets potentially capital loss....Like the dividend yield did for stocks in the early 1980s.

"Like the dividend yield did for stocks in the early 1980s. "

rhino, were you investing in the stock mkt back then? in the 80s?

"Hey Juiceboy; The question wasn't posed as an opportunity to gloat about your trip to the Turks--we're discussing macro-issues about the market"

I'm not a gloater changedropper, never have been. steve asked a question and I answered it honestly. Probably didn't need to include the Turks information, but what can I say, I was excited.

"it's great that you are having a baby, going on vacation, and doing well in your career. and also irrelevant. would those things not be happening if you rented?"

Yes happyrenter, that’s is a fair point but also irrelevant. My point was to answer steve’s question on why I don’t worry about “the signs”. If you don’t like my answer that’s fine, but it is the truth.

"if you bought within the last three years then unless you had some sort of insider deal you do not pay less per month than you would to rent a comparable apartment."

HR, not everyone bought a $1500 psft condo in the last three years. Also, regardless of what anyone says on this board, I look at cost of ownership on a total cost basis, including the tax benefit. With rates the way they are right now, deals you can get in the current market, 30% down, and the tax benefit you can get very, very close to a breakeven rent to buy. Do the numbers at around $1100 - $1200 a sqft and let me know what you come up with.

"why is it that so many owners insist that all times are good times to buy and all prices are good prices to pay? it just doesn't make sense."

happyrenter, where did I say that all times are good time to buy? What you and your fellow bears like to do is spin every non negative comment into "buy now or be priced out forever". That is not at all what I'm saying. What I am saying is that there are deals to be had and if you look at the numbers you can get very close to a breakeven rent vs. buy. That is not in any way a projection for the future market.

"Juiceman, are we in a bull market for dental work?"

farquhar, I know this may sound crazy, but don't believe everything you read on streeteasy. My profession has nothing to do with this, but I do find it funny that steve thinks I'm a dentist. If you really want to know, I’m a Botanist.

"Congratulations, JuiceMan. Best of luck to you and the Mrs."

tenemental, you are a very good man and happy to see you back. Thanks for the congrats.

"by "rock solid" I would imagine Juiceman is talking about the only markets that are not plummeting... i.e., the ones that never went up to begin with."

There is some truth to that. However, I choose to buy real estate in good neighborhoods that have a long term market appeal. I'm not a "buy in a fringe area and hope for the neighborhood to turn" kinda guy. My second home is in a desirable neighborhood that people will always want to live. To your point, it did not experience the craziness that some other parts of the country did. However it is as stable an "investment" as there could be, and I also enjoy it very much.

"Rock solid" was his meaningless phrase inside his meaningless self-congratulatory post."

Not that I didn't know this already, but you are really dense Rhino86. You just don't get it so I won't waste my time educating you. I will end with another "self-congratulatory post", I'm really glad I don't see the world through Rhino86's eyes, because that would be really miserable.

Juiceman - you don't seem to view RE from an investment perspective. Why would I buy an overpriced asset if I can invest my $ elsewhere? You say you don't sweat the market cycles, but no serious investor would ever make this statement. The only solid investment is that which is made at an attractive price, regardless of the quality of the asset. Yes, you have to pick between renting or buying, but considering closing costs, fees and the fact that renting is overall MUCH CHEAPER than buying, why would anybody with a brain who cares about investment returns seriously contemplate buying in this economic environment???? Why not wait until prices bottom out???

THat 900k renting for 4500k comment is a JOKE. This is the reality:

These two are the EXACT SAME unit in the EXACT SAMEE building:

http://www.streeteasy.com/nyc/sale/342481-condo-100-west-58th-st-times-square-new-york

http://www.streeteasy.com/nyc/rental/467053-condo-100-west-58th-street-times-square-new-york

$3500 a month to rent or 42k per year versus:

$1,357,000
Common Charges: $1,136
Taxes: $947

Prudential estimated mortgage:
"Mortgage Amount = $1,085,600
Down Payment = $271,400
Monthly Mortgage Payment = $7,223 [7%]"

So assuming you are in the 45% tax bracket, (which I am) its net $7252.43 per month after-tax deductions to buy a place that costs $3500 a month to rent. Plus you would be out $271,400 for the down payment. I would say that investing $271,400 in a few two year jumbo CDs and/or investment grade muni bonds and saving $45k a year by renting would leave you ahead by $361,000 after two years PLUS interest. The ONLY way you would end up ahead after two years is if the place went up in value by 27% in two years. Raise you hands if you think that will happen?

I excluded closing costs and commissions, and any interest earned on CDs or munis, which would really mean it would have to go up a lot more. Like 20% a year.

Raise you hands if you think that will happen?

I am renting until 2011 at least, no matter what.

Admin, no I wasn't. I didn't realize that studying financial history was silly. Juice, the fact is when you need to tie up cash (and ignore the opportunity cost of that cash), as well as factor in tax benefits to break even vs. renting, history has shown that long-term appreciation from those levels is kind of stinky. That doesn't make me miserable, it just makes me someone who looks at cycles. In the 1990s people were rewarded with wild appreciate because buying at those levels meant SAVING hundreds of dollars vs. renting on a PREtax basis. In a falling market, prices are likely to fall to levels that make owning cheaper pre-tax, to compensate people for the perceived risk of further depreciation in principal value. The analogy is stock were so cheap in the early 1980s (6-7x EPS) that the big dividend yields were buffering you against further depreciation if you held for 3-5 years.

Jason what is the joke? This apartment in my neighborhood would probably rent for $4500/mo. The simple price to rent ratio is 16.5x. If you paid cash you would 'yield' 4% after-tax on your money vs renting a comparable place. A condo's rent ratio is going to be higher.

http://www.streeteasy.com/nyc/sale/364607-coop-151-east-83rd-st-upper-east-side-new-york

At the same time, you do highlight the fact that its absurd for a developer to ask $1.35mm for an apartment that they'd rent you for $3500. Yes I have seen the same thing. Developers continue to ask for 30x rent on a simple price to annual rent ratio which in this case is like a 1.3% after tax yield on your money. Its crazy.

Honestly you brought out a more interesting issue than anything previously discussed.... The condo developers are going to crush the rental market. Did you see that apartment was originally asking $8500 in rent?

:) Juiceman, and congrats on the baby.

JuiceMan, congrats on the baby.

But you didn't answer the question (as usual). The question is not about refinancing - the question is about BUYING TODAY when the anticipation is that property prices will plummet, and rents (as per another thread) are plummeting. Quite different from your answer.

Also, interest rates for jumbo loans are still very high, and the loans are very hard to get, despite your protestations otherwise. So if you answer in the present tense, not about refinancing a property you bought years ago, it would be more helpful. I think others have said as much.

Rhino, I'm assuming you aren't the broker for 151 East 83rd? The numbers on that apt (which does need work) re a bit "hinky"...the maintenance is really $2200 per month, the seller has offered to pay $800 per month towards it for the next 5 years. Nice offer, but changes the numbers.

Ha no I am not the broker. And that changes the numbers a lot. That kind of maintenance for that size apartment is a huge red flag. If that was legit maintenance, then I'd say they sellers are pricing pretty well...which is not that I am saying the market isn't going to continue to ratchet down.

"Jason what is the joke? This apartment in my neighborhood would probably rent for $4500/mo. The simple price to rent ratio is 16.5x."

The actual price to rent ratio here is 32.3X. You claim it would go for $4500 in your hood - which is 25.1x ratio, NOT 16x as you claim.

Anyway, the joke was saying a TYPICAL apartment NOW would sell for 900k and rent for 4500. Right now, all over street easy, you can see 900k apartments for rent AND sell that also are in the 25-35x range.

And its NOT just condos (and coops), since Rockrose, Avalon, etc, have been forced to drastically lower rents to keep up with the glut of condos/coops for rent.

No, it is as I claim. I am doing a simple price/annual rent ratio. I'm not sure what ratio you are using to get 25x, but its not a typical ratio people use. I think you are calcing price divided by annual after tax monthly cost or something. If you calc price/rent like everyone else in the world does it, then 16 ratios are not uncommon for coops. Yes, for condos they are much higher.

juiceman,

the problem i that you keep contradicting yourself. if you claim it was a great time to buy real estate over the past three years, and then claim that it is a great time to buy real estate now because prices are down 30%, you just can't be taken seriously. if prices are down 30% (which they are) it MAY be a good time to buy now, but by definition it cannot have been a good time to buy over the past few years.

and just to give you all an idea how low rents have gotten, i spoke to a broker yesterday about a large classic six on west end in the low 90s for my sister and her husband. the apartment rented for $6800 last year; now the landlord is looking for $5000. i asked the broker what the fee was--he said 15% of first year's rent. when i told him she wouldn't pay that, he said "ok, how about 8%." he told me there is no washer/drier in the unit, so i said forget it. he called me back the next day and said the landlord would be happy to install one.

Happyrenter, I was impressed by the classic six rental listings at 110 W. 96th if you want to pass them along to your sister. They are three (not sure if any are dupes) and they are no-fee. Its kind of mind blowing to think about where the value of these apartment need to go if you can rent them for under $5k.

http://www.streeteasy.com/nyc/rental/471415-rental-110-w-96th-street-upper-west-side-new-york

thanks rhino, 96th between columbus and amsterdam is a little grungy for her taste, but they do look pretty nice.

Yeah West End def has a better feel than over there. Don't know what the status is of that whole retail complex is and hopes pinned on that to improve the scene.

prices are not down 30%. More like 15-20%.

The -20% asks aren't moving. The -15% is already stale. Nothing short of -25% has a hope of executing.

hr- seems like $5k hasn't hit the classic sixes in the 70's and low 80's, although I'm not "actively" looking so haven't tried negotiating. Perhaps it won't. A $5k 6 in the 90's is no good to us either...BUT, I like that the LL was panting at your feet. Good to know...

btw - what's the LL asking on that one? Asking $5k or will accept $5k?

"Now, what I'd like to hear from JuiceMan, petrizitz, LICC = tech_guy, spunky (where's spunky?!) et al., is how they can ignore all these signs"

Steve, you should know by now that people CAN indeed be very effective ostrichs. They can bury their head in the sands for years. I still know ppl in Miami, in Southern California (both down 40-45%) who call me a "chicken little" for predicting a decline in real estate. Likewise, their were ppl in 2002 who said "Arrrr, the NASDAQ will be back at record highs in 3 months!". (In 2009, we're still about 40% of the NASDAQ peak!) So you shouldn't be upset or incredulous that some people can't read the signs in advance -- or even slightly after -- a cataclysmic event.

YOU. SHOULD. BE. GRATEFUL!

From Urban Digs:

"For a real time guess on where we are right now, I put the deals being done right now down around 15%-25% from peak levels (peak being deals signed into contract in early/mid 2007)."

http://www.urbandigs.com/2009/01/price_discovery_phase_1_begins.html

alpine, Noah posted that nearly two months ago. A lot has happened since then.

first of all, 2 months is a lifetime in this market. second, urbandigs isn't the bible. actual sales are happening at 30% off and more.

Alpine was taking umbrage with a -30% guess. His support was a 15-25% range quoted two months ago by Noah, that refers to closing data from over three months ago, which reflect prices likely negotiated five months ago...

Alpine said the market was down 15%, and supported it with a stale quote of 15-25% representing October deals closed in Decemebr. I think people have an issue understanding that "prices" as discussed mean today...They mean if you tried to sell something today, what level would you have any hope to find a buyer, today...a buyer who could get financing today, who could get approved by the board today. What we have here is a failure to communicate. I mean who would actually debate that negotiations today would likely occur 5% below the low end of October negotiations.

JM, a little one? How fab. We've disagreed, but you've always seemed like someone who reasons and considers to me, despite my snarky comment a month or so ago. Both great attributes for a new parent. All the best.

"if you bought within the last three years then unless you had some sort of insider deal you do not pay less per month than you would to rent a comparable apartment. in fact, if you bought within the last five years or even, with the fall in rents, the last seven years you don't pay less per month to own than you would to rent."

happyrenter,

This is quite the overstatement, no? You can't claim to know the price on every transaction within the last seven years, so how can you say such a thing? I didn't get what I consider to be an "insider deal," yet I was able to negotiate pretty hard and do exactly what you say is impossible. And I am sure I'm not alone.

I think he means on a pre-tax basis. On an after-tax basis you can do better than rent. Even then, however, its tougher if you don't charge yourself an opportunity cost for your downpayment. Otherwise, you could simply put down enough cash to drive the payment below rent and then claim monthly savings.

"The whole contrarian wisdom is a myth."

Rhino86,

Totally agree - I've seen a few comments saying that when every last poster here admits the market's down, that'll be the bottom/time to buy. I hope people don't actually make decisions based on this theory.

"6) I’m in the airport heading to a lovely vacation in the Turks
7) I have a baby on the way"

Congrats JuiceMan! All the best raising Junior Juice.

Contrarian thinking is an ego trap. Momentum is a much more powerful indicator in my experience, much of it learned the hard way.

PS: True contrarian is when there is no one talking about buying. Its when saving hundreds of dollars of month vs renting isnt worth the risk of the market falling another 15%. Its single digit price to rents, where the market itself is telling you the risk premium attached to buying is super high. These prices now, while down, are not implying the market is fearful.

I have been looking for weeks and haven't seen one two bedroom for under 2,500. (Only maybe in Harlem or if you leave Manhattan.) In fact I haven’t even seen a real 1 bedroom in a nice building for less 2,500. This does not include free months and those gimmicks.

"In fact I haven’t even seen a real 1 bedroom in a nice building for less 2,500. This does not include free months and those gimmicks.'

Well, a free month is money you don't have to pay so its not a gimmick, its 8.3% lower rent. And define "nice building"? Here are some doorman REAL 1 bedrooms in neighborhoods ALL OVER Manhattan below Harlem:

http://www.streeteasy.com/nyc/rental/480113-condo-350-albany-street-battery-park-city-new-york
http://www.streeteasy.com/nyc/rental/482237-coop-453-fdr-drive-lower-east-side-new-york

http://www.streeteasy.com/nyc/rental/444352-coop-140-west-end-ave-lincoln-square-new-york
http://www.streeteasy.com/nyc/rental/369891-condo-56-pine-st-financial-district-new-york

http://www.streeteasy.com/nyc/rental/455303-condo-1760-second-ave-yorkville-new-york
http://www.streeteasy.com/nyc/rental/440572-rental-500-west-43rd-street-clinton-new-york
http://www.streeteasy.com/nyc/rental/481073-1619-third-ave-yorkville-new-york

http://www.streeteasy.com/nyc/rental/459790-rental-241-east-76th-street-upper-east-side-new-york
http://www.streeteasy.com/nyc/rental/482120-condo-333-east-34th-street-murray-hill-new-york
http://www.streeteasy.com/nyc/rental/471214-rental-392-central-park-west-upper-west-side-new-york

A couple of these are 2 bedroom, 1 baths. All over 700 SF.

Thanks for the links I’ll check them out. I would like to say that I’m hopeful but what I have discovered (since I have answered tons of these) is that once when you answer it turns out it’s not a 2 bedroom or even a 1 bedroom. Even though it’s listed on street easy as such. Also the free months come with signing a lease for 2 years. So two free months at but their locking you in to pay 2,400 for 22.

The best has to be advertising a studio as a two bedroom. You fall in love with the place even though it’s way to small and more then you were willing to pay for a two bedroom and finding out once your filling out the application for the apartment that your not allowed to build walls.

The reason I say that free months are gimmicks is since brokers are using them to lie to people. The brokers are advertising and saying to you that the rent is 2,300 and 3 months free. Then eventually you find out the rent is 2,550 with 3 months free. Their advertising the net effective rent as the real rent.

"Also, regardless of what anyone says on this board, I look at cost of ownership on a total cost basis, including the tax benefit."

So do I.

"With rates the way they are right now, deals you can get in the current market, 30% down, and the tax benefit you can get very, very close to a breakeven rent to buy."

Nope, still cheaper to rent.

Even at the high end of market decline estimates (25-30%) so far, examples of rents down 20-40% have already been shown (including in this article).

Given that buying was MUCH more expensive from the declines, not sure how two similar declines are going to flatten out that ratio.

Or are you completely ignoring the cost of putting down 30% in cash? Yes, if you put down a milion, you can save $100 in rent!

Yes clearly the opp cost/risk of the levered equity investment in real estate through a downpayment is being ignored.... Which is still a bull market way of looking at the world. I like looking at it as a cash buyer... and then see what the "income yield" rent - maintenance. Its still pretty low at current levels...pitifully low for condos.

now1225 a couple of those have flooplans, and all list over 700 SF, so they are all clearly actual 1 bedrooms. A friend of mine was looking BPC and Fidi and found a BUNCH for under $2500, all very very negotiable in doorman buildings, and a few midtown west too. So I know these types of ads, especially from Corcoran, Halstead, and Prudential, are "real". Other brokerage firms I don't know so much...

Also all no fees here:

http://www.nybits.com/search/

A few under $2500 asking, a few even under 2k all DEFINITELY real because they are all by owner.

"Yes clearly the opp cost/risk of the levered equity investment in real estate through a downpayment is being ignored.... Which is still a bull market way of looking at the world. I like looking at it as a cash buyer... and then see what the "income yield" rent - maintenance. Its still pretty low at current levels...pitifully low for condos."

We've got a long way to go...

bjw2103,

actually, i CAN know the price of most real estate transactions in the past seven years--it's the beauty of public documents. and i have yet to see even one example of a purchase in the past five years that beat renting a similar apartment--unless, that is, the person sold the apartment to an even greater fool in 2007. if you can find one, please share it.

it doesn't take a genius to recognize that paying $1.5 million and $2000 per month in maintenance for an apartment that rents for $6000 is not good business.

Speaking of that, an investor buyer in the Brompton on the UES is looking to rent a junior four they probably paid over $1.5mm for $5500/mo. I guess its not a yield investment. Contact Sothebys.

that would be $2800 a month maintenance after the sponsors sock the existing residents with fees to make up for all the empty units

happyrenter,

I know they're public record, but I sincerely doubt anyone's taken the time to look through all of them. That's why your prior statement was a bit hollow. I certainly don't think it was the norm to have carrying costs <= rent during this period, but it's pretty ridiculous for anyone to say there were no such cases. I'm not going to out myself, but this is my case, pre-tax. I'm not smart nor good enough to have been the only one, especially if you go back to 2002. I completely agree with your last sentence though - there are tons of examples of overpaying. It doesn't mean you can make sweeping generalizations however.

Blah blah the point here is that on a pre-tax basis, charging down payment for opportunity cost/risk, it has been generally more expensive to buy for a while. And until August, it was basically the winning bet that appreciation would more than make up for the difference (especially if you sold). Now we have to examine the market in light of being paid monthly to own, and how much is fair, rather than paying for the privilege, as had been the norm since from say 1990 to 2001.

Well, when you factor in a 20-30% decline (leveraged), its awful tough to even pretend to lean the ratio to buying. You'd probably have to get back to 2002 or so to hit the break-even (assuming we're at 2004 or so prices now... and your two years of appreciation would need to pay for several years of higher costs).

Exactly why until you get a 10% cash return (rent - maintenance) / (purchase price), no one should have any interest in absorbing 20-30% declines... which are on the peak $1, not the 70c we sit here at today. On that basis its 30-40%. Yikes.

Yeah, a WHOLE lot of "yikes" these days.

;-)

"No, it is as I claim. I am doing a simple price/annual rent ratio. I'm not sure what ratio you are using to get 25x, but its not a typical ratio people use. I think you are calcing price divided by annual after tax monthly cost or something."

No, I am doing asking price/annual rent, which is what MANY reports by real estate analysts use. They assume that the tax benifits are cancelled out by maintenence, insurance, etc. so my way is in fact the more normal and stantard way. Your way assumes all the benifits of taxe deductions but pretends maintenance, property taxes, and insurance costs nothing. The quick and dirty way most wall street analysts use is purchase price/annual rent, and exclude everything else. If you WANT to do it your way, it ONLY is logical if you include maintenance, etc.

25x is too high.

Its been argued back and forth here, but the numbers usually end up at 12-20x. 25 is just wrong...

And Manhattan was even above that...

Jason you are just incorrect about how people calc price to rents. They dont include maintenance. Its assume that maintenance is in proportion to rent, and its a simpler calculation....and its the one people use. Sorry dude. Look it up. In my example $900,000 divided by $4500 x 12 is 16x. Where you get 25x I don't know....nor do I know what you are trying to represent with that figure.

Juiceman - Congratulations on the baby!!!

Enjoy the Turks and, if you happen to do any diving there, please let me know what you think of it.

Where i get 25X is that I found an apartment that cost $3500, nOT $4500. I got 32X but looking at an ACTUAL apartment for rent for 3500 AND for sale for $1.36 MM. And I have "looked it up." The ACTUAL cost of owning a home includes after-tax mortgage, maintenance, net property tax, and insurance. Rent = rent, period. Price to rent should EITHER be JUST purchase price/rent assuming maintenance, property tax and insurance cancel out the mortgage interest deduction OR it should be purchase price net of all the aformentioned over rent - which remarkably comes out to just about the same.

That famous Goldman Sachs report that has been bandied about specifically JUST used the simpler first version of price to rent, as did a JP Morgan report on the same topic.

Hell, even Wikipedia has the second method - one MUST include maintenance et al in "price", NOT exclude them.

See http://en.wikipedia.org/wiki/Real_estate_bubble#Housing_ownership_and_rent_measures

There are two methods there, both of which I describe above, the second of which is used in the Goldman report.

> Where i get 25X is that I found an apartment that cost $3500, nOT $4500.

25x still means renting is cheaper...

Jason I am talking about price to rent, which is why I said price to rent. There are not two methods. If you go and read your own wikipedia article, you are talking about the house price to earnings ratio. I am talking about price to rent and price to rent on $900k/$4500*12=16x, which is based on renting an equivalent apartment.