$360K for One Bedroom Worth the Price?
Hi!
We are almost gonna sign a contract to buy a new construction 600 sqft condo on Washington Ave @ St Marks.
We LOVE the neighborhood and cannot wait to move in but it is so hard to decide because of the market. It took us a loooooooong time to save up so any brutally honest advise is welcomed.
Do you think it is a good price?
GZ
We are almost gonna sign a contract to buy a new construction 600 sqft condo on Washington Ave @ St Marks.
We LOVE the neighborhood and cannot wait to move in but it is so hard to decide because of the market. It took us a loooooooong time to save up so any brutally honest advise is welcomed.
Do you think it is a good price?
GZ
Comments
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I moved to area in March. Pre-war bldg 1-BR 399,000. Worth every cent. If you love the place...do it!
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I wouldn't pay that much.
A few things to consider:
Assuming we're talking about the same bulding, the front of the units are floor to ceiling glass.
Across the street is a large, unsightly and dangerous open pit construction site. The entire side of the street on that side is often strewn with garbage and debris. a really hideous view through all that glass.
I don't have any specific detals about the site, but given the current economic climate I would wager there is a significant chance of it remaining nothing but an open pit for a number of years, clearly negatively affecting resale vaue.
Second, while I live in and love this hood, there is a significant amount of violent crime. More so than in nearby neighborhoods. Again, given the economic climate, any recent "gentrification" s likely to roll back or at least freeze for a significant period of time. -
I think I know the one. Condo prices in the area have risen slightly or held the line over the last couple of years while they've been falling elsewhere. This is a nice place to live and should hold up well long term, in my opinion, but we cannot know where they're going from here; there's even more uncertainty than usual because e.g. what if Obama & Fed try to force mortgage rates to 4.5%? What if that causes international confidence in US treasuries to collapse causing massive USD devaluation? What if unemployment doesn't stop rising until it gets to 15%?
Do you really like it and want to live there for several years? Is it still likely to suit your needs in 3-5 years time? You're certainly paying too much if you aren't happy there, because you're about to blow over $10,000 on transaction costs you'll never see again (and more when you want to sell). Forget the short term movements in the market, you'll definitely lose if you hold it for a short time.
A condo is a community where you'll be collectively responsible for keeping a large building maintained (or lose your equity if the building drops in value due to neglect). Have you met as many as possible of the other people moving in, and thought about how you're going to work together in coming years to solve the inevitable problems and shape the management of the building? Are you prepared to join the board ASAP, spend a couple of hours a month working to protect your home and investment?
How much do you think it will cost you to rent a place like that, and how much are you currently paying in rent? What is the value of the following:
total monthly carrying costs (mortgage+common charges+tax) - principal repayments - mortgage interest tax break
Compare that number to your rent. If it's higher now, project it forward a few years, factoring in steady rise in rent and steady rise in principal repayment. What year will you be saving money by buying rather than renting? (ignoring the downpayment opportunity cost, ignoring short term market movements, and ignoring the fact that you'll one day own a property and be rent free -- I'm talking about the money left over from your paycheck from now onwards, including what you pay to yourself like you did when you were saving up). If it's the 1st year, you're not paying too much, you're getting ahead from the start. If it's the 5th or 10th year, consider bargaining down the price a bit if you can, or going and renting something nicer for the same money, or staying put and building your deposit even further until the equation does make sense.
If you want to be scared out of buying, read this:
http://www.cepr.net/documents/publications/Changing_Prospects_for_Building_Home_Equity_2008_10.pdf
Its premise is a 15:1 buy:rent ratio which I don't accept, because of interest rate changes, taxation, and so on, which is why I say run the numbers yourself. Also, it covers the whole of NYC/NJ metro, and Prospect Heights is in better shape than average and I'm hoping it will stay that way. -
If it's the one on Washington, not St Marks, make sure the building has other buyers committing. It's been empty for about 8 months now, with no units moving at all. Even if they gave you a nice price chop, you don't want to live there all by yourself. Also your lender might want 50% of the building occupied or something like that. I would never be the first to buy there and be the only one to live there for quite a while. Personally I think those apartments are too small. There are a couple of bigger ones around the corner on St Marks that still haven't sold, but with most of the building occupied.
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I predict that units in that building will be valued at/reselling at 20 percent less than the price you referenced in 12-16 months.
As stated above, if you are not looking to move in the short term, I would try to negotiate that price down to $320 at least and you should be able to break even if/when you are looking to move.
Hardly an expert, but thats my 2 cents. -
I don't think anyone knows what will happen to the market in 5 or even 1 year's time. If you have a steady job that's fairly recession-proof so you know you're going to be able to make your payments and you're not planning to move for at least 5 years (10 would be better), none of that really matters too much. The local real estate market could completely collapse making it a bad investment or the dollar could collapse making you glad you got rid of that cash and invested in something of real value. Who knows? As long as you like your place and you can make your payments, that other stuff is less important.
Of course, trying to get a lower price is always a good idea, but I'm sure you already negotiated to the best of your ability if you're on the verge of closing. But if they're overextended and desperate to unload it and they see you about to walk away from an almost done deal, maybe you can do a little better.
No answers here, only more questions, and this isn't my field of expertise at all, but those are the things I would be taking into consideration if I were buying now. Doctorj's analysis is also good advice, as always. -
My wife and I just signed a contract -- and I feel really good about the price we got. Here's why.
Real estate experts used to have an old, common sense rule before the bubble. A coop or condo should sell for 15 or 16 times the annual rent of a comparable apartment (without rent control or whatever).
So I called a broker and pretended we wanted to rent out an apartment just like the one we were about to buy. We asked him to estimate the lowest conceivable rent we would get for a place like that.
I know rental prices will drop this year. Also I know that as the bubble collapses for-sale prices should drop below the common sense value of the real estate. I still felt pretty good having the common sense formula to reassure us that we weren't being incredibly stupid to buy.
Also, we love the place, and we are buying a place to live, not an investment. -
I agree with prospectus
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Wow! THANK YOU FOR ALL YOUR ADVISES! It really helps. For us we are living in Chinatown/ Lower East Side Manhattan and we are the one last breed who still stay here, all of our friends are in PH, PS and FG area. Therefore we frequent this area a lot. And yes you guys are right, the place we are looking at is on Washington Ave facing west. After reading all of your responses I have the following questions:
1) Lo Kee (kudos for your analysis) mentions that there's "significant amount of violent crime" in this area... My friend Charlene lives on Bergen and Underhill and she says it is pretty safe although it gets very very quiet at night. Is Washington Ave safe? Cause I know sometime one block makes a big difference...
2) doctorj (Thanks for your in-depth advise!) mentions the rent VS mortgage ratio. We are living in Chinatown and paying $1700 for a studio so anything is an upgrade for us. The mortgage+tax+cc we calculate is gonna be a bit more than what we pay now. I think I shouldn't compare my rent to PH so I guess my question is- How Much in average to rent a One Bedroom in PH?
3) Prospectus, I have never heard of that equation, wow that makes total sense! That's a brand new perspective. Just as you guys we plan to buy and live here for a loooong time, not quite as an investment, and therefore we keep thinking left and right, back and forth since it is such a big chunk of hard-earned money...
Therefore my thinking echoed with Carnivore's comment...
But one thing still bugs me is what Newheights says- the condo has been on the market for a while and that worries me... Why is it in such a low demand?
AGAIN THANK YOU SO MUCH! I KNOW I AM GONNA HAVE REAL NICE NEIGHBORS SOON
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RE Newheights comment.
Lots of new properties have come on the market between Franklin and Vanderbilt over the last year ...this, combined with the recession, has likely lead to properties being on the market longer.
RE: Washington Ave.
It has certainly gotten better over the last few years, but you should still be "urban aware". (be sober, have no ipod, avoid drug corners, etc.) -
Gas zappers: sorry, I didn't mean to alarm you. It's just that I live close-by and it doesn't seem that any units are being sold in that brand new building for months now.
But maybe you are talking about the new-ish building that already has people living there? Or the brand-new one with the street number hugely displayed on the facade?
If you're talking about the new building, it's still empty and has been for months now. No one seems to have moved in. If you ask me, it's because the apartments are very narrow and the floorplans look awkward. But again, I don't know if we're talking about the same building.
So whatever building you'd like to buy into, ask the broker if any other units have sold yet, and if not, ask them point blank why not. You're in a great position to negotiate an even better price.
Developers are a bit nervous in this market. Plus don't forget all the new buildings in the neighborhood recently seemed to have construction resumed on them, so there will be quite a supply of new homes in 6 months-1 years time. I often bike past a new building that seems finished on Bergen and Vanderbilt that advertises itself with ipod docking stations. They're building like crazy on St Marks between Vanderbilt and St Marks. Just to let you know that you have plenty of options in the neighborhood. -
Gas Zappers wrote:
There's a whole bunch of condos on the market in PH-environs. There are resales in some established condo buildings, and there's also higher-end new construction for sale. That particular building is right on Washington, and is probably at the mid-low end of the 'luxury' new construction. Maybe some people prefer sidestreets to being right on Washington. That means lots of choices. Basically, an awful lot of stuff came on the market at the same time, then financing got difficult (though probably it's now getting easier again) so if something is a little overpriced or has some minor drawback, it'll take longer to move.
But one thing still bugs me is what Newheights says- the condo has been on the market for a while and that worries me... Why is it in such a low demand?
When buying a PH condo, we picked a beat-up resale in a long-established building rather than a brand-new one. There's pluses and minuses, but with an established fully occupied building we felt there was less risk, because it should already have reached some kind of equilibrium in terms of maintenance and depreciation, and we could see it was already full of people with steady jobs to share costs with. If I were doing it again, I'd probably still buy a resale on the cheap, but I'd pay a lot more attention to mechanicals, heating, insulation, roofwork, drainage, aircon options, etc. Stuff inside your apartment you can fix or change easily, but issues affecting the whole building can be harder or impossible to fix. -
Related to what doctorj said, it almost goes without saying but always hire an engineer to inspect the place before buying and make sure you have access to the entire building, including roof, basement (boiler room, etc) so you can have a realistic expectation regarding any major upcoming expenses. Personally, I think this is worth it even for new construction, since the average layperson has no idea whether something is well-constructed or not, or whether a specific model of boiler is good, etc.
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I agree with all this -- also it might be good to get some confirmation, maybe through your lawyer if possible, of the number of units under contract in your building, and how firm the contracts are. Did they have to put down a real 10% down payment?
You want to feel secure that the developer isn't drowning in unsold condominiums. Maybe ask the developer to reassure you that the condo association will be financially stable, and that the developer can pay off its construction loans and isn't going to have to cut prices in half in a fire sale... -
I would wait, the place is and has been unoccupied for a while, and market conditions indicate a downward trend. I wouldn't pay more than 300K for that place, but I couldn't put a down payment on a decent car w/the money I have in my name...
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So I use this tool (I post it in another thread too) to help me decide whether to buy or not. The monthly payment including mortgage+maintenance+tax(25yr abatement)+tax benefit come out around $1600-1700.
Here's the tool (click Advanced Setting to put in common charges etc.)
http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html
So the question is how much is the average rent for a One-Bedroom in Prospect Heights? Or what will you get for that amount of money? -
Gas Zappers wrote:
http://www.rentometer.com/
So the question is how much is the average rent for a One-Bedroom in Prospect Heights? Or what will you get for that amount of money? -
Cool The Kid wrote: I would wait, the place is and has been unoccupied for a while, and market conditions indicate a downward trend. I wouldn't pay more than 300K for that place.
I agree with this 100 percent.
I hope I am wrong, but I strongly think that will be the market value of those places (maybe even less) by September 2009.
I travel quite a bit for work and I have seen what the first twelve months of the recession have done to vlaues in the rest of the country, and the downward cycle is only beginning now in New York. -
It's also possible that the price will rise...
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doctorj wrote: It's also possible that the price will rise...
Dude, are you hoarding physical gold? With the recent backwardation of the precious metals markets, paper gold may not count. -
Carnivore wrote: [quote=doctorj]It's also possible that the price will rise...
Dude, are you hoarding physical gold? With the recent backwardation of the precious metals markets, paper gold may not count.
No but I just got an email and apparently I won the lottery in Nigeria!!! -
Carnivore wrote: [quote=doctorj]It's also possible that the price will rise...
Dude, are you hoarding physical gold? With the recent backwardation of the precious metals markets, paper gold may not count.
What am I going to do, buy it on Ebay for $150 / ounce over spot? Then store it in my apartment when there's been break-ins lately, let alone the security situation if the USD collapses? And when I flee the country, as I would be forced to if conditions deteriorate to the point where I need the gold, do I take it with me in my carry-on, or do I check it in with the rest of my luggage? Will I be able to pay for my ticket at the airport with Krugerrands? -
Hahahahaha! doctorj I love that Zimbabwe picture!
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"Real-estate attorney Michael Carmody says new purchases have 'come to a screeching halt as of late September,' and clients with existing agreements are calling to back out. Lawyer Jerry Feeney says he used to get two new calls a day from people drawing up contracts; up to 40 percent of inquiries these days come from clients trying to abandon ship. Attorney Brian Tracz adds that until the summer, 'no one wanted to back out.'"
http://nymag.com/realestate/realestatecolumn/53160/ -
Lo Kee wrote: "Real-estate attorney Michael Carmody says new purchases have 'come to a screeching halt as of late September,' and clients with existing agreements are calling to back out. Lawyer Jerry Feeney says he used to get two new calls a day from people drawing up contracts; up to 40 percent of inquiries these days come from clients trying to abandon ship. Attorney Brian Tracz adds that until the summer, 'no one wanted to back out.'"
The chart in that article shows 11 or 12 broken contracts per week (in Manhattan). Doesn't seem like much to get excited about.
http://nymag.com/realestate/realestatecolumn/53160/ -
arches wrote:
Our seller just called us up. They're anxious to make sure we still want to buy our place and that our mortgage is going through.
The chart in that article shows 11 or 12 broken contracts per week (in Manhattan). Doesn't seem like much to get excited about. -
arches wrote: [quote=Lo Kee]"Real-estate attorney Michael Carmody says new purchases have 'come to a screeching halt as of late September,' and clients with existing agreements are calling to back out. Lawyer Jerry Feeney says he used to get two new calls a day from people drawing up contracts; up to 40 percent of inquiries these days come from clients trying to abandon ship. Attorney Brian Tracz adds that until the summer, 'no one wanted to back out.'"
The chart in that article shows 11 or 12 broken contracts per week (in Manhattan). Doesn't seem like much to get excited about.
http://nymag.com/realestate/realestatecolumn/53160/
How bout this?
http://curbed.com/archives/2009/01/13/q4_brooklyn_reports_show_bloodletting_except_brownstones.php -
This game (aka talking our own books) is fun!!
"The good news: housing stock in brownstone Brooklyn is holding its own. The report found that median sales prices of homes increased 12 percent from $1.115 million to $1.287 million. So, owners and buyers in Brooklyn Heights, Cobble Hill, Boerum Hill and Park Slope have less reason to run out and buy Pepto Bismal. Mr. Miller calls brownstones, right now, "a relative anomaly in the market," meaning that no one should forget where the Rite Aid or CVS is located. There is one other word when considering news that is good: "coop." Coop prices are holding up much better than condos. While median condo sales prices fell 4.7 percent, median sales prices of coops went up 2.9 percent, although again on the dark side, sales volume plummet a gut wrenching 32 percent from Q4 2007 to Q4 2008."
So if you own a brownstone or a co-op (which probably covers most prospect heights owners)...still not that exciting. I'm not saying it won't be exciting some day...just isn't so far. -
well, there´s a 1 br co-op going on the market I believe this weekend for $249k. it´ll be on washington if it happens this weekend. I have it on good authority it has roof rights AND there will be fresh baked cookies at the open house.
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arches wrote: There is one other word when considering news that is good: "coop." Coop prices are holding up much better than condos. While median condo sales prices fell 4.7 percent, median sales prices of coops went up 2.9 percent, although again on the dark side, sales volume plummet a gut wrenching 32 percent from Q4 2007 to Q4 2008."
I wish they'd split the condo numbers into new construction and resales. I bet the resales in established condo buildings aren't moving differently from the coop market, since hardly anyone is making new coops nowadays. The newly constructed luxury condo market was an entirely different kettle of crack.
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