Do yourself a big favor and sign a 1 year lease on a nice apartment. You will thank yourself 10 times over for the rest of your life. You can always break the lease if you find a great apartment to buy that you can't resist. But for the love of all things good, please take this simple advice. You will not regret it.
Yes, let's not buy anything and let inventory pile up. Then we can have a crash and let the vulture investors pick up the pieces. Prices may go down but they will go up again and it is impossible to time the market.
This is always the way it has worked. Why the rich keep getting richer.
Do what's smart for you. If you are buying a home to live in, and you can get a good deal now, and you love the place, go for it.
And if you can't afford what you want, or would like something better, chances are prices will fall a lot and you'd be an idiot to buy now. And who knows, situations change and you may need to leave before the market value of your home reaches what you bought it at. If you can't take that risk, don't listen to the pressure from the sellers - for them, they want your money and most don't give a damn about you. I've encountered too many really sickening people trying to sell places. They are ONLY looking out for their interests, so you look out for yours.
No - it is this simple: There are people in this world who make poor financial decisions in their lives and people who make wise ones. The biggest one you ever make is the purchase of your home. The people who make this decision wisely will be MUCH wealthier over the course of their lives than the ones who foolishly pay too much, buying before a major correction. If you don't understand the math and why this is the case, I don't really care to explain it to you, brainwashedconsumer, so, in your case, I think YOU should go buy, and enjoy SUPER high mortgage payments for the next 10 years until you can't afford it anymore and are forced to take a HUGE loss wiping out everything you ever worked for. Or pay $1.5 million cash for something you will be able to pay $1 million for soon. But if you have that much cash I can guarantee you one thing: You either earned it and are smart enough to understand why it makes sense to not buy now, or you were handed it, in which case you will lose it one way or another, so it really doesn't matter whether you make this bad decision or another one. If you mortgage now, the price you pay for making this bad decision will be the same the rest of the country suffers, you will lose everything in your home. The only thing separating you from everyone else is they didn't have an ENTIRE CRISIS TELLING THEM WHAT WAS ABOUT TO HAPPEN IN FRONT OF THEIR FACE EVERY SINGLE DAY FOF THEIR LIVES before they made their stupid decision. You do. Best of luck.
The other thing to consider is your monthly cost of ownership. The way the economy is going mortgage rates are very likely to go up; even today's 6.5-7% on a 30yr fixed jumbo is still at historical lows. With higher rates and price drops your monthly nut might be the same and now you pissed away another year of rent helping the owner pay down his mortgage, no tax benefits and no equity to show for it.
No, NBA. Rising rates may be the catalyst that cause prices to drop, that is true. But prices will drop WAY beyond levels that will cause you to have the same mortgage payments. HOWEVER, even if you had higher mortgage payment, you would be MUCH MUCH better off paying less of a purchase price with a higher mortgage payment.
And as most people have already pointed out, net of your tax deduction, it is cheaper to rent right now than to buy, on a monthly basis, so you are NOT throwing away a year's rent.
I agree that no one can call the exact bottom or top. Having said this, given the sad economic state of affairs in the public & private sectors and the gravity of this financial credit bust, caution is warranted. In addition, prices are still relatively close to the highs after an unprecedented 12 year uninterrupted bull market. Paying for these sort of valuations in a dangerous economic environment where most asset classes are in way confirmed bear market, is simply not wise advice(in my view).
I just wish there was an efficient way to short this. The NY commercial side was easy enough.
dmag2020, this is such oversimplified "advice." It's a bit much to post here and proclaim your opinion to be universally sound advice and anyone who does otherwise is an "idiot." Buying a home is not such a simple decision - there are countless factors involved, and there's no way you can do them justice on a single post here. This is just more extremist crap.
BJW - I agree with your statement about it being complicated. You have to look at the situation for yourself. If you love the apartment, neighborhood, the price and feel you will be there for 10+ years you will limit your risk. That's all you can do. There are no guarantees....ever. If you are hesitant or don't feel it makes sense, then rent. No harm in doing that either. It's a lease. See how it goes for a year and evaluate things at that point.
> and feel you will be there for 10+ years you will limit your risk
IMHO that doesn't limit the risk, a decline is a decline no matter how long you hold on...
If being "stable" is a goal, thats a good think, but there is still risk involved.
Just as buying a bond with a low interest rate. It might feel safe, but you are adding in interest rate risk in the long term.
nyc, I agree with that. It's a bit of cliche to say "you can't time the market," but the truth is, if you're aware of the larger forces at work, you can pick your spots better than if you're just blindly flinging darts at the board. The larger point though, is that making a blanket statement like "all buyers should rent now" is very shortsighted. Everyone's situation is different, and every property and negotiation is different.
dmag2020 - I have read your rather condescending statement and thank you for your advice on hat you think I should go and do. :) You started a thrad with a three lined simple statement, what kind of responses did you expect? Its interesting how you seem to make massive assumptions about people you have no idea about. Anyway, I guess in someways it keeps this forum interesting and in some cases very boring.
If you fancy an intelligent discussion let me know.
Although the market for the immediate future is gloomy as an owner and perhaps good as a buyer, as always many variables exist. One major factor is getting a loan. Even if prices drop, it maybe a lot harder to get a mortgage in the future at a decent interest rate. That may be one consideration for perhaps buying in the next 6 months.
"The larger point though, is that making a blanket statement like "all buyers should rent now" is very shortsighted. Everyone's situation is different, and every property and negotiation is different."
I think real estate markets are much easier to time than stock markets ... stock prices move much quicker and plunge on bad news immediately ... not so with real estate prices. I agree that it's difficult to pick the exact bottom, but I think you can pretty much tell when you are near the right hand side of a peak, which I'm pretty sure we are now.
As for how much prices have to fall from their 2007 peak - that's an individual decision and obviously the longer your time horizon, the less you need to be off that peak ...
Why not just make an offer that you're comfortable with on a place that you want? How much prices will go down is anyone's guess but I'd be ok putting in a offer at a 25-30% discount of asking NOW rather than waiting another year to see what prices will be.
just put in some -25% offers. from my agent, the seller's agent was willing to work if we upped the offers but wasn't willing to put in a counter yet.
i feel like seller expectations haven't been shifted to reflect market reality yet-- list prices haven't dropped enough, but there is a lot of 'negotiation' behind the scenes. i think getting an acceptance on a 25-30% discount is rare.
that may change once sellers lower their list prices across the board and inventory -still- doesn't move...
"I'm not quite sure about that. Your ability to "absorb" a loss is *not* a good reason to take one..."
The point isn't that a longer time horizon avoids the fact that you could have paid cheaper for it if you'd waited longer -this might be true. But there is something to be said for saying to oneself "well, prices have come down x% already, they may come down more, but I'm not buying at the absolute peak, and I love this place, and what if this is the bottom and I missed it or I can't find a place I like as much, and renting the same place would cost me just as much." I think if you can honestly say these things to yourself there is an argument for buying then, even if you think prices haven't quite bottomed.
Personally I don't think prices will bottom in 2009 and probably not even in 2010, but I still might be a buyer at some point in 2010 if all those things I said remain true (highly unlikely in 2009, I think, but just my opinion). It's good to be aware of better times to buy but also not to be too precise and "overtime" the market.
"you guys have no idea how quickly this is going to get very bad"
Dmag - I think everybody here is intelligent and I wouldn't assume people aren't sophisticated enough to understand what is going on and some of economic challenges ... I am looking at history as my guide and historically real estate prices don't fall that quickly. In the rest of the country, real estate prices are down an average of 25% or so (some surveys say 20%) and it's taken 2 years. During Manhattan's last real estate bust prices headed downwards for 4 years or so, and didn't start declining until 2 years after the market tanked in 1987. So if history is any guide, prices won't have corrected fully in a year or even 2. If you disagree and think it's different now/in this case, please explain. I hope I'm wrong!
I agree... this will take some time. We'll probably decline over at least a couple of years, and I figure it will be 5 years at least before we see any upward trajectory.
For $2500/month you get the following: 1) you avoid principal risk on a $800k studio (you should sleep easier knowing you can't lose your entire net worth in a matter of weeks), 2) you have the ability to invest $800k elsewhere (at the very least you can invest your down payment, but cheap leverage is available in most asset classes, not just homes), 3) the flexibility to change your living system as the world changes (if you lose a job you don't go bust - you just scale down).
Btw, prices are HIGHLY negotiable. I went to see a bunch of places today. HALF of the selling brokers volunteered that their sellers were very negotiable and gave specific reasons (moving, moved, died, etc.) I also got NO BS on how the market would hold up which was great for once. They know...
The people who argue that it is better to own than rent -- without any regard to the point in the cycle -- are the same fools who buy into the stock market at the top and say it doesn't matter as long as they hold for 10 years. You cannot necessarily time either market perfectly -- but you would be in absolute denial to believe that the fall out of the market and economy is not going to have a prolonged negative impact on the real estate market. Wait to buy. You can get more for your money later. Whatever "deal" is out there -- will pale to the ones to come.
I think we've all been drinking the NYC real estate mania cool aid for way too long. How many of us have watched real estate as closely as we are right now in a downward trending market of the past? I am fascninated by the psychology of buyers and sellers - prices have gone straight up for so long that it is impossible to predict how fall they can and will fall. New York City is so different from the rest of country in that rental apartments are ubiquitous. For my family the reality of the buy vs rent debate is figuring out what we can comfortably afford to pay while sleeping well at night buying, comparing that with what we can currently get for our money on a rental and making the most informed decision we can. Then truly re-evaluating the market in the next year when the lease is up. Renting right now is keeping us nimble.
The stock market crashed in 1987 then it took two years before the real estate market collapsed....back then it took about 5 years to start appreciating....this time it will be much worse...Wall street burned out all it's engines...investment banking, bonds, equities, and mergers and acquisitions%u2014have shut down at once. Their business model has been obliterated and most jobs are gone for good. It%u2019s bad news for the 300,000 or so people who work on the Street. Citibank just announced another round of layoff....60,000. This is going to reshape new york real estate for a long time.The national debt now is approaching 12 Trillion dollars depends on foreigners financing our spending.... now China has basically pulled back buying our debt and is demanding higher interest rates which will be driving up mortgage rates which will further drive down prices. Yes there will be blood on the streets..............
http://finance.yahoo.com/tech-ticker/article/128178/Citi-Firing-60000-Chairman-May-Still-Lose-Job?tickers=c,axp
Buyers: Just Rent
Do yourself a big favor and sign a 1 year lease on a nice apartment. You will thank yourself 10 times over for the rest of your life. You can always break the lease if you find a great apartment to buy that you can't resist. But for the love of all things good, please take this simple advice. You will not regret it.
why? Substantiate your answer please. If a buyer acquires a property which they will live in for the next ten years, what is wrong with that?
BWC
It will be painful to watch your apartment loose 100k in the first year, that's all
Yes, let's not buy anything and let inventory pile up. Then we can have a crash and let the vulture investors pick up the pieces. Prices may go down but they will go up again and it is impossible to time the market.
This is always the way it has worked. Why the rich keep getting richer.
Do what's smart for you. If you are buying a home to live in, and you can get a good deal now, and you love the place, go for it.
And if you can't afford what you want, or would like something better, chances are prices will fall a lot and you'd be an idiot to buy now. And who knows, situations change and you may need to leave before the market value of your home reaches what you bought it at. If you can't take that risk, don't listen to the pressure from the sellers - for them, they want your money and most don't give a damn about you. I've encountered too many really sickening people trying to sell places. They are ONLY looking out for their interests, so you look out for yours.
No - it is this simple: There are people in this world who make poor financial decisions in their lives and people who make wise ones. The biggest one you ever make is the purchase of your home. The people who make this decision wisely will be MUCH wealthier over the course of their lives than the ones who foolishly pay too much, buying before a major correction. If you don't understand the math and why this is the case, I don't really care to explain it to you, brainwashedconsumer, so, in your case, I think YOU should go buy, and enjoy SUPER high mortgage payments for the next 10 years until you can't afford it anymore and are forced to take a HUGE loss wiping out everything you ever worked for. Or pay $1.5 million cash for something you will be able to pay $1 million for soon. But if you have that much cash I can guarantee you one thing: You either earned it and are smart enough to understand why it makes sense to not buy now, or you were handed it, in which case you will lose it one way or another, so it really doesn't matter whether you make this bad decision or another one. If you mortgage now, the price you pay for making this bad decision will be the same the rest of the country suffers, you will lose everything in your home. The only thing separating you from everyone else is they didn't have an ENTIRE CRISIS TELLING THEM WHAT WAS ABOUT TO HAPPEN IN FRONT OF THEIR FACE EVERY SINGLE DAY FOF THEIR LIVES before they made their stupid decision. You do. Best of luck.
The other thing to consider is your monthly cost of ownership. The way the economy is going mortgage rates are very likely to go up; even today's 6.5-7% on a 30yr fixed jumbo is still at historical lows. With higher rates and price drops your monthly nut might be the same and now you pissed away another year of rent helping the owner pay down his mortgage, no tax benefits and no equity to show for it.
No, NBA. Rising rates may be the catalyst that cause prices to drop, that is true. But prices will drop WAY beyond levels that will cause you to have the same mortgage payments. HOWEVER, even if you had higher mortgage payment, you would be MUCH MUCH better off paying less of a purchase price with a higher mortgage payment.
And as most people have already pointed out, net of your tax deduction, it is cheaper to rent right now than to buy, on a monthly basis, so you are NOT throwing away a year's rent.
>it is impossible to time the market<
I agree that no one can call the exact bottom or top. Having said this, given the sad economic state of affairs in the public & private sectors and the gravity of this financial credit bust, caution is warranted. In addition, prices are still relatively close to the highs after an unprecedented 12 year uninterrupted bull market. Paying for these sort of valuations in a dangerous economic environment where most asset classes are in way confirmed bear market, is simply not wise advice(in my view).
I just wish there was an efficient way to short this. The NY commercial side was easy enough.
> no equity to show for it.
No equity is 1000x better than NEGATIVE equity....
dmag2020, this is such oversimplified "advice." It's a bit much to post here and proclaim your opinion to be universally sound advice and anyone who does otherwise is an "idiot." Buying a home is not such a simple decision - there are countless factors involved, and there's no way you can do them justice on a single post here. This is just more extremist crap.
Are people who can afford a $1.5 mil apt really taking home-buying advice from losers on the web?
I mean, I'm not one of them, so I don't know.
BJW - I agree with your statement about it being complicated. You have to look at the situation for yourself. If you love the apartment, neighborhood, the price and feel you will be there for 10+ years you will limit your risk. That's all you can do. There are no guarantees....ever. If you are hesitant or don't feel it makes sense, then rent. No harm in doing that either. It's a lease. See how it goes for a year and evaluate things at that point.
"No - it is this simple:"
dmag, your post is so on the mark it should be framed.
> and feel you will be there for 10+ years you will limit your risk
IMHO that doesn't limit the risk, a decline is a decline no matter how long you hold on...
If being "stable" is a goal, thats a good think, but there is still risk involved.
Just as buying a bond with a low interest rate. It might feel safe, but you are adding in interest rate risk in the long term.
nyc, I agree with that. It's a bit of cliche to say "you can't time the market," but the truth is, if you're aware of the larger forces at work, you can pick your spots better than if you're just blindly flinging darts at the board. The larger point though, is that making a blanket statement like "all buyers should rent now" is very shortsighted. Everyone's situation is different, and every property and negotiation is different.
dmag2020 - I have read your rather condescending statement and thank you for your advice on hat you think I should go and do. :) You started a thrad with a three lined simple statement, what kind of responses did you expect? Its interesting how you seem to make massive assumptions about people you have no idea about. Anyway, I guess in someways it keeps this forum interesting and in some cases very boring.
If you fancy an intelligent discussion let me know.
Although the market for the immediate future is gloomy as an owner and perhaps good as a buyer, as always many variables exist. One major factor is getting a loan. Even if prices drop, it maybe a lot harder to get a mortgage in the future at a decent interest rate. That may be one consideration for perhaps buying in the next 6 months.
BWC
"The larger point though, is that making a blanket statement like "all buyers should rent now" is very shortsighted. Everyone's situation is different, and every property and negotiation is different."
Agreed. I'd leave it at "most should rent now".
I think real estate markets are much easier to time than stock markets ... stock prices move much quicker and plunge on bad news immediately ... not so with real estate prices. I agree that it's difficult to pick the exact bottom, but I think you can pretty much tell when you are near the right hand side of a peak, which I'm pretty sure we are now.
As for how much prices have to fall from their 2007 peak - that's an individual decision and obviously the longer your time horizon, the less you need to be off that peak ...
Absolutely on the first part. RE markets have incredible inertia. The turn EXTREMELY slowly...
> the longer your time horizon, the less you need to be off that peak ...
I'm not quite sure about that. Your ability to "absorb" a loss is *not* a good reason to take one...
What does breaking a lease entail?
Also, how much do brokers charge on 1 year leases?
0 if you avoid them and go leasing offices yourself.
Why not just make an offer that you're comfortable with on a place that you want? How much prices will go down is anyone's guess but I'd be ok putting in a offer at a 25-30% discount of asking NOW rather than waiting another year to see what prices will be.
just put in some -25% offers. from my agent, the seller's agent was willing to work if we upped the offers but wasn't willing to put in a counter yet.
i feel like seller expectations haven't been shifted to reflect market reality yet-- list prices haven't dropped enough, but there is a lot of 'negotiation' behind the scenes. i think getting an acceptance on a 25-30% discount is rare.
that may change once sellers lower their list prices across the board and inventory -still- doesn't move...
I like that approach. Just throw the offers out, and see who blinks... by law the brokers have to present all offers to their clients.
"I'm not quite sure about that. Your ability to "absorb" a loss is *not* a good reason to take one..."
The point isn't that a longer time horizon avoids the fact that you could have paid cheaper for it if you'd waited longer -this might be true. But there is something to be said for saying to oneself "well, prices have come down x% already, they may come down more, but I'm not buying at the absolute peak, and I love this place, and what if this is the bottom and I missed it or I can't find a place I like as much, and renting the same place would cost me just as much." I think if you can honestly say these things to yourself there is an argument for buying then, even if you think prices haven't quite bottomed.
Personally I don't think prices will bottom in 2009 and probably not even in 2010, but I still might be a buyer at some point in 2010 if all those things I said remain true (highly unlikely in 2009, I think, but just my opinion). It's good to be aware of better times to buy but also not to be too precise and "overtime" the market.
You are not going to have to wait that long. You guys have no idea how quickly this is going to get very bad.
DMAG2020 - then why sign a 1 year lease? Why not wait it out wherever we are?
Oh, totally do that, as long as you don't own your apartment. I just meant, those who are looking for and need a new place to live right now.
"you guys have no idea how quickly this is going to get very bad"
Dmag - I think everybody here is intelligent and I wouldn't assume people aren't sophisticated enough to understand what is going on and some of economic challenges ... I am looking at history as my guide and historically real estate prices don't fall that quickly. In the rest of the country, real estate prices are down an average of 25% or so (some surveys say 20%) and it's taken 2 years. During Manhattan's last real estate bust prices headed downwards for 4 years or so, and didn't start declining until 2 years after the market tanked in 1987. So if history is any guide, prices won't have corrected fully in a year or even 2. If you disagree and think it's different now/in this case, please explain. I hope I'm wrong!
I agree... this will take some time. We'll probably decline over at least a couple of years, and I figure it will be 5 years at least before we see any upward trajectory.
Rent vs buy...If I spend $2500 for a studio in four years haven't I thrown $120k out the window. Why should I continue to rent?
For $2500/month you get the following: 1) you avoid principal risk on a $800k studio (you should sleep easier knowing you can't lose your entire net worth in a matter of weeks), 2) you have the ability to invest $800k elsewhere (at the very least you can invest your down payment, but cheap leverage is available in most asset classes, not just homes), 3) the flexibility to change your living system as the world changes (if you lose a job you don't go bust - you just scale down).
So there are NO good deals out there?
Btw, prices are HIGHLY negotiable. I went to see a bunch of places today. HALF of the selling brokers volunteered that their sellers were very negotiable and gave specific reasons (moving, moved, died, etc.) I also got NO BS on how the market would hold up which was great for once. They know...
> If I spend $2500 for a studio in four years haven't I thrown $120k out the window
Only if you don't know math.
If renting saves you from a $200k loss and/or is cheaper than the carrying costs of the mortgage anyway, its the smartest thing you'll ever do.
Buying an asset that is about to lose 10% ON MARGIN is 100x more "throwing money out the window"
The people who argue that it is better to own than rent -- without any regard to the point in the cycle -- are the same fools who buy into the stock market at the top and say it doesn't matter as long as they hold for 10 years. You cannot necessarily time either market perfectly -- but you would be in absolute denial to believe that the fall out of the market and economy is not going to have a prolonged negative impact on the real estate market. Wait to buy. You can get more for your money later. Whatever "deal" is out there -- will pale to the ones to come.
I think we've all been drinking the NYC real estate mania cool aid for way too long. How many of us have watched real estate as closely as we are right now in a downward trending market of the past? I am fascninated by the psychology of buyers and sellers - prices have gone straight up for so long that it is impossible to predict how fall they can and will fall. New York City is so different from the rest of country in that rental apartments are ubiquitous. For my family the reality of the buy vs rent debate is figuring out what we can comfortably afford to pay while sleeping well at night buying, comparing that with what we can currently get for our money on a rental and making the most informed decision we can. Then truly re-evaluating the market in the next year when the lease is up. Renting right now is keeping us nimble.
The point I'm trying to make is that I think it's going to take more years than two for prices to find a bottom.
The stock market crashed in 1987 then it took two years before the real estate market collapsed....back then it took about 5 years to start appreciating....this time it will be much worse...Wall street burned out all it's engines...investment banking, bonds, equities, and mergers and acquisitions%u2014have shut down at once. Their business model has been obliterated and most jobs are gone for good. It%u2019s bad news for the 300,000 or so people who work on the Street. Citibank just announced another round of layoff....60,000. This is going to reshape new york real estate for a long time.The national debt now is approaching 12 Trillion dollars depends on foreigners financing our spending.... now China has basically pulled back buying our debt and is demanding higher interest rates which will be driving up mortgage rates which will further drive down prices. Yes there will be blood on the streets..............
http://finance.yahoo.com/tech-ticker/article/128178/Citi-Firing-60000-Chairman-May-Still-Lose-Job?tickers=c,axp
lo888 - did you get any sense of just how "negotiable"? i.e. 5% off last ask? 10% off? 30% off? All offers considered?