I was recently quoted for an AOL article about a new feature that real estate website Trulia recently created.
Check out the article here: http://www.walletpop.com/2011/01/24/better-to-rent-or-buy-check-out-trulias-city-by-city-index/ .
Trulia's graphic says that New York City is a city where the costs of owning are higher than the costs of renting. While this was true for many years from 2001-2009, it is less true now. And, as I say in the article, the benefits of owning may still be there, they just take longer to achieve in a place like New York.
Here are some reasons that people might want to purchase their home:
1) To stabilize their housing costs: Rents tend to go up every year. In a place like NYC, rents can jump a few hundred dollars from year to year. Buying a property with a fixed interest mortgage helps stabilize housing costs for long periods of time (you will still have increase in maintenance, property taxes, and home insurance over the life of your mortgage, but the percentage year over year is much lower than the potential increase in rents).
2) To have a place of your own: Ever lost out on a security deposit because you had to paint your bedroom blue or risk going insane from all that vanilla off-white? Not a problem if you own your own place. How about those "landlord special" stoves and countertops? Even in a nice building they are calculated to appeal to the most potential renters. If you want a custom kitchen, you are pretty much out of luck. For liability purposes you can't even install a custom stove without your landlord's permission. Purchasing a place gives you more control. You might have to pass the work by a co-op board, but they won't deny you because they don't like your choice of backsplash tile.
3) To increase equity/net worth: To me this is the least important reason to purchase a primary residence, but it's still a benefit that you will acquire over time: instead of paying rent to your landlord - and receiving nothing long term - you are gradually building ownership of a property, and creating net worth for yourself. This benefit applies ONLY IF YOU SPEND 8-10 YEARS in your apartment at minimum.
2 comments:
Thanks Hanna.
I love the variety of apartment rentals in New York City, but I'm a big boy and I want to own. My problem is that there are a lot of mixed messages coming out of the New York real estate market (all depending on whom you talk to) at the moment. Ive heard "don't dare buy" from some friends in the lease corner and I've heard "rent? not this year" from some friends in sales. Since you are currently engaged in both, I'll ask you. Has the lending market relaxed enough to allow for loan amounts that would be required to purchase in the city? I know it's hard to gauge, being the beginning of the quarter and all. Just curious.
Thanks again Hanna
@austinscottbrooks: Without knowing more about your situation, I couldn't say if it was right for you to be purchasing now or waiting. To be sure, there are certain favorable conditions for people to buy if they can. These include the historically low interest rates for mortgages. Also, according to the Fannie Mae website , the conforming loan limits are as high as $729,750 for single family homes (including single co-op and condo units). Anything above that ("jumbo loans") are a bit tougher to find, but that was always the case. Banks are more strict on debt to income ratios and reserve requirements. More exotic loans (such as negative amortization or interest only) are harder to find, and less likely to be approved by a co-op board. In general, it's not a bad idea to look at buying, even if the rent/own comparison is somewhat skewed to the rental side. Good luck.
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