Comments on: Rent vs buy, Manhattan edition http://blogs.reuters.com/felix-salmon/2012/05/09/rent-vs-buy-manhattan-edition/ A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: dc10023 http://blogs.reuters.com/felix-salmon/2012/05/09/rent-vs-buy-manhattan-edition/comment-page-1/#comment-38917 Fri, 11 May 2012 20:36:57 +0000 http://blogs.reuters.com/felix-salmon/?p=13888#comment-38917 Mtge deduction isn’t exactly proportional to mtge payment. In low interest rate environment, the interest rate portion is smaller percent of total payment.

It would be interesting to see the graphs by size (1BR, 2BR) as portions of 1BR in rentals and purchases may vary over time. I agree with earlier statements that total costs of buying should include HOA + real estate tax (or maintenance) and cost associated with tying up down payment. Minus interest deduction.

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By: MalcolmCarter http://blogs.reuters.com/felix-salmon/2012/05/09/rent-vs-buy-manhattan-edition/comment-page-1/#comment-38865 Thu, 10 May 2012 21:33:06 +0000 http://blogs.reuters.com/felix-salmon/?p=13888#comment-38865 Regarding that deduction, I do continue to think that it matters a great deal in NYC. As Miller reports about Q1, entry-level sales (of studios and one-bedrooms) amounted to nearly half of all sales (48.1%). The median price of condos was $1.05 million; for co-ops, $638,000. With average rent reported this week hovering around $4,000 monthly, depending on the data source, I think it is unlikely that those who move from renting to buying use the standard deduction anyway.

To me, the larger point, which underlies your previous response, dWj, is that using the mortgage payment without various qualifications does not compare apples to apples very well. Moreover, as Miller’s report shows, sales of entry-level co-ops amount to the vast majority of that type of apartment that changed hands, while sales of condos approached nearly half in the first quarter–and most wouldn’t be classified as “high-end.”

As a real estate broker, I can say with confidence that most buyers I encounter at open houses and elsewhere are middle-class consumers trying to squeeze themselves and their families into spaces that residents outside NYC would find laughable.

In any case, thanks for the provocative piece, Felix.

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By: dWj http://blogs.reuters.com/felix-salmon/2012/05/09/rent-vs-buy-manhattan-edition/comment-page-1/#comment-38860 Thu, 10 May 2012 18:38:21 +0000 http://blogs.reuters.com/felix-salmon/?p=13888#comment-38860 @Malcolm: I’m not sure the mortgage deduction is an independent variable here; it’s pretty much going to scale with mortgage payment, isn’t it?

Perhaps this will help (and also address the last comment by mnguyea): what you should be looking at here is not “buy if the purple line is lower, rent if the green line is lower”. The interest deduction (which, even in a high-tax state like New York, isn’t worth that much — remember, you lose your standard deduction if you itemize) is a smaller adjustment than things like property taxes, maintenance, and even home price appreciation, all of which should drive the gap between monthly mortgage payments and rent on an equivalent apartment up and down. And, as mnguyea seems to indicate, some people just prefer to live in a place that is, in whatever sense, “theirs”, whether that means they can paint the walls without permission or just that it feels more like home because they own it. Try to quantify these things as best you can if you’re making a concrete decision between buying one place and renting another, but in terms of generalities, I think you’re likely to add more noise than signal to simply looking at these lines and saying, “before the bubble, the ratio between these values bopped around in a range that’s mostly still lower than where it is today”.

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By: mnguyea http://blogs.reuters.com/felix-salmon/2012/05/09/rent-vs-buy-manhattan-edition/comment-page-1/#comment-38858 Thu, 10 May 2012 18:08:28 +0000 http://blogs.reuters.com/felix-salmon/?p=13888#comment-38858 I think the last sentence is the worst/bad rubbish advice I’ve read lately…”And compare it to rents, and it still looks like you’d be better off renting than buying.”

In my opinion, given the choice and if you can afford it…the no brainer here is to buy. If you can afford $3k on rent than certainly you rather pay $3k on a home that is ‘yours’ plus the mortgage,tax deductions makes it an worth while investment instead of give money to the landlord or a black hole. Especially,here in NYC were rent is so high and the market so far has been stable.

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By: MalcolmCarter http://blogs.reuters.com/felix-salmon/2012/05/09/rent-vs-buy-manhattan-edition/comment-page-1/#comment-38857 Thu, 10 May 2012 16:42:18 +0000 http://blogs.reuters.com/felix-salmon/?p=13888#comment-38857 Perhaps I overlooked something, but omitting the mortgage interest deduction as a variable (impossible though it may be to come with a good number) strikes me as a distortion of the data.

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By: Moopheus http://blogs.reuters.com/felix-salmon/2012/05/09/rent-vs-buy-manhattan-edition/comment-page-1/#comment-38850 Thu, 10 May 2012 13:56:00 +0000 http://blogs.reuters.com/felix-salmon/?p=13888#comment-38850 dWj–I’d guess the picture for the outer boroughs probably looks different, but probably varies a lot more by neighborhood. But in the outer reaches of the city you’re more likely to find properties affordable for middle-class families. In Manhattan, it’s mainly high-end lux condos for sale, so it doesn’t really reflect a broad market.

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By: tuckerm http://blogs.reuters.com/felix-salmon/2012/05/09/rent-vs-buy-manhattan-edition/comment-page-1/#comment-38834 Wed, 09 May 2012 23:37:48 +0000 http://blogs.reuters.com/felix-salmon/?p=13888#comment-38834 I think there might be some systematic measurement error for the sale prices since the difference between median asking prices and actual sale prices is likely affected by the state of the market. IE in 2006 the median sale price might have been above the median asking price and in 2009 it was probably way below.
Also I wonder if there has been some systemic change to the housing stock through better units moving from rental to sale.

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By: dWj http://blogs.reuters.com/felix-salmon/2012/05/09/rent-vs-buy-manhattan-edition/comment-page-1/#comment-38829 Wed, 09 May 2012 22:05:25 +0000 http://blogs.reuters.com/felix-salmon/?p=13888#comment-38829 I’d be interested in the outer boroughs, but perhaps nobody else would.

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By: SteveHamlin http://blogs.reuters.com/felix-salmon/2012/05/09/rent-vs-buy-manhattan-edition/comment-page-1/#comment-38825 Wed, 09 May 2012 21:25:24 +0000 http://blogs.reuters.com/felix-salmon/?p=13888#comment-38825 Felix – a few ideas for you:

(1) log(n) and re-base the data series so that you show *relative* Manhattan vs. all-country, and make the growth trends more meaningful to the human brain. Absolute, compounded prices are not that relevant for what you’re trying to show.

(2) it’d be interesting to chart your Manhattan real estate graph against some sort of Manhattan compensation or wealth metrics. Is Manhattan compensation/wealth not changing in the same way that it is in other parts of the country, and might that explain the continued elevation of purchase prices?

(3) Sectors: How much of this is made up of very high-end properties vs. middle-class purchases? Is high-end Manahattan real estate not unlike high-end art, with such an increasing and global class of very rich people that super-luxury goods/assets have a constant bid, regardless of rent-buy relative valuation?

Do you think people that can afford $20+ million purchases really care what the rent vs. buy calculus is? At that level, real estate is an asset, not shelter expense like lower-priced houses and rental apartments.

(4) Where’s the link to the underlying data sets, so that we can play, too?

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By: AngryInCali http://blogs.reuters.com/felix-salmon/2012/05/09/rent-vs-buy-manhattan-edition/comment-page-1/#comment-38824 Wed, 09 May 2012 21:14:47 +0000 http://blogs.reuters.com/felix-salmon/?p=13888#comment-38824 It’s the maintenance/common fees that kill you in Manhattan! Even after you buy, you’re paying a good percentage of what the rent would be every month.

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