Every week the team meeting starts with the same question. "How's the market?" Why is this important? What does this have to do with renting or buying an apartment?
The truth is that the market has an incredibly large affect on what we pay and the type of apartment that we can live in. When I say, "the market", I am referring to several things: The stock market, rate of unemployment, real estate values, etc. But if you come into my office and ask me directly how the market is, I'm going to tell you about the affect that all of this has had on real estate, and here's the answer:
Sales are down, rentals are up. This is my one sentence answer. But for interest's sake, let's break that answer down.
Sales are down for one proper reason. The inability to get a mortgage these days. After the crisis of 2008, the ability to attain a mortgage became incredibly more difficult. Gone were the days where a man who had 25,000 dollars in the bank could buy a 1,000,000 dollar house, and this is a good thing. The reason the market crashed in the first place was because nobody was able to pay the incredibly expensive mortgage they knew they could not afford in the first place. As a result of the crash, criteria for receiving a mortgage became very strict. Credit scores have to be close or near to perfect; your bank account has to look like it is under no threat of defaulting on the massive mortgage for your new home. What has happened is the exact reverse of what happened before 2008. Now no one can get a mortgage.
This is not the answer to the problem either. Because it is so difficult to get a mortgage now, all those who are actually able to pump money back into the economy from where it came are now taking that money and throwing it away on rentals. I am not saying that I advise against renting in the city. What I am saying is that a boost in rentals is not going to save the economy. What helps the economy is when people buy homes, sit on them for years, let them appreciate, and then sell them, making a handsome return, and getting an even bigger house, thus starting the process all over again. The fact is, that if you have made a smart real estate choice, and your property is guaranteed to appreciate, than no one is losing money. In fact, the buyer has only gained as opposed to month by month slowly draining their bank account to pay for the monthly rent.
So, is it smart to buy right now? Absolutely. When the market bottoms out, which it has, there is only one direction that things can go, and that is up. Look at Brooklyn. Just a few years ago, it was the alternative for Manhattanites that wanted a cheap alternative to Manhattan but still wanted to be close to the city. As a result, everyone had this idea right about at the same time and guess what, Brooklyn is now just as expensive as Manhattan. Now, just think about all those people who made the choice to rent in Brooklyn instead of buying. There money is gone, their rent has gone up, and they have nothing to show for it. However, those lucky few who actually bought there homes, made returns that are phenomenal. These people did not have a window into the future. They took a guess and crossed their fingers. Worse comes to worst, they take a loss on their apartment if the property somehow dips in value; however, in my opinion, it's best to gamble with that as opposed to paying 2500 a year for a two bed in Williamsburg over 5 years, only to find that you have nothing to show for it, GUARANTEED! That's 150,000 dollars down the drain. Is your 2 bed that you originally paid 1,000,000 going to lose that much value in 5 years? I doubt it. If it was in Montana I might say yes, but this is the bubble that is New York City. If it was my money, I'd buy and risk the loss I'd be guaranteed to take if I was renting.
So what's a safe investment? I'd think about an area that is relatively under priced now, and then look at what's going on in the neighborhood. Is there going to be a large construction project to revitalize the area? Buy something close! Think about 2nd avenue. That train construction is scaring people so far away from second avenue that the sales prices are really great right now. What's going to happen when that subways finished? Access will be easier, and I bet property values will shoot through the roof. What about Hudson Yards? Maybe you don't want to live in midtown, but this is not about want, this is about being smart and finding a good investment. Buy a condo near 10th or 11th avenue in high 20's or low 30's. It's going to be a steal, not only that. When the mass that is Hudson Yards is completed, it's going to be like a brand new Rockafeller center in the middle of no where. I bet by the end of it, you won't be able to find a decently priced apartment in the entire neighborhood. But you'll be alright, because you were smart and you bought, and now your 1 bed is going to sell for ordinarily 2 bedroom prices.
So is renting really that bad? No it's not. It may not be preferable but it's the best that most of us can do at the moment. But if your coming into my office, and your asking me for a 7000 dollar a month 1 bedroom, maybe you should think about buying.
If it was my money, I'd buy.
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