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U.S. Census Bureau released data showing how housing costs have grown dramatically, and boy, is it a doozy. The NY Times puts it more eloquently: "The numbers vividly illustrate the impact, often distributed unevenly, of the crushing combination of escalating real estate prices and largely stagnant incomes." Fine time for the data to be released - we can all look at what candiates are saying about affordable housing during election time speeches.
Here are some city figures from the article:
- More than half of New Yorkers are spending more than 30% of their income on rent (30% is considered the "percentage figure commonly seen as a limit of affordability")While city dwellers are familiar (and furious) with expensive housing options, the problem housing costs are also increasing in the suburbs. There's also a graphic showing how sharp the increases have been in regions all over the country.
- The average cost of a home increased by 79% - from $251,000 to $449,000
- Mortgages and home-related costs increased by 16%
- Manhattan figures: Median gross rents increased by 14% between 2000 and 2005, the number of people paying at least 50% of their income on housing increased by 14% and the median value of Manhattan homes is $718,000
And the NY Times has an article about groups trying to forward affordable housing issues on the NY state level.
Photograph of house in Queens from Bluejake
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You can read essentially the same article from the Times at the end of the 1980s.
Housing gets out of whack with income as people stretch and stretch themselves into house-poverty to get in the game. But eventually it snaps, and you have a burst bubble.
To see the future, read http://www.youdovoodoo.com/80sbubble.htm
The coming bust is deja-vu all over again!
We have discussed this at so many lengths and from so many different angles. The thing that gets me all riled up is that between my husband and I, we make a fairly decent amount of money. We're doing OK. However, we come nowhere close to being able to afford an apt or house in this area. Sure, we could take one of those crazy no interest loans, (which are going to screw the pants off a lot of people right now as I don't see their real estate growing much more in the next couple of years [Hello! Bankruptcy!]) but we know better.
We've been trying to figure out who is paying 700+ thousand bucks for an apartment. Are people in debt up to their ears? Or are people being paid that much money? Is it both? I really don't get it. Also, how is it people have 70 thousand bucks laying around for a downpayment (which is needed at almost every co-op in Brooklyn)? Who has that kind of savings? That leads me to my next freak out, 70 grand will buy a house in so many other towns across America. And when that sinks in, I find it almost impossible to make the move and buy here.
I'm at a loss.
Do we need the blog to tell us that New Yorkers pay percentages above what they should. Everyone knows this. The cost of the house doesn't include the taxes on the property, which is too high also. Someone help me out here. I thought that an appraiser, working with a bank, was supposed to make sure the house is sold for a reasonible market rate.....??? hmmmmm
While clearly housing is more expensive in NY than in other places, the fact that we spend more than 30 percent of our income on housing isn't necessarily worrisome. The Bureau of Labor Statistics says that the average transportation costs for a household in the lowest income quintile total 17 percent of their total expenditures. The figure is 18-21 percent for higher income households.
New Yorkers have a lower rate of car ownership than people in other cities, and it's incredibly easy to live without a car, compared to the hassles of doing so in other cities. I seriously doubt that most low income families are spending thousands of dollars a year on metrocards, so if they're applying some of the money to their rent that residents of other cities spend on transportation, their total cost of living could still be comparable.
More evidence for my hypothesis. New York doesn't rank among the top 10 highest cost cities for combined transportation and housing expenditures.
mihow,
I know people who have been with a company 20 and 30 years. Some come from a generation which had to wait until they had money saved either in the bank or the 401k to buy a house. The savings was the only way a bank would take them seriously. They are not a part of the generation (21 century) which graduates from grad school with the assurance of 60K to 80k salary. However, to answer your question. It is possible to draw 70 thousand buckets from one or several reserves if you have been working for a while.
I think the answer to your question is both. Some are making the money and are in debt, and can not afford to use the 70 for down payment. They are gambling. Others are making the money, with joint salaries are not having problems spending the 70 lying around. My brother in -law borrowed 10,000 laying around to buy his new BMW. A down payment. However, it wasn't laying around literally, it has to be replaced for the childrens future education.
... we can all look at what candiates are saying about affordable housing during election time speeches
People already had their chance to look at what candidates were saying about housing. It's just that people gloss-over and don't pay attention, and let fluffy ads influence their choice. Remember the Bloomberg re-election? Remember how he said that the Avalon Chrystie was his solution to the affordable housing crisis? It's luxury housing. And Schaeffer Landing? Luxury housing as well, and both got huge grants on the public dime. And Bloomberg appointed Marvin Markus, a man who's known for jacking up rent higher than anyone else.
Any of you who voted for Bloomberg get what you deserve: even more expensive housing, because apparently that's how you choose your leaders. Thank you so very much, can't wait to see who you pick in November!
I've been working a long time. I guess, had I not moved all over the United States throughout my entire 20s, I, too, would have 70 grand lying around. It's probably just me. I haven't ever been that great at saving large sums of cash. But my husband and I are on the fast track now. Granted, I don't know if I'd put 70 grand down on a small, nyc apartment. Rent here, buy elsewhere? Probably.
Thanks, mh.
Mihow - when did you steal my identity? My husband and I are in the same exact position - we make plenty of money, but it will take quite a while for us to amass the cash to put a down payment on an apartment and pass co-op muster. I have friends who have been mysteriously able to put $150-$200K down on an apartment. I've beaten my head against a wall so many times about this, but have recently realized that the phrase "my parents" seems to come up over and over again in this context.
"New Yorkers have a lower rate of car ownership than people in other cities, and it's incredibly easy to live without a car, compared to the hassles of doing so in other cities."
That's the difference, though - when you buy a car, you own the damn thing and can sell it. We may only pay $1000 or so a year for a subway pass (far more if you're in the suburbs), but you're only paying to use it. You own nothing.
mihow,
I meant 70 bucks instead of buckets.
You youngens clearly aren't following the link and reading. If virtually no one can afford housing, the price of housing will fall.
The people in trouble are those who stretched to the limit to buy at the top. Lots of my friends were harmed by doing so at the peak of the 1980s market. They were house-poor for years, and those who bought coops/condos were trapped in them years as well. The inflation-adjusted decline was one-third plus for houses, more for coops and condos.
We are in the equivalent of 1988. I bought in 1994 at a fair price. I don't think it will take that long this time, though I could be wrong.
(Remember the Bloomberg re-election? Remember how he said that the Avalon Chrystie was his solution to the affordable housing crisis? It's luxury housing. And Schaeffer Landing? Luxury housing as well)
That's what the developers hope. But some of the luxury housing is going to turn out to be affordable housing, after foreclosure of workout and auction.
mh, I kinda liked buckets. I bet I could find 70 of them.
mihow,
I totally agree. I learned the difference in house size years ago when I visited a friend looking for houses in Tennessee.
For the price range, even today, you can buy twice as much house for the money in many parts of the south. You just have to solve the dilema of maintaining the same salary in the south which you might make in a place like NYC. I guess business ownership could do the trick.
With that said, I would either retire in the south, or make sure I could maintain the cost of living and buy a big house "WAY" outside of New York State. I probably wouldn't purchase a 70K home anywhere unless it had a lot of character and the neighborhood was very nice. Unless the I was guaranteed that the future market value would allow me to sell again down the road for much more. For example if the town was growing.
I have never like the "boxes" stacked on top of each other/apartments in NYC. I would never own an apt. in NYC unless it was passed down to me.
People are definitely getting the money from their parents. Lots of people my age (early 20s) already a have significant portion of their rents paid by their parents. when the parents believe the time is right - often when the kid gets married - they then give them a huge chunk of money for the downpayment. It has always been common for parents to help their kids starting families buy a home...it's just that in new york, that "help" is pretty pricey to give. my father has also told me that when my boyfriend and i can make the monthly payments on an apt he will help with the down payment. It's simply another way to pass down wealth to the next generation.
Well, reagan must have done something right, then, eh?
/kicks self for having cheapo, nonrich parents, thus am fucked.
Kristin - thanks for the honesty. My irritation is partly, of course, directed toward the fact that some people have parents who can help and some don't (give me a break - that's human!), but mostly directed toward many people's disingenuous claim that they're relying on their own savings for a down payment.
Curse you mom and dad, why were you born so f'ing Poor!
however, thank you for handing down those sweet arms in case the world will end like you said, daddy.
WT economist: "The people in trouble are those who stretched to the limit to buy at the top."
Educate me.
The problem in the 90's (followed by the eighties) came when those that purchased were "stretched to the limit" when the bottome fell out of everything. They lost everything.
You say we are at the same period of 1988. That is scary. Are the 90's going to follow?
Our economy is a little better now because of the IRAQ war. What happens if the war stops and there is another recession. The cycle will come back around. Those who can not afford the situation they are in will lose, like the yuppies in the 90's. Remember also, it was the housing market (2000's sales) that was also helping the slumping economy. This does not look good.
There is nothing good about a bubble bursting. There is nothing good about people not being able to buy over priced homes. It could be a signal of something else.
I gotta tell ya, unless my parents were filthy rich, like Spelling rich, I would have a lot of trouble taking that amount of money from them. I guess I'd rather they spend it on vacations or something.
Maybe I would be saying something otherwise if they were super rich. I dunno. Or maybe I'm stubborn or just stupid.
To answer mihow, my spouse and I could buy our apartment 3 years ago only because my father-in-law died. The inheritance was the 70K we needed for a down payment on our coop.
Yes, it's messed up when professionals with decent incomes (ours was just over 100K), steady jobs, and good credit are unable to buy a home. We were in our 30s and 40s, and had some savings but nowhere near 70 grand, when the inheritance came. The monthly mortgage + maintenance is actually less than our rent was. If my father-in law were still alive, we'd still be renting.
Spike, thanks for that information. I imagine that happens quite a bit as well.
WT is exactly right, and thus the reason I'm waiting. If nobody can afford to buy at these prices - and there is always a finite end to the insanity (see Nasdaq index circa 2001, Google tulipmania) - sellers will be forced to lower their asking prices. It's already happening across the country.
We have already seen the future: ask anyone who bought real estate in the metro area in the late 80s what that was like and you'll start to understand what the next few years will look like for real estate in New York. Only worse, I imagine.
If you're contemplating buying: wait. You're better off renting - even if you have nothing tangible to show for it - until the bubble bursts.
The amazing thing is that we might not have even hit the apex in NYC yet. I see realtors still stretching asking prices, crazy prices still being paid, and all sorts of accounting tricks and incentives being offered to buyers in an effort to keep today's housing prices falsely inflated: rebates, offers by the seller to pay the buyer's real estate taxes for the next year, free trips, cars, etc.
I also heard somewhere that a lot of the housing being thrown up by developers (at least in my hood, which is Greenpoint) was meant to be sold to own but is now being switched to rentals. I can't remember why this was but I do know that it has something to do with this bubble. Anyway, wondering if anyone else heard about this.
Ultimately, though, I just wouldn't pay that kind of money, even with a loan/grant from my parents, to live in the city and be subjected to its taxes, uneven public schools, small apartments, etc. I think it takes really looking at that amount of money in the face sometimes to make you realize why people move out to the suburbs. It's not that it's cheaper, it's that you get so much more (depending, of course, on your criteria).
Its nice to see the Census Bureau confirm what everyone expected.
This is obviously a bubble, the situation in NY just exaggerating the national housing bubble created a few years ago by the Fed. When incomes stagnate and housing costs continue to rise, eventually something will give. The bubble is already bursting in the exurbs and the deep red states, I will give it another year here and it will burst as well.
And if you rent, I would wait at least three years until buying, its taken that long for past housing collapses to hit trough.
Bloomberg isn't really to blame for this, but he is to blame for cheering it on and doing nothing to ameliorate the effects. The housing bubble is to Bloomberg's economic policies what the internet bubble was to Clinton's.
(There is nothing good about a bubble bursting.)
Sure there is. Young people can afford housing again. My kids might actually be able to live in Brooklyn. People can no longer screw their financial future by HELOCing fake equity and spending in on things they can't afford.
Some people believe that the housing bubble, and borrowing against inflated values, is the reason Americans have been able to spend six percent more than they have produced for the past forever. THAT can't go on forever. So consumption is going to have to fall, and that is going to be an economic hit.
But how much spending power is lost when instead of paying 28% of their income for the mortgage, people pay 50%? I've convinced that NY's local economy was weak through the late 1990s because all those who bought at the 1980s peak had no money for anything else! All that money was transferred to sellers who moved to Florida.
In Boston, job growth was weak through 2005 because businesses couldn't hire the young and families with children. High prices were choking them. They were leaving in droves. Now that the housing bubble has burst, other sectors are picking up.
I think it's high time Americans get the wake-up call that has been forthcoming for quite some time - the one about how reckless spending and borrowing habits will eventually catch up with you.
My generation (I'm in my 30s) will probably not see the kinds of retirement benefits that previous generations have enjoyed as a result of many things: insane governmental fiscal policies, irresponsible personal saving/spending habits, longer life spans, and probably most dangerous, out of whack expectations. It's going to be a hard pill to swallow for today's over-entitled, spoiled 30- or 40-something American to adjust to living more frugally. Social Security just isn't going to be there and even among my friends - most of whom are 6-figure income earners - IRAs aren't going to cut it. It's a little scary.
Back to the housing point: there's going to be some major short-term pain for those who got themselves involved with ARMs and are staring bankruptcy in the face. And yes, the overall economy will suffer as people realize they're not worth quite what the newspapers told them they were just a year ago and subsequent spending diminishes.
Those are good things, IMO; they force the issue of more responsible spending and more realistic expectations.
The Economist had a great article about debt recently. Yes, we are a bit irresponsible but it's not just our fault. The big guys keep giving it out! It seems they are becoming a little more cautious but still. Individuals don't know when to say when. I said the same thing on the saturated fat post, sometimes we need someone to step in and say enough is enough.
I do agree with you, Anonymass. We have lived irresponsibly.
Y'all remember lay away? I was thinking about that this morning. I remember my mother used to put things on lay away - things she couldn't afford - and in a month or maybe two, we'd have said item. Now, we just go in with our plastic and even if we don't have the money or see the money coming in the future we buy it. Things have changed. Does lay away even exist anymore?
I'm rambling. I really just wanted to bring up the term lay away.
Re: layaway, I read just last week that Wal-Mart is doing away with layaway.
You're right in that we are living in a world of limitless credit entitlement, of which we are reminded daily by credit card solicitations, refinance offers, personal loan offers, etc.
We're now seeing those who overreached with ARM mortgages being offered further credit extensions. How do we address reckless overspending? Offer these people even more debt.
The problem is that the constituency who ultimately pays the price for reckless living is the responsible segment of the population and, to an even larger extent, future generations.
These are the people who will end up paying for personal bankruptcies incurred today and the huge debts and deficits that our federal, state, and local governments engender.
One thing is for sure, having debt keeps us all working for people we wouldn't give the time of day to otherwise.
One thing I am conscious of is not providing a lifestyle for our kids, now that we are established, that they will not be able to afford when they start out. That's doing them no favor. We save up for the college instead. No AC, no cable, etc.
NY would be the best place in the world to live cheap, were it not for housing prices. Cheap food (just eat like the immigrants, and live longer too); cheap transport -- take the subway, walk or bike; lots of cheap and free entertainment; smaller housing units -- suburban zoning forces people to buy or rent more than they need. But the bubble has cancelled out all those advantages.
For now. But it won't last.
Other trends won't last either. There was a reaction against excess consumption 100 years ago at the onset of mass production, with arts and crafts era houses being smaller and with less stuff-clutter than what preceeded them.
Extrapolating the past decade, everyone would demand a new house the size of a hotel and drive a car the size of a bus. My guess is fewer, higher quality goods will be all the rage a few years from now. People will live with less and like it if they have to.
AHHHHHHH yes, I knew that census crap was worth something after all! They finally got something right, Housing is way to damn expensive in NY . I think they they were a little off in there conclusions here . It should have stated- "Housing prices in the city are to high due to poor workmenship, and general location of said property"! Obviously if your going to build in a poor neighborhood then you have to expect the market for that parcelled property will sell for less . That's the way it's suppose to be anyway, The problem here is that most buyers are into the property not to live their . They want to use it to make money off of (subleasing)which drives the rent through the roof due to the fact that people will pay whatever that landlord wants for it . This is a problem that will never really go away because money talks and the rest walks! Politics people !
Hello,
We are looking to get our website done through real estate web site design and was
wondering how much agents typically spend on pay-per-click marketing? We do not want to go over budget and the idea of paying per click scares us a little as we are a start-up company.
Has anyone realized significant ROI through PPC? Please advise. Thank you.