Housing Report: Broad and Deep Pain Across U.S.
An article this weekend in the Real Estate Journal (which, unlike its parent paper, is free online) told of widespread doom and gloom for the nation’s housing market. The article sites a recent report by Economy.com that predicts that prices will continue to slide for at least another couple years in roughly 100 metropolitan markets…
An article this weekend in the Real Estate Journal (which, unlike its parent paper, is free online) told of widespread doom and gloom for the nation’s housing market. The article sites a recent report by Economy.com that predicts that prices will continue to slide for at least another couple years in roughly 100 metropolitan markets across the country. The biggest risks lie in California and Florida, the report says. As for New York, the forecast is for a relatively benign decline of 3.5%. Elsewhere on the East Coast, Economy.com says that Boston has already bottomed out. The good news? The current downturn “so far looks more like a correction than a crash on a national scale.” A spoonful of sugar helps the medicine go down.
Prices in 100 U.S. Cities Expected To Decline [Real Estate Journal]
Photo by sercasey
“I honestly fail to see how a 3.5% decline in property values will have any effect whatsoever on any brownstoner.”
That is based on a big ASSUMPTION that prices only fall 3.5%. And that’s a big assumption – there are areas of NY where they have already fallen more than that.
Anon 2:29, please let me know where I can get a 4 story brownstone in the nabes you mentioned for $1.3 million. Not only will i buy it, I will pay you a finder’s fee.
I guess Alan Greenspan is a fool too.
I wanted to have an entire Brownstone and was oepn to either renting or buying. I looked for 2+ years. If you’re looking to rent a whole Brownstone, good luck, because there are about 10 of them on the market at any given time and the asking rents start at about $7-8K per month in the neighborhoods I looked in (Brooklyn Heignts, Cobble Hill, Carroll Gardens). $7K of rent per month = about $84K a year which would support about $1.3 million of mortgage (at 6.5%). If you rent, your rent is sure to go up every year. Assuming it goes up 3% a year, you’re rent is going to increase to $9,500-$10,000 after 10 years. Contrast that with owning. Buy the Brownstone at $1.3 and borrow $1.0 million. Annual interest expense on the mortgage is $65,000 per year. Keep a triplex for yourself and rent out a garden apartment for $1,800 per month for income of $21,600 per year leaving you about $43,400 of interest expense to cover for your triplex. Assume the mortgage interest tax shelter saves you enough to cover property taxes, heat + water, property insurance etc. That means you’re getting your triplex for a monthly payment of about $3,600 per month and that payment is going to stay relatively fixed over the next 10 years. There is no way you can rent a comparable place for that,
“and cramer is pumping up those hb stocks if you buy on his say you are a fool”
Kramer is bullish on housing stocks. He believes that we hit a bottom 3 months ago. It’s not just him though ,Alan Greenspan said almost the same thing yesterday. Also the market for housing stocks (which is the compilation of all demand and supply)has gone up sharply over the last 2 months. Try and buy Toll Brothers if you don’t agree.
If you believe the stock market is a good indicator of what is to come, the indication is that housing has bottomed and we have seen the worse.
Also history tells us that it is very difficult to sustain a downturn in housing without a corresponding weakness in the economy. In NYC, the economy is booming!!!
I wish the housing market tank and all those, who bought many homes as investment, file for bankruptcy. I know many people who bought houses (not homes) for $200k are selling the same houses (not homes) for $700k. When buyers try to negotiate the price down by $100K, they think that they are being ripped off.
Why should I have any sympathy for those who have no sympathy for me? What the hell….let them rot.
Renting cost VS buying cost… the way I always look at it is:
if I were to buy right now, how much would I have to deposit (down payment) so if I were to rent it, the rental income would cover my mortgage + monthly? I owned a house in another state 10 years ago, where I bought with 0 down (yes, zero) and rented it a couple years later, and the income covered my cost. That’s a strong rental market. A couple years ago, I bought a small studio on the UWS (way up) and my monthly cost with 10% down was about the same as the rent on the same units in the building. I sold that place over a year ago, and at the time, the rent would have been much lower than the buyer’s monthly cost (with 10% down). What that tells me is the “owning” market has increased at a much faster rate than the rental market. Currently, I’m renting, and pay about 2k/month. If I were to buy my place (it’s not for sale), I figure my monthly cost would be 3500-4k/month, with 10% down. So, I figure renting is still much cheaper than buying, at least for me. I’ve been using this sort of simple calculation for years (in differnt states), and I think it always gives a fair evaluation of buying vs renting.
I’m waiting this thing out it will be more than 3.5% decline in nyc
and cramer is pumping up those hb stocks
if you buy on his say you are a fool
Anon, at 12:40pm. I’m curious to know what you mean by the idea that many brownstoners cannot ride out a r.e. bust. I honestly fail to see how a 3.5% decline in property values will have any effect whatsoever on any brownstoner, most especially those who have owned for some time and have considerable equity, and relatively low debt.
Even those brownstoners who bought recently are not likely to be impacted – most of them put very large downpayments and funds for renovation into their properties; I don’t know any “poor” brownstone buyers. The only thing I could maybe see is if they bought with an ARM, maybe rising interest rates might get to them eventually, but that scare seems to have subsided for the moment. And if we really see a real recession, interest rates will likely decline (that decline is exactly what softened the last recession).
And as donatella pointed out, anyone who is receiving rental income is quite happy right now. Last time I put my garden apt on the mkt, there was practically a riot to submit applications vs. 2 years ago when the rental mkt was relatively tame.
Bottom-line, as long as our local economy holds up and employment remains robust, both the brownstone and rental markets will be just fine, despite a little bumpiness. So, far, I’m not seeing any blood in the streets. What I do see is rent increases accelerating in the future, as LL’s respond to increased costs for heat, insurance, taxes, etc., and I think that is what will help equalize the balance between cost of owning and cost of buying, at least for NYC.