Archive for Rent vs Buy

Aug
20

In the News – August 19, 2012

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08/15/12  In Manhattan Home Search, Some choose to Go Big:  There are a small, but growing group of New Yorkers with deep pockets and the stomach for renovations, some are creating single-family homes out of an apartment building.  Behold the return of the urban mansion.  See the full article in the Wall Street Journal 

08/16/12  Refinancing a Vacation Home:   Homeowners who want to take advantage of historically low mortgage rates and refinance a vacation home should be prepared for stricter loan requirement especially if they rent out the property.  See the full article in the New York Times

08/17/12  Rent or Buy?  Blanching at their rent bills, more New Yorkers are being forced to confront that age-old question, should I rent or does buying make more sense?  See the full article in the New York Times 

08/19/12 Upper East Side  fourth-grader Samuel Wohabe is cooking up quite a career in food: White House ‘State Dinner’ is next for the 9-year-old upper East Sider and co-winner of national Healthy Lunchtime Challenge  See the article in the New York Daily News

Jun
17

In the News

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6/11/12  Manhattan apartments tip furthest in favor of buyers in last six years:  Amid rising rents, buying a Manhattan apartment hasn’t looked this sensible since 2006. Citing data from appraisal firm Miller Samuel, Bloomberg News reported that in the first quarter the average cost of buying was 20.8 times more expensive than the annual cost of renting, the smallest spread since the end of 2006, when buying was 20.4 times the cost of renting. In the second quarter of 2008, the multiple was 26.7.   Read the full article at the Real Deal

6/11/12:   For Comedian, Leading Her Condo Board Is a Serious Matter:  To sit on the board of a condominium or cooperative in New York City is to exert exquisite control over your building, to decide who gets to buy Apartment 12C and to pick the color of the lobby wallpaper. But it is also a position that comes with neither compensation nor thanks, and it requires sitting through hours of bickering over questions like whether the doormen ought to wear little caps. The ranks are often dominated by retirees, real estate brokers and lawyers.   Read the full article in the New York Times 

6/13/12  American buyers join foreigners in flight to city’s luxury market:  Wealthy Americans have been lost in the hysteria over foreign buyers descent upon the city’s luxury real estate market, but in the last week domestic buyers have returned with a vengeance. The Wall Street Journal noted that two apartment deals totaling $110 million closed Monday to foreign buyers.  Read the full article at the Real Deal 

6/14/12  Hospital for Special Surgery Unveils Plan for New Building:  The Hospital for Special Surgery unveiled plans Wednesday to build a 207,000-square-foot, 13-story ambulatory care facility.  The proposed building would included three floors of operating rooms for ambulatory surgeries — where patients stay up to 23 hours — along with a floor for recovery.  Read the  full article at DNAinfo.com

May
17

To Rent or To Buy…That Is The Question

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You’ve got to live somewhere and you’ve decided to live on Manhattan’s Upper East Side.  You want 2 bedrooms and 2 baths in a full service doorman building. Now you need to decide if you want to buy or rent. 

On the one hand, mortgage rates are near record lows, but you know that won’t last forever.  Apartment prices are, on average, lower than last year, but sales are up.  Rent, on the other hand, seems set to be rising thanks to low vacancy rates. 

  • Neither mortgage rates nor rents are likely to rise rapidly
  • Apartment prices, relative to rents, remain higher than their long-term average (?)
  • If you plan on moving again in the next few years, renting is usually better than buying.
  • If you’re planning to settle in one place for at least 5 years, buying makes sense

So let’s use the example above where the goal is to buy or rent an apartment on the Upper East Side consisting of 2 bedrooms and 2 baths in a full service doorman building. Let’s say you’ve just seen the First Quarter Rental Report from Prudential Douglas Elliman   , or The April rental report from MNS Real Estate Group  or the Citi Habitats’ First Quarter Report  .

You can use a Rent vs. Buy calculator or you can get to know your Rent Ratio:  Take the sale price of apartment divided by annual cost of renting an equivalent apartment.  Below 15 is where most people lean towards buying.  The New York Times recently reported  that according to Moody’s Analytics, at the end of last year, the rent ratio for Manhattan was hovering around 29. Still down from the peak about 5 years ago, but still higher than the decades before the housing bubble.

I generally suggest using a rent ratio of 15 to 20 as a beginning point of discussion for the rent vs. buy calculations.

So let’s say you want to pay up to $4500/month for a rental ($54,000 per year). Using the rent ratios of 15 to 20, it may be advantageous to buy an apartment costing between $810,000 (15 x $54,000) and $1,080,000 (20 x $54,000).

Rencenty, I did a property search on the Upper East Side (60th Street to 96th Street from FDR to 5th Avenue) for 2Br + 2Bth coops and condos with full time doormen. I limited the maximum price to $1,080,000.

Of the 87 listings,  19 are condos or condops and 68 are coops. The search results show the average price is $937,000 and the monthly charges average $2076. 87.  

Although the benefits could outweigh the costs (tax deductibility of mortgage interest, tax deductibility of coop maintenence, etc.), additional costs of ownership must be considered:  closing costs, borrowing costs and maintenance or common charges. Not to mention the need to have $200,000+ as a minimum down payment required either by the mortgage people or the Board.   

Consulting your buying team (broker, attorney/financial advisor and mortgage banker or broker) will help you make the right decision.

Categories : Build Your Team, Buyers
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Oct
08

Manhattan Rental Market Overview 3Q 2009

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Manhattan Rental Market Overview 3Q 2009

Miller Samuel, an independent appraisal firm,  and Prudential Douglas Elliman real estate today released the Manhattan Rental Market Overview.

The report tracks the 2549  apartment rentals in the third quarter of 2009 and compares the data to second quarter sales of this year as well as the same quarter sales of 2008 thus adjusting for seasonality.

Continued declines in rents may remove potential buyers who feel they are safer renting for a year or two while they wait for the bottom to occur in the residential sales market.

Highlights of the report include:

  • The average rental per square foot was $47.84, down 9.4% from $52.80 in the prior year quarter, but an increase of 8.3% from the prior quarter result of $44.16. This suggests some easing in the rate of decline since the same metric in the prior quarter fell 17.5% year over year.
  • There were 6,527 listings available at the end of the third quarter, 5.4% above the 6,191 listings in the same period last year, but 10.5 below the prior quarter total of 7,290 listings.
  • Downtown had the highest rental price per square foot of the four regions and saw a modest increase over the summer, averaging $45.87 per square foot, up 2.9% from the prior quarter.
  • One-bedroom apartments showed the largest gains over the summer, rising 6.3% to $46.62 per square foot from the prior quarter. Other than 2-bedroom apartments, which saw a 1% increase over the same period, all other types posted declines.

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Jul
10

Manhattan Rental Market Report 2nd Quarter 2009

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Manhattan Residential Rental Report 2nd Quarter 2009Miller Samuel, an independent appraisal firm,  and Prudential Douglas Elliman real estate today released the Manhattan Rental Market Overview. The report tracks the 2346  apartment rentals that occured in the second quarter of 2009 and compares the data to first quarter sales of this year as well as the same quarter sales of 2008 thus adjusting for seasonality.

The market report shows that rental inventory year-over year was up 28.8% , there was a 17.5% year over year decline in rental price per square foot and a 58.3% decline in the number of new rentals. Interestingly, the average rental price in Q2 09 vs. Q2 08 shows a decrease of only .9%,

At the end of a very interesting article written by Jonathan Miller for the Huffington Post,  he confirms what I’ve seen is that there are a large number of first time buyers out there, and contracts are being written (and signed).

“One of the key culprits for the rental price and activity drop was the record low mortgage rates in the spring, which pulled many first time buyers out of the rental market (if they could qualify under the banks newly-found underwriting conservatism). Combine that shift with rising unemployment and there is less activity and downward pressure on rental prices.

One could therefore argue that the rental market is a leading indicator for the purchase market, at least in Manhattan. When the economy improves and the pace of unemployment begins to ease, the number of rentals should begin to rise, eventually followed by sales activity.”