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Posts Tagged ‘Rent versus Buy’

[Three Cents Worth #260 NY] Looking At Manhattan’s Mortgage History

February 25, 2014 | 3:23 pm | curbed | Charts |

It’s time to share my Three Cents Worth (3CW) on Curbed NY, at the intersection of neighborhood and real estate in the capital of the world…and I’m here to take measurements.

Check out my 3CW column on @CurbedNY:

In this week’s column, I thought I’d look at something near and dear to our economic hearts: tracking rental versus mortgage payments in Manhattan. Above, you’ll find Manhattan’s median sales price for co-ops and condos, as well as median rental prices, plotted against a theoretical monthly mortgage payment. At first I was using this to present the rent-or-buy decision, but the visual became a little more than that.

For the mortgage payment estimation, I used generic defaults of 20 percent down and 30-year fixed Freddie Mac mortgage rates using median sales prices as the anchor—understanding that a 20 percent down payment has not been a constant over the past 20 years. Although I’m only tracking principal and interest on the payment, I’m not factoring in the tax deduction either, so the offset is somewhat reasonable in this simple visual. Here’s what I found:…

3cwNY2-25-14
[click to expand chart]

 


My latest Three Cents Worth column on Curbed: Looking At Manhattan’s Mortgage History [Curbed]

Three Cents Worth Archive Curbed NY
Three Cents Worth Archive Curbed DC
Three Cents Worth Archive Curbed Miami
Three Cents Worth Archive Curbed Hamptons

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Rent vs. Buy Analysis Leaves Use And Enjoyment Out Of The Equation

September 25, 2005 | 9:15 pm | nytlogo |

sub

The New York Times this weekend released the results of an analysis of the costs and benefits of home ownership and renting, considering the tax benefits [NY Times]. It is a difficult topic to cover.

The article concludes that now may be a better time to rent than buy since prices are rising, rents are just beginning to rise and buyers place too much emphasis on the tax deduction.

We have to give credit to the New York Times Real Estate Section for publishing this analysis since they depend largely on advertising revenues from real estate brokers. Whether or not you agree with their analysis, it is refreshing to see this sort of thing.

One point of contention I have with articles like this is the concept of valuing the bundle of rights of ownership. This is left largely out of rent to value equation because it is so subjective. For example, the Economist magazine has been trying to call the collapse of the housing market for the past 4 years [Economist] using the spread between rents and sales prices as the predictor of housing price inflation but does not attempt to quantify home ownership within their analysis.

rentdue Nearly every article like this has an advantage of ownership as a feature such as the freedom to change the “color of their living room walls,” but its not quantified. It seems to me that the rent that a property is worth does not reflect all components of its value.

In other words, if a premium is placed on owner occupancy in a given market, then the value to the purchaser would be higher for an owner occupant than it is to an investor. For example, even during the darkest days of the recession in New York, the Manhattan townhouse market reflected a premium for single family houses over two to four family houses. The rental income of the units in the building did not justify the prices being paid for two to four family houses using the multipliers and overall cap rates used by investors at that time as buyers opted to convert these houses to single family.

Using rents as the only way to quantify use and enjoyment of a property paints an incomplete picture.

In addition, the rent versus buy decision should only apply on a case by case basis. It sort of like saying that nationally housing prices went up x% and then applying that amount to your property. The same goes for the opposite end of the spectrum. Rosy reports of rising prices do not always apply to all properties in the same manner.

Related Links
Housing: Buy or Rent [Angry Bear]
NYTimes: Is It Better to Buy or Rent? [Calculated Risk]


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