Manhattan real estate

[pig4bill]

A guy I know that's a player in the market is looking to short NYC real estate. He's expecting quite a few hedge fund blowups and shrinkage of trading desks and investment banking in general, which will result in a lot of Manhattan housing up for sale later in the year.

[amazinmets73]

Dude, just live where I live, in Harlem... or go to Queens or Brooklyn..

[Phone Booth]

[ QUOTE ]

You cannot come close to buying a $2,000,000 apartment in Manhattan on a gross household income of $400k.

Maintenance alone is anywhere from $2,500 to $4,000 a month, you have your mortgage payment, and then you have all the other uber-expensive costs of living in Manhattan.

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Sure you can. Cost of living in Manhattan isn't really that much higher than anywhere else, if you're willing to economize - plenty of people live here on $40,000 or less, while paying $1000+ for rent. Maintenance is cheaper for a lot of new buildings ($1000-$2000), tax is negligible and monthly payment (assuming a $1,600,000 mortgage) should be 11000-12000 (some of which should be tax-deductible, AMT notwithstanding).

[IronFly]

Tweety, I'm also a trader in NYC, and I understand what you mean about having your social life centered in the city. Since this thread began I was mugged on my way home in Jersey City, so now I'm looking to rent in Manhattan. I should be moved by Oct 1st.

If I were you I'd really consider waiting and trying to bank another bonus or two so you can get what you want but not overload yourself. Plus the Manhattan market may cool off a little in the coming year (jumbo mortgage rates skyrocketing, etc).

[howzit]

tweety,

someboyd i know was looking into leveraging up and getting his first 2br apt in new york. very close to you in terms of job and economic status. hedge fund PM looking to close about low 7 figures for 2006 and 2007.

his mortgage model did a pretty thorough PV/IRR calc in new york using a few options: interest only, standard 30yr fixed, 5 yr ARM. . .basicaly it came down to a five-year horizon before the break-even point came about. slight appreciation in mkt price, amortizatin of fees.

for those that aren't in nyc....manhattan real estate has very little correlation to the national real estate market. there's a limited supply and people who are willing to sell their apts can take it off the mkt and wait until a more favorable time OR the developers who have units coming unto the market can convert that into rentals. the thought that prices will come down in this crunch is pretty much null.

tweety, you're probably looking at places going from $1100-1400/sq ft and the the good news is that the unavailability of cheap credit to less than prime borrowers means there'll be a huge inventory of condos that are either just finishing building or about to come into the market very soon.

(I saw a couple of 1300 and 1400 sq ft 2 BR places going for about 1.5)

in the east village where i live, there's a huge boom in nearly finished condos and i'm assuming that a lot of these condos will not be presold and that the owners might have to switch them over to rentals. as a consequence, the renting market is feeling a squeeze and as i'm looking for a new apt to move into soon, the situation is terrible for renters.

also new york rent is artificically lower than what market should be. this may seem ridiculous for everybody who's in shock at nyc rental prices but the fact is that homeowners can't rent out their properties at their mortgage. the rental market is considerably cheaper than the mortgage market. i think it's around 12-15% cheaper.

on the flip side, i think you'll be getting a lot of apartments to choose from as a buyer right now and if you really do have stellar credit and can have your parents as guarantors, i would think banks would be very happy to lend out at a favorable rate.


for those that don't live in new york, here are some fees:

1% $1mm+ mortgage tax
1% transfer fee up to $500k
4-6% brokerage fee when selling
attorney costs, recording fees, yada yada.
nyc is the most expensive place to close a house.

i believe the cap gains tax is negated after 2 years.

less out the interest deductible up to $1mm and what's crazy is that the embedded fees make the house depreciate by 5-6% the moment you sign the papers. planning to buy manhattan real-estate turned out to be a break-evenish proposition as an investment.


ultimately, he didn't buy a place because his timeline in new york is uncertain.

[howzit]

[ QUOTE ]
He's expecting quite a few hedge fund blowups and shrinkage of trading desks and investment banking in general,

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this already happened. however, you're forgetting the funds that shorted the insurance/housing/mortgage companies. plus, you're looking at mostly credit desks, not the equities, fx, commodities desk who are doing brisk business. (although nobody knows how long equities can hold on.)

[IronFly]

curbed/dealbreaker look at Manhattan real estate:

http://curbed.com/archives/2007/08/1...eal_estate.php

[colgin]

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For probably 20 years people have said something to the effect of "NYC real estate is in a bubble." However, as anyone who reads the prices in the OP can tell, it's just kept going up.

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This is not compeltely true. Prices have adjusted downwards and painfully so for soem. See the period from 1988 to 1995. Also, I don't think anybody was saying Manhattan real estate prices were in bubbly territory towards the end of that period.

[colgin]

Trying to forecast the NYC real estate market accurately is hopeless. Good luck.

That said, now more than ever you should be a little concerned about just how prices have gone, especially in light of the unfolding credit crunch and potential impact on Wall Street and related jobs. This is not a bad time to wait and see. However, if you find a place that you would live in for at least 5 years and that you love and can comfortably afford, then go for it. However, this seems liek the worst possible time to stretch to the max for some uber-expensive $2MM+ 2 bedroom box in Manhattan. Perhaps prices will keep going up, but if ever there had been a risk in recent memory of a significant correction, it seems like there is one right now.

Moreover, you note that rent is a crazy $6-8K for a nice 2 bedroom. I don't dispute those figures as I am VERY familiar with both the sales and rental markethere. However, and I am sure you have done the math, paying even $8K for a rental is significantly les expensive on a monthly basis EVEN after taking into mortgage interests deductions (kiss goodbye real esttae tax decuction due to the evil AMT) than a $2MM plus apartment. It is not even close. Plus, you need to put down a minimum of $200K and much more if you are looking at coops. Even with sky high rents here and vacancy rates under 1%, it is still cheaper to rent (in the short run) than buy at virtually every price point and for every type of apartment. So, unless you are going to hold for say 30 years, the justification for buying has to do with factors like future price appreciation and the various benefits of owning v. renting (decorate as you wish, no landlord, etc.). Given where prices have gone over the past few years, you should be a little suspect about the potential for significant future price appreciation over the next few years. Think of it this way. It sounds like you have a pretty good job. If you are feling close to priced out fo a humble 2 bedroom, then you musthave a lot of company. Unlike stocks and certain other assets, even in manias, there is a limit to the degree of appreciation in housing due to income requirements of buyers. Prices cannotkeep going up forever without income continuing to go up with them, and now it looks like income growth in NYC may be slowing down.

Good luck and be careful.

P.S. One last thought. Many here in NYC say that real estate prices only go up. Aside from being demonstrably untrue, recall that in 2005 homeowners were saying that in every city in America and they really beleived it. Hasn't worked out that way so far. Then again, maybe NY really is different. [img]/images/graemlins/ooo.gif[/img]

[colgin]

Howzit,

Good point about all the condos coming tomarket. Manyo f these have been pre-sold. However, I suspect that many were to "investors". When these buildings are finished I think you will see a number of rentals in these condos at the same time as yet newer condos are tryig to sell theris. Unlike coops owners who,as I often here, can choose not to sell if they do not like prices, condo developers must sell and there is a still a lot more inventory coming online. However, to date, these condos have been selling pretty well. It will be interestng to see how that market develops inthe next 6-12 months.