New York City Real Estate Blog

Is It Better to Buy or Rent?

“This is the best time to buy,” Pat Vredevoogd Combs, the president, said cheerfully. “There’s a lot of inventory in the marketplace. Interest rates are low. It’s a wonderful tax deduction.”

By the Realtors’ way of thinking, it’s always a good time to buy. Homeownership, they argue, is a way to achieve the American dream, save on taxes and earn a solid investment return all at the same time.

That’s how it has worked out for much of the last 15 years. But in a stark reversal, it’s now clear that people who chose renting over buying in the last two years made the right move. In much of the country, including large parts of the Northeast, California, Florida and the Southwest, recent home buyers have faced higher monthly costs than renters and have lost money on their investment in the meantime. It’s almost as if they have thrown money away, an insult once reserved for renters.

Most striking, perhaps, is the fact that prices may not yet have fallen far enough for buying to look better than renting today, except for people who plan to stay in a home for many years.

With the spring moving season under way, The New York Times has done an analysis of buying vs. renting in every major metropolitan area. The analysis includes data on housing costs and looks at different possibilities for the path of home prices in coming years.

Is It Better to Buy or Rent?

Compare the costs of renting and buying equivalent homes.

It found that even though rents have recently jumped, the costs that come with buying a home — mortgage payments, property taxes, fees to real estate agents — remain a lot higher than the costs of renting. So buyers in many places are basically betting that home prices will rise smartly in the near future.

Over the next five years, which is about the average amount of time recent buyers have remained in their homes, prices in the Los Angeles area would have to rise more than 5 percent a year for a typical buyer there to do better than a renter. The same is true in Phoenix, Las Vegas, the New York region, Northern California and South Florida. In the Boston and Washington areas, the break-even point is about 4 percent.”

Economix: A Word of Advice During a Housing Slump: Rent(NYT)

Is It Better to Buy or Rent?

“This is the best time to buy,” Pat Vredevoogd Combs, the president, said cheerfully. “There’s a lot of inventory in the marketplace. Interest rates are low. It’s a wonderful tax deduction.”

By the Realtors’ way of thinking, it’s always a good time to buy. Homeownership, they argue, is a way to achieve the American dream, save on taxes and earn a solid investment return all at the same time.

That’s how it has worked out for much of the last 15 years. But in a stark reversal, it’s now clear that people who chose renting over buying in the last two years made the right move. In much of the country, including large parts of the Northeast, California, Florida and the Southwest, recent home buyers have faced higher monthly costs than renters and have lost money on their investment in the meantime. It’s almost as if they have thrown money away, an insult once reserved for renters.

Most striking, perhaps, is the fact that prices may not yet have fallen far enough for buying to look better than renting today, except for people who plan to stay in a home for many years.

With the spring moving season under way, The New York Times has done an analysis of buying vs. renting in every major metropolitan area. The analysis includes data on housing costs and looks at different possibilities for the path of home prices in coming years.

Is It Better to Buy or Rent?

Compare the costs of renting and buying equivalent homes.

It found that even though rents have recently jumped, the costs that come with buying a home — mortgage payments, property taxes, fees to real estate agents — remain a lot higher than the costs of renting. So buyers in many places are basically betting that home prices will rise smartly in the near future.

Over the next five years, which is about the average amount of time recent buyers have remained in their homes, prices in the Los Angeles area would have to rise more than 5 percent a year for a typical buyer there to do better than a renter. The same is true in Phoenix, Las Vegas, the New York region, Northern California and South Florida. In the Boston and Washington areas, the break-even point is about 4 percent.”

Economix: A Word of Advice During a Housing Slump: Rent(NYT)

Losses at subprime lenders are spreading to higher-rated credits

“American Home Mortgage Investment Corp. shares fell as much as 19 percent after the company's loans attracted few bids from investors, fueling concern that losses at subprime lenders are spreading to higher-rated credits.

First-quarter profit will come in at 40 cents to 60 cents a share, the Melville, New York-based company said in a statement on April 6. It was expected to earn $1.06, the average estimate of eight analysts compiled by Bloomberg. The quarterly dividend was cut to 70 cents from $1.12. Earnings for 2007 will probably be $3.75 to $4.25 a share, the company said, instead of the $5 analysts predicted in the Bloomberg survey.

American Home reported few bids and lower-than-expected prices for its Alt-A mortgages, granted to people with strong credit ratings who don't meet all the criteria for conventional loans. A week earlier, M&T Bank Corp., partly owned by Warren Buffett's Berkshire Hathaway Inc., cut its forecast because of weak demand and higher defaults on Alt-A mortgages. M&T said investor concern about the increase in bad subprime loans is hurting prices for less-risky mortgages.

``There's no question the credit problems we've seen in subprime are blending into Alt-A,'' said Fox-Pitt Kelton Inc. analyst Matthew Howlett in an interview. ``It's reflective of the poor underwriting that has gone on in this sector.''

American Home's stock declined $4.29, or 17 percent, to $21.55 at 12:33 p.m. in New York Stock Exchange composite trading. The shares had dropped 26 percent this year before today. American Home is a real estate investment trust or REIT that originates home loans and invests in mortgage securities. ”

American Home Mortgage Shares Fall on Profit Forecast(Bloomberg)

 

New York attracts foreign investors

“New York real-estate brokers and developers are passing up dollars for euros, pounds, won and rubles as overseas buyers eagerly snap up pricey city properties.

Brokers are on a new push to sell million-dollar Manhattan condos to buyers in Paris, London, Seoul and Moscow who like the city's steadily rising real-estate values and seek to add profit by taking advantage of the cheap dollar.

"Interest rates in America are still lower than in the United Kingdom," said Kevin Newton, a principal of a British investment group seeking to buy several New York apartments.

And while many Manhattanites are stunned that real-estate values climbed 200 percent in the last decade, overseas buyers say prices could go even higher.

"You've got generally good value in comparison with U.K. and European prices," said Nick Vaughan, international sales manager for Hamptons International, a big British brokerage embarking on a new drive to sell New York properties.

He especially likes new projects in the Financial District, including the 47-story, 330-unit William Beaver House, at the corner of William and Beaver streets, where new luxury condos are selling for between $950,000 and $4.25 million - "fantastic value for a fantastic project," Vaughan said. ”

GOOD BUY, NEW YORK: FOREIGNERS(NYPost)

Bars and lounges in Flatiron area

“As the NYPD crackdown on Chelsea's wild 27th Street club scene continues, artygoers are migrating east to the Flatiron District, where crowds, clubs and fisticuffs are on the rise, police say.

The capacity of gin mills in the heart of the Flatiron District - 19th, 20th and 22nd streets between Fifth and Sixth avenues, and 21st Street between Fifth and Park avenues - has surged to more than 10,000 people.

Since January, there have been 39 felony assaults in the Flatiron's 13th Precinct - an 18.1 percent increase over the same period last year.

Meanwhile, felony assaults have dropped 17.6 percent from last year in the 10th Precinct, which covers 27th Street and the heart of Chelsea's club scene, where 18-year-old Jennifer Moore partied last year before she was murdered.

Police cracked down on the area following the murder and a series of Post investigations on lax club security and rampant teenage drinking.

The State Liquor Authority has launched 19 investigations into Flatiron clubs since January. The agency has also received 12 applications for new liquor licenses, which is on pace to match last year's flood of 51 applications. ”

2nd Ave. Subway Update

“Several factors actually suggest that this time the outcome may be different. The financing for the $3.8 billion project appears more certain than in the past, including an anticipated federal commitment to cover about a third of the cost.

And the plan is more measured. The goal is to build a first section of the subway with stops along Second Avenue at 96th, 86th and 72nd Streets and at 63rd Street and Lexington Avenue. It is intended to operate as an extension of the Q line and is expected to open in 2013. Once further financing is secured, later phases of construction will extend the line north to 125th Street and south to Lower Manhattan.

It was September 1929 when the city formally announced plans to build the Second Avenue subway, running the length of the East Side and into the Bronx. The cost of digging the Manhattan portion of the tunnel was estimated at $99 million, although there would be additional expenses, including the cost of real estate and equipment.

The Second Avenue plans were part of an ambitious expansion to add a 100-mile network with an overall estimated cost of about $800 million. But within a few years, during the Great Depression, planning for the new line came to a halt. ”

Is That Finally the Sound of a 2nd Ave. Subway?(NYT)

Results of the housing market slowdown

“But other states, especially those where housing prices soared in recent years, are also seeing their collections slow, especially in the sales and real estate transfer tax categories. While the economy remains generally strong and it is too early to predict whether the housing slump will have long-term effects, some states will have to adjust their wish lists.

For example, New Jersey could face a $2.5 billion shortfall by mid-2008, Gov. Jon S. Corzine has said, and may lease its turnpike or its lottery to a private company to raise money. In California, where income tax receipts in January were $1 billion less than forecast, a nonpartisan legislative analyst has urged budget cuts and warned that the state could have about $2 billion less in revenue this year and next than Gov. Arnold Schwarzenegger has projected.

New home sales nationally fell in February to the lowest rate in seven years, and homeowners who tapped into plentiful home equity and spent extravagantly during the real estate boom have started to cut back.

Those events not only threaten revenue streams for things like building materials and labor, but also affect spending on big-ticket items like cars and furniture, which many homeowners financed with home equity lines of credit.”

Housing Slump Pinches States in Pocketbook(NYT)

Taxi 07 initiative

“With 13,000 taxicabs trolling our streets at any given time, the canary-colored chariot is as ubiquitous and easy to get into as Paris Hilton. And now that the New York cab is turning 100, a nonprofit group is whipping up a special birthday present—an exhibit of taxis past and (possibly) future as part of this weekend’s New York International Auto Show at the Javits Center.

 PULL UP TO MY BUMPER All’s fare at the Taxi 07 next-gen cab exhibition.
Image courtesy of Standard Taxi

From that initial meeting, nine prototypes were created for the auto show exhibit, part of the yearlong Taxi 07 initiative. Outside Javits, Hybrid Technologies is displaying a lithium-battery-powered, zero-emissions taxi, while Kia is showing off its Rondo taxi, made in collaboration with local design firms. “It’s got a rotating front passenger seat so special-needs passengers can be lifted out, and a toddler seat that folds down,” says Tim Kennedy of Smart Design, one of the firms responsible for the Rondo. “We also added additional interior lighting so riders are less likely to lose things.”

Not all the prototypes are so pragmatic. A 200mph, 1,000-horsepower hydrogen-powered Crown Victoria, dubbed “the World’s Fastest Taxi,” will be parked outside, as will the Donk, a ghetto-fabulous model from Rides magazine featuring exaggerated ground clearance, oversize rims and a tricked-out custom paint job.”

Yellow fever(TimeOutNewYork)

Astor Place Barnes & Noble will close

“The East Village is losing another bookstore - and this time, it's a big chain operation that's biting the dust.

The Barnes & Noble branch at 4 Astor Place will close at the end of the year because the rent is too high, company spokeswoman Mary Ellen Keating said yesterday.

"We'd like to stay there, but we really can't afford it," she said.

Keating would not reveal how much the rent is.

Barnes & Noble has operated at Astor Place since 1994.

Shares of the company have been down as much as 10 percent this year as revenue growth slowed. ”

ASTOR PL. BOOKSTORE IN 'NOBLE' DEFEAT(NYPost)

Happy Easter!

 In medieval times a festival of egg throwing was held in church, during which the priest would throw a hard-boiled egg to one of the choirboys. It was then tossed from one choirboy to the next and whoever held the egg when the clock struck 12 was the winner and retained the egg.

The first Easter baskets were made to look like bird's nests.

Easter Bonnets are a throw back to the days when the people denied themselves the pleasure of wearing finery for the duration of Lent.

Happy Easter From GNYRE!

Downward pressures on home prices

“A sharp increase in homes offered for sale last month suggests that home shoppers will find plenty of choices this spring.

The number of homes listed for sale in 18 major U.S. metropolitan areas at the end of March increased 6.5% from a month earlier, according to data compiled by ZipRealty Inc., a national real-estate brokerage firm in Emeryville, Calif. The data cover listings of single-family homes, condominiums and town houses on local multiple-listing services.

Over the past 22 years, home inventories nationwide have increased an average of 1.7% in March from February, according to Credit Suisse Group. Supplies typically rise modestly in March as sellers pursue the many families with children who seek new homes in the spring, so they can move during summer vacations.

 The big rise in the latest month may reflect sellers' expectations that it will take much longer to find buyers than it did during the housing boom of the first half of this decade, said Patrick Lashinsky, president of ZipRealty. Rather than waiting for April or May, he said, many people planning to move this summer put their homes up for sale in March. He added that many sellers are being cautious, waiting to sell their old homes before committing to buy new ones.”

Housing Inventory SurgesIn March Across the U.S.(REJ)

Without immigrants New York would be losing population

“Without immigrants pouring into the nation's big metro areas, places such as New York, Los Angeles and Boston would be losing population.

The New York metro area, which includes suburbs in New Jersey and Pennsylvania, added 1 million immigrants from 2000 to 2006. Without those immigrants, the region would have lost nearly 600,000 people.

There are about 36 million immigrants in the United States. About one-third are in the country illegally. The Census Bureau, however, does not distinguish between legal and illegal immigrants.

Immigrants and advocates march to New York's City Hall on March 14 as they rally for immigration reform.

Lawmakers were unable to reach an agreement last year on how best to stem the flow of illegal immigrants. Immigration was a contentious issue in many congressional races in November.

Many demographers associate shrinking populations with economic problems, typically poor job markets or prohibitive housing prices.

"A lot of cities rely on immigration to prop up their housing market and prop up their economies," said William Frey, a demographer at the Brookings Institution, a Washington think tank.”

Without immigrants, big cities would shrink(CNN)

 

Mechanical sliding doors on the edge of Second Avenue subway platforms

“The Second Avenue subway, as it is envisioned by planners at the Metropolitan Transportation Authority, will have many modern features that set it apart, including roomier, brightly lighted stations with wider platforms that are cooled in the summertime and are fully accessible to the handicapped.

But as the authority prepares for a groundbreaking ceremony next week, planners are considering one innovation that would make the Second Avenue subway radically different from every other line in the city: mechanical doors on the edge of the platforms that would open to allow passengers to move on and off the trains.

The doors, set into a wall of glass or metal, would create a floor-to-ceiling barrier, sealing off the track and tunnel area from the platforms and altering forever the daily experience of waiting passengers. Gone would be the rush of air and thunder, gone the visceral thrill as many tons of steel hurtle by at high speed, just inches away, all replaced by the hygienic interface of technology. ”

2nd Ave. Subway Platforms May Get Glass Walls and Sliding Doors(NYT)

More of the same:

MTA Considers Platform Sliding Doors On Second Avenue Subway Line(NY1)

Groundbreaking for Phase One of the Second Avenue Subway announced for Thursday, April 12, 2007.

The first construction contract involves the construction of new tunnels between 92nd and 63rd Streets, the excavation of the launch box for the tunnel boring (TBM) machine at just south of 92nd to 95th Streets, and access shafts at 69th and 72nd Streets. These shafts will be excavated toward the end of contract One and be used for the subsequent construction of the 72nd Street station. Contract One is expected take 40 months to complete.

Second Avenue Subway(MTAinfo)

Atlantic Yards:Demolition postponed while new civil lawsuit filed

“Opponents of the Atlantic Yards project will mount another court challenge today to block the massive project from going forward.

A coalition of civic groups is filing a lawsuit claiming the environmental review for the project was not thorough enough. They say the review didn't adequately consider traffic problems and security concerns that may arise.

The project calls for an 18,000 seat arena for the Nets and more than 2,000 units of affordable housing.

Today's lawsuit is just one of several the developer – Forest City Ratner – is facing. NY1 has reached out to Forest City Ratner for comment, but has not heard back. ”

New Lawsuit Filed To Stop Atlantic Yards Project(NY1)

“ Today twenty-six co-petitioners filed an Article 78 and Declaratory Judgment lawsuit in New York State Supreme Court (New York County) to annul the Final Environmental Impact Statement (FEIS) and approval of Forest City Ratner's "Atlantic Yards"project. The suit alleges that former Governor Pataki's Empire State Development Corporation's (ESDC) FEIS was fatally flawed on substantive and procedural grounds.

The suit also seeks to enjoin demolition and construction with a preliminary injunction. ”

26 Co-Petitioners File Lawsuit Against the Empire State Development Corporation, PACB, MTA and Forest City Ratner Companies (DDDB)

Housing market in the US has slowed

“The increase in house prices in many countries since the late 1990s has exceeded what would have been expected on the basis of changes in underlying fundamentals, such as household income and interest rates. This suggests that house prices in these countries are overvalued, increasing the possibility of a price correction.

In the United States, house price appreciation during the current cycle has been strong by historical standards.There has, however, been considerable differentiation across regions, with house price appreciation being most rapid in the west and northeast of the country, whereas prices in the south and midwest have lagged.

With the housing market cooling—most indicators of housing activity are weakening—the key question is how U.S. growth will be affected, given that consumption and residential investment, both affected by rising housing prices, have been key drivers of the strong economy in recent years.Previous housing market cycles in the United States have been associated with vastly different economic outcomes. In the 1979 cycle, real house prices fell, and consumption, residential investment, and GDP growth all slumped. Of course, economic conditions then were very different from those today: real interest rates were very high, as was the unemployment rate. The 1987 housing cycle was associated with a limited growth impact, and the IMF forecasts that the current housing cycle will do the same for 2007 growth. But there are downside risks. First, the slowing in house price appreciation could be more pronounced than expected—a drop in prices cannot be ruled out. Second, the wealth effects of slower house price growth on consumption may now be larger than in the past because of the greater exposure of households to asset price movements.

The Slowdown in Global Housing Markets(IMF)

 

he sale of a Village townhouse at 11 West 10th Street broke the record for the most expensive residential sale ever in Downtown

“A NEW record price paid for a residence below 14th Street has just popped up on city public records. The Post's Braden Keil reports that a 55-foot-wide townhouse on West 10th Street has sold for $33.14 million. Frederick Wilson, a venture capitalist, sold the renovated five-story house to a Wall Street banker after first listing it for $37.5 million. According to previous reports, Wilson bought the place, which once served as a rooming house for women, in 2000 for $7.35 million.”

RECORD DIGS(NYpost)

Big Apple Real Estate Market Overview

“While the national housing market is struggling with rising inventory and weakening home values, the prices and number of apartments selling in Manhattan rose in the first three months of this year, according to data released yesterday by several of New York City’s largest real estate brokerages.

Sales volume in Manhattan was up 12 percent over the fourth quarter of last year, according to data provided by Brown Harris Stevens and Halstead Property.

Those two brokerages also said that the average price for a Manhattan apartment, including both co-ops and condominiums, rose 6 percent in the first three months of this year over the fourth quarter of 2006. The Corcoran Group said prices rose 12 percent, and Prudential Douglas Elliman put the increase at 5.4 percent.

Even greater increases were seen in the prices being paid for the largest apartments in Manhattan and for apartments in Brooklyn. The wealthiest New Yorkers paid 20 percent more for apartments with four or more bedrooms than they did in the first quarter a year ago. Buyers also paid an average of 22 percent more than they did a year ago for Brooklyn apartments, especially those in newly constructed or converted buildings.”

Market Strong for Apartments in Manhattan(NYT)

More of the same:

Manhattan home prices on the rise - again (CNN)

Manhattan Apartment Prices Increase at Slower Pace (Bloomberg)

"Stabilization in the housing market"

“Home-builder stocks traded higher Tuesday after a realtors group said pending sales of U.S. homes rose 0.7% in February. Toll Brothers Inc. (TOL :

Toll Brothers, Inc

Last: 27.87+0.69+2.54%
TOL27.87, +0.69, +2.5% ) gained 2.5% at $27.85, Ryland Group Inc. (RYL :

The Ryland Group, Inc

RYL42.39, +1.09, +2.6% ) added 2.5% to $42.34 and D.R. Horton Inc. (DHI :

D.R. Horton, Inc

DHI22.12, +0.45, +2.1% ) was up 1.8% at $22.06, while the broad Dow Jones U.S. Home Construction Index (DJ_3728 :

DJ_3728603.99, +15.20, +2.6% ) rose 2.3%. The National Association of Realtors said February pending home sales were hit by unusually bad weather and some fallout from the subprime loan sector.”

Pending home sales data lift home-builder stocks(MarketWatch)

 

“Pending home sales rose in February, bolstering speculation a housing market swoon won't curb economic growth. Crude oil dropped the most in three weeks, reducing inflation, which the Federal Reserve has cited as its main concern

``We're seeing some stabilization in the housing market,'' said Neil Wolfson, who oversees about $32 billion as president of Wilmington Trust Investment Management in New York. Lower oil prices are also aiding stocks, he added. ``It allows consumers to spend more, which helps retailers and those who produce goods for retailers. If we see strength in the economy, that is certainly good for stocks.''

U.S. Stocks Climb as Home Sales Rise, Oil Declines; Home Depot Shares Gain(Bloomberg)

More of the same:

Pending home sales in surprise rise(CNN)

A Threat to the American Dream?(Fox)

David Lereah predicts that"tighter underwriting practices may cause total home sales to fall by about 100,000 to 250,000 nationally"

“Current market problems and reforms in the underwriting and pricing of subprime loans, including the tightening of underwriting standards by regulators, will have a short- term impact on housing markets.  That will be lessened if Congress enacts legislation to expand the roles of Fannie Mae, Freddie Mac and the Federal Housing Administration to provide more housing opportunities to lower-income homeowners and those living in high cost metropolitan areas, the National Association of Realtors® said today.

NAR Senior Vice President and Chief Economist David Lereah predicted that tighter underwriting practices may cause total home sales to fall by about 100,000 to 250,000 nationally, or no more than 3 percent a year over the next two years.  Many of these households will probably, over time, purchase a home when they have attained the financial capacity to do so by saving for a down payment or growing their income.

“Foreclosures are increasing inventories in certain local markets.  The projected flood of foreclosures are problematic and will add to the already loose housing supply in some local markets, but these local markets are exhibiting healthy economic activity, enabling them to be able to absorb increases in foreclosures,” Lereah said.”

NAR Forsees Short-Term Impact on Housing Market From Subprime Reforms(Realtor)

New Century seek funding while it reorganizes

“New Century Financial Corp. said Monday it will immediately cut 3,200 jobs, or 54 percent of its work force, as part of its Chapter 11 bankruptcy reorganization.

The Irvine, California-based company also said it agreed to sell its servicing assets and platform to Carrington Capital Management LLC for $139 million, subject to bankruptcy approval.

Separately, New Century said CIT Group Inc (up $0.41 to $53.33, Charts). and Greenwich Capital Financial Products have agreed to provide up to $150 million of debtor-in-possession financing to keep the company in business as it reorganizes.

New Century (Charts) had been the largest U.S. independent provider of home loans to people with poor credit histories before collapsing amid rising subprime delinquencies and defaults

But after defaults started rising last year, the subprime mortgage market imploded in February, contributing to a sell off in the stock market and fueling fears that more weakness in housing, and tighter credit in general, would hurt the economy, and possibly even spark a recession.”

New Century files for Chapter 11(CNN)

New Century Financial Files for Bankruptcy in Wake of Subprime Loan Crisis(Bloomberg)

Subprime Lender New Century Files for Bankruptcy Protection(FoxNews)

For mortgage market, it's prime's time(CNN)