Thursday, February 22, 2007

Bright Lights, Big City, Ridiculous Real Estate Market

Some months ago, doing jury duty, I ran into the mother of some old friends, who now sells apartments in Manhattan. She urged me to buy young, and assured me there were still apartments "under $400,000." On my way home last night, I stopped at a real estate storefront and looked at the photos of beautiful apartments—none of which had price tags under 340K, and that was for a teeny studio. Granted, that was a high-end sort of place, but nevertheless—real estate prices in New York are astronomical. How can anyone under 30 afford to buy at those kinds of prices? I would like to buy young, and it's not like I want to buy a SoHo loft or anything, but how does one even begin to come up with a down payment of that size making less than, say, 100K?

I know we're a city of renters—but is it actually impossible to buy in New York before you've really, truly "made it"?

(I wonder, also, how much this contributes to gentrification—it's easier to push out a community of renters than one of owners, and the pushed-out people benefit less.)


jessica said...

The outer boroughs. Really. You can buy a studio in Bay Ridge for between $100-150K. And it's a nice area. That's what I'm going to start saving for as soon as I graduate (with an almost as "useless" degree in poli sci....).

I've really enjoyed reading your blog--I'll be in a similar situation to you shortly. I graduate in May with a liberal arts degree from NYU but also with no debt from student loans or CC debt thanks to generous parents and a determination to keep myself debt free. Until I take out a mortgage. :)

S/100/30 said...

When I was living in NYC, every single person I know who bought did so via family money.

Kyle said...

Hey. Great site. I'm also an English major living in NYC and completely bewildered by the cost of real estate here. Like the commenter above, anyone I know buying property is doing it with family money. And that's really only one person. Everyone else I know (all from 25-30) is renting.

For those of us who don't come from money, and have debt from supporting ourselves throughout school, buying anything in the city or even most parts of Brooklyn seems like a fantasy.

Bay Ridge is pretty nice however. I'm just south of Park Slope and love it here. Good luck with the studio Jessica.

Anonymous said...

It isn't just NYC. I'm in Denver, where it's increasingly difficult to find affordable housing. There are lots of condos/townhomes going for $300K-$700K, and "joined" homes (aka duplexes) for $500K to $1mil+.

There is a condo complex going up near my apt where the penthouse apt will be over $1mil.

It's very difficult to find something under $200,000, and if you do it's tiny and old (and also likely to be in a neighborhood where they are ripping down the cheaper housing and building McPriced McMansions).

And then, to add insult to injury, there is a trendy area here called Stapleton, where it's actually possible to find a studio or 1 bdr for around $135-150K. The kicker? You have to make less than $30K a year to be allowed to buy it -- it's subsidized housing they've mingled in with the super-pricey homes and apartments.

I just don't get who is buying these things. I'm still a renter and nearing 40.

SF Money Musings said...

there's an article in the NY Times about how rents are almost equivalent to buying a home.

Of course that's on the real extreme high-end.

My friend has no student debt and works as an analyst/auditor for a big investment bank in NYC. And she rents! She says there's nothing in Manhattan under $300,000. Brooklyn's not an option for her considering her working hours. She'd rather rent close to work than buy in another borough.

My friend works as a supply chain manager and makes a healthy salary. But combining her salary with her husband and they can't afford anything decent in the Bay Area. Ridiculous real estate prices are horrible in the big desirable cities. I guess we only hope that we'll reach the ownership stage someday.

mOOm said...

$340k in Manhattan is a huge bargain! Recently I looked up prices on a new condo development in Burlington VT - range $550-750k. 2 bed condo - don't seem very big. They do have a Lake Champlain view. I was guessing $300k ish before I found the numbers.

There is nothing wrong with renting if it makes more financial sense (which it does on the West Coast and the near-coastal NE. I actually prefer the idea of renting. I'm 42.

Living Almost Large said...

Move outside of Manhattan. I live in NE and lived in Southern CA, the only way to buy is to buy while young something small and trade up. I bought a 1 bd condo then traded up. Instead of wasting rent I paid equity. Also my 1 bd was $150k and I sold for about 2x. I think $340k is a lot.

You need to save first. But how do people in really HCOLA do it? Exactly what I said, buy small, start out saving and move on up. In places like Denver, Seattle, FL, those are still much more affordable than NE, NY, SF, LA/OC.

Anonymous said...

I understand and sympathize strongly with your bewilderment! I live in DC and the real estate market is similarly mind boggling. Thankfully, though, I don't really find DC a very desirable place to live anyway and will be moving to the DFW area as soon as I graudate.
Knowing how much further my money can go in the Dallas area, I could never in good conscience buy a single square foot in this place. I hope NYC is a cooler place to live. ;)

Strange Bird said...

I find it confusing that people still give advice to buy small and trade up. Even small these days is close to half a million, which was a mansion when my parents were buying a home (and though they supposedly made less than we could, it wasn't by the same percentage as housing has gone up). And buying in Denver or Seattle? That's great, if you live and work in Denver or Seattle. Where do you start when you already live, work, and grew up in LA or NYC?

Anonymous said...

Save save save. And compromise. I bought at age 27 in Jersey with a 20% down payment - Manhattan was just too expensive. I am 33 now, my house has doubled in value and I'm so glad I bought when I did. The house I bought wasn't move-in condition. It still needs some work, even 6 years later, but it's MINE!

The way I saved was a combination of these:
1) Any extra "found" money got put into savings (bonus, tax refund, etc)
2) Go on shopping diets - resolve not to spend any money on non-necessities for a month here and there - it's amazing how this can add up.
3) Eat all the stuff you have in the house before going grocery shopping or getting take out. It might sound stupid, but everyone has stuff they're pushing around the back of their cupboard. Suck it up and save 50 bucks by eating the crap you already bought.
4) (Along the same lines as #3...) Don't buy anything until you need it. When in doubt, here's a rule: You don't need it if you already have one that works.
5) Once I paid off my student loans and my car, I put those monthly payments into savings instead. This added up quick and I didn't even feel it since I was already used to having the payment.

I was able to pay off my college debt pretty aggressively because as my salary rose, I allocated the extra money toward debt/savings, instead of spending it or upgrading other things.

You have to make sacrifices and decide what's more important to you - the short term or the long term. You don't have to sacrifice your whole lifestyle, but some key choices could make the difference. For example, I drove the car I had in college (a '93 Sentra) until 2004. All my friends got new cars in the meantime, and sometimes I felt sorry for myself driving my beat-up manual-windows 1-hubcap Nissan, but in the long run I'm glad I was able to put an extra $300/mo into the bank. Plus, my car insurance was cheap b/c the car was so old.

Good luck,
Another former English major, aka The Comment That Turned into a Short Story

Escape Brooklyn said...

My boyfriend (now husband) and I bought in Ditmas Park/Flatbush - an "up and coming" neighborhood of central Brooklyn. We paid $125k for a one bedroom two and half years ago and prices are now about $230k.

We planned to trade up within two years to a multi-family, but prices throughout NYC went through the roof and we can't afford to move anywhere without doubling our monthly expenses. And that's living in a smaller unit of a house with renters above and below us!

In order to buy, we saved cash and also tapped our Roth IRA's for the downpayment and closing costs. No family money, unfortunately. I'm glad we did it, though, since we're paying a mortgage instead of a landlord.

We're going to move to Philly in the next few years because it has a good city feel for a fraction of NYC's cost. I don't want to die in my Brooklyn apartment.

Good luck!

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