Sell this summer/fall or wait it out a year?

Awful time to sell... but a worse time to rent. You will likely earn a tiny return on current value of your apartment, AND it is likely that property values will continue to decrease in the near term... making it even worse. Do the math.

i think most on this board would say sell asap and cut your losses. sorry about your trouble.

As long as you are prepared to take 2003 prices for your condo, you should sell now. If not, wait it out a few years.

I was in same situation as you. Bought 2BR in 2003. My carrying cost is $3.5K and I just rented for $4.5K. Since I have a 30yr fixed rate mortgage, I will just hold on and let the renter pay my apartment down.

Forgot to mention that I also owe a bigger place. I never had the intention to hold on to my other place but since it didn't sell quickly, I figure I keep it. I do believe that inflation will eventually pick up and rents should go up (2yrs down the road).

I've always planned to hold long-term and keep this as an investment property once my family outgrew it. I can cover the fact that we'd be underwater but I'm just not sure that it's the right thing to do.

can you afford the places if rents come down? 30%?

Be prepared. Just in case that is how the supply/demand equation works out.

chelsea condo owner: Your out of pocket expenses are relatively small. I would say hold on to your place. I don't think that rents are down permanently. They move much quicker than sales with the economy. This year and probably next year will be bad but then unemployment in the City will go down and things will start to look better which I equate to higher rents.

You also need to consider if you want to be landlord or not. Can be a pain in the butt. I would consider that a cost as well

chelsea,

are you currently living in the apartment? are you desperate to move out? the truth is that the only scenario under which i would hold the apartment is if i could live in it.

if you sell it now and price it aggressively you will most likely take a smallish loss on your initial investment--if you borrowed a lot, you may lose most of your equity. unfortunate, but not the end of the world.

if you hold onto the apartment and rent it out, this is what will happen: you will have to rent or buy another apartment. if you buy, you will be doubling down on manhattan real estate and taking on enormous leverage (two highly mortgaged apartments). if you rent, you will have an out-of-pocket expense of several thousand dollars on top of your rent to basically subsidize the renters in the condo.

you will be doing this with the hope that apartment values go up. they may go up. they also may go down, in which case losing your equity will be the least of your problems. at that point you may owe significantly more on the apartment than it is worth, and, depending on the rest of your financial situation, you may end up in bankruptcy.

either live in the apartment or sell it, those are your only reasonable options.

We are currently living in the apartment but would probably leave NYC and rent a much more inexpensive place in the burbs for a year. We have no plans to buy or rent another place in NYC to replace this. We aren't desperate to move yet, which is why I'm wondering if we should wait another year.

chelsea_condo_owner,
Talk to your accountant about the cost/benefit of converting your home to an income-producing apartment. We had to rent out our house in the burbs when it failed to sell, and took a small monthly loss against our mortgage payments. We sold after a year, but because we had converted the use and lost a little money we actually wound up with a massive tax refund ($37K, no joke). Anyway, the whole process made us feel like crazy people, but it ended up being fine. We recovered most of our equity, and what we lost we actually regained as a tax refund. It's one of the reasons I became a real estate agent - I wanted to help other people not lose their minds.
Tina
(Brooklyn broker)

And if you want to rent it for $2800/month, I have a terrific couple relocating from Denver...

Chelsea... r u going to listen to a broker and another "owner" in NYC with a vested interest in not having the sales listing top 20K in 2 yrs... Take it from an agnostic renter/buyer/investor RE guy... EVERY indication is to SELL now... cut your losses and pick up your exact unit in 2 years for 50% off.

Nice Tina... $37K tax refund.... WOW... let me see if I can lose more money by buying GM stock.... I'll get back $.40 on the dollar.... TINA you are in the wrong profession.... you should be a tax attorney.....

LMAO.

CHELSEA... the fact you are asking that question should say something about your mindset, no?

Thanks w67, you're sweet. A tax attorney? Too many barriers to entry for an idiot like me!

Anyway, I wasn't saying don't sell - by all means, try to sell. I'm just suggesting you speak to your accountant beforehand so you understand the ramifications of each possible outcome, so that you don't panic.

w67thstreet, why so snarky? I am describing my situation. How can you make a universal recommendation of SELL NOW without knowing all the facts. I do agree that real estate is most likely going to come down but your statement that it will be 50% in 2yrs is a guess nothing more. And if you tell me I am another "owner", you are another "renter" with a mission!!

I would sell now. Holding on another year will most likely only expose you to even lower prices. I think the decline will end some time in 2010 but it will be many, many years until we see 2007/2008 prices again. Just my opinion...

between selling now and selling one year later, the answer is clear - sell now. however, if you have holding power for 8 - 10 years, then hold.

Chelsea,

SELL IT. I'll be very honest, things are going to get far worse than they already are.

Major corporations will close shop in Manhattan, unemployment will jump north, and there'll be flood
of fire-sales, forced liquidations by developers receiving margin calls.

Deutsche bank is dead on with 47% decline from today's price. Don't wait til the Lehman of NYC real estate hits the street, get out now.

you can send me a box of chocolate in 2010.

Chelsea Condo Owner-
I would tend to agree with the last post from eric_cartman, I would make the suggestion to get a reasonable estimate of what you could get both on the rental end and the sale end as a final price, and then do the math, calculating in that there are sometimes additional costs and risks as a landlord. I think it is safe to say that 1 year from now the average sale price will be lower. Look at the closest comps you can find in your area, and if you decide to sell as opposed to rent just be sure to price carefully, it is all about competing with other sellers at this point to attract the smaller pool of buyers. My guess is that in a year we will actually have Higher inventory and therefore even more competition as this new market settles in so to speak. This is especially true for newer condos as we will be seeing even more of the default shadow inventory comeback to market. You could also put your place on the market for sale and if you do not get a number you are happy with, rent it instead!

sell it last year

Despite what the bull says, reversion to mean is unavoidable. If you lucky enough to find a qualified buyer, you should consider selling it now.

it never reverts exactly to the mean without overshooting to the downside first.

it's the truth.

I'm in the same situation, I purchased my apt which I live in and cannot rent out in 2004. I've just gonna into contract to sell it. I've lost a little bit of money but I'm glad to get back my down in tack. Remember that it cost about 10% in closing costs to sell your apartment if you decide to use a broker which I highly suggest.

We were not willing to potentially be underwater and not be able to move if we needed to. I consider my down payment to be an oversized security deposit. It just isn't worth the risk to stay. Prices are not going to rise anytime soon.

Thanks to all for the feedback.

A question - you mention that you'd always planned to hold the apartment 'long-term' as an investment once your family outgrows it. So, has your family outgrown the apartment? Or could you remain comfortably another 5 years or so?

The reason I ask is this - while it is absolutely true that NYC RE is in the middle of a major downturn, with likely considerably farther to drop, it doesn't necessarily mean prices won't eventually stabilize and perhaps even turn around. I remember people panicking and dumping recently-purchased properties in the early 90s as prices plummeted by 30%. Today those same properties are worth three to four times their late-80s purchase prices. Nothing remains in freefall forever.

All this said, your comfort level is paramount. If you're unable to sleep at night, then absolutely cut your losses and get rid of the apartment now. Waiting a year makes no sense, IMO, as the market's not expected to turn around anytime soon.

chelsea is a bit overdeveloped this year- new conversions and new developments are starting to take less than 1000 a foot

people cant get financing as easily for thos though- but once they do start trading at 1000 a foot with the all cash buyers, it will ultimately bring down the neighborhood even more

Tils, Our family is outgrowing the apartment and I think we could stay another 1-2 years max. Depending on the rental market, I wouldn't mind carrying some extra cost over the next few years but I'm not sure where my comfort level is these days to commit to that knowing that if I don't sell now, I may have to hang on for 5+ years if my equity turns negative over the next few years. Thanks for your comments.

chelsea_condo_owner,

this is the trouble with an illiquid asset. the truth is, just never know exactly what you'll be able to sell the apartment for or how long it will take to sell it. all these people saying 'if you can hold on for 5-10' are guessing just as much as the people who say it could be under water for 30 years (or forever).

when the NASDAQ bubble popped i had friends who thought tech would bounce back within 5 years. the truth is that, inflation adjusted, it is unlikely the NASDAQ index will ever equal its peak in 2000. unfortunately, there is no normal in a market, so it is silly to talk about a return to normalcy. you could end up subsidizing a renter in your place for ten years and THEN have to sell for a huge loss. or, you could subsidize a renter for five years, the market could bounce back, and you could wind up ahead for holding on. i think the first scenario is more likely, but either is possible.

how many times more will we have to hear the ridiculous comparison of equities to real estate?