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In the months following the September 2008 liquidation of Lehman Brothers, a dramatic decline in sales prices of homes alarmed residents throughout New York City. However, with the market’s apparent stabilization this summer, renters have been pondering the quintessential New York question: Is now the time to buy?
“Interest rates and prices are still low,” says Elaine Tross, vice president at Prudential Douglas Elliman Real Estate.
“If you’re in a position to buy and can get a mortgage, it’s an advantage to do so.” Tross adds, however, that “there’s not one given answer” when it comes to purchasing a home. Many New Yorkers have the assets, stability, and employment that make buying an option, but are sticking to rentals for other reasons.
“We find people are choosing to rent because of the uncertainty [in the sales market],” says Steve Maschi, vice president at Glenwood Management Corp, which manages Barclay Tower, among other luxury rental buildings. “It’s a combination of factors: the difficulty in getting a mortgage, the uncertainty about the marketplace. A lot of people now feel better holding on to their extra cash as opposed to plunking down huge payments for purchases.”
Whichever route you choose, there are pros and cons. Renters enjoy freedom, buyers have stability. Renters suffer landlords, buyers sweat mortgages. Yet in the current marketplace the advantages and disadvantages may be more pronounced. It all depends on your particular circumstances, and, of course, who you ask.
“New York City hasn’t seen a buyer’s market like this in a very long time,” says Highlyann Krasnow, executive vice president of The Developers Group, whose developments include The Edge, among other buildings.
With the Real Estate Board of New York reporting average home prices down 22 percent during the second quarter of 2009, Krasnow’s point is well-founded. Prices are demonstrably low throughout the city, and interest rates are still below 6 percent.
While Krasnow agrees with Maschi that the “lending
restrictions got a lot tighter over the past few years,” she points out
there are banks working with buyers and closing on mortgages even in new
developments. Deanna Kory, senior vice president of the Corcoran Real
Estate Group, says securing a mortgage these days “is not as difficult
as people think. People worry about the financing, but I have yet to
experience anybody who qualified for a co-op having problems with a
mortgage.”
Still, lending restrictions aren’t what they once
were. “Five, ten years ago,” says Sofia Estevez, senior vice president
at Rockrose Development, “you showed up to a bank and said ‘I want to
buy this’ and they would say, ‘Okay.’ It was unbelievable. You could
just get a mortgage. Now, you have to be able to afford a mortgage
absolutely. If there’s any question, it’s not happening.”
The
hurdles of home financing in the current market have driven some New
Yorkers to the safety of a yearly lease. “A lot of people are choosing
rentals because of the expense and difficulty of getting financed,” says
Maschi. Yet for others, the sales market is simply too precarious.
Maschi says that “there’s probably more economic risk involved in a
purchase now than there has been in the past.” He adds that a rental
“might be a good place to sit for awhile to see what happens to the
sales market.”
Waiting,
however, could be as risky as making a purchase. “I would definitely
say now is the time,” urges Krasnow. “With sales creeping back up, if
you continue to wait, sellers might not be as willing to negotiate and
interest rates might be higher.” While furtive buyers may hope to time
the market, delaying to get the best deal, Kory warns, “The problem is
there’s no way to know. If you rent and the market does improve, you’ll
kick yourself.”
Estevez
agrees that timing the market is tough. “You may not want to buy
because you think it’s going to go down further,” she says. “I think
we’ve gone as far down as we’re going to go.”
In spite of the supposed
ripeness of the market, brokers still see reasons to rent. Kory claims
that “discretionary buyers”—ones not buying out of necessity—may be
discouraged by a lack of inventory. In this case, she encourages renting
during the interim. Likewise, Tross says, “If you’re buying to flip it
in two or three years, you’re better off renting.” On the other hand,
says Tross “If you’re going to be in the apartment five years, you’re
fine because the prices will go back up, you’ll still have that low
interest rate, and you’ve built a home for yourself, you’ve built
equity.”
Kory extends this timeline, saying that the “five- to
seven-year horizon” is where resale value becomes important. “You want
to look at whether or not the resale value is good,” she says, “but you
can’t always buy at the bottom and sell at the top. If you’re living
there with your children and you want to have convenience, safety, and
proximity to schools, those are the things that are going to be the most
important in the long run.”%uFFFD
