Well, if you buy a CONDO in this town, you can always rent it out and make money and actually use your home as an investment. If you buy a co-op, forget it. Chances are the co-op board won't let you rent it out... and then if you want to sell the place, the co-op board could reject potential buyers. I have a friend who recently had THREE different buyers, all with enough money, rejected by her co-op board.

Renting is just throwing money away.

Especially in this town.

I feel you Jim. What I get for my monthly rent is far more than I would get if I had to pay mortgage, RE taxes, etc. So, with no down payment, I get to live better than I would otherwise, and have a nice chunk of change left over to invest in liquid assets.

And many, especially here in NYC, are transients. If ownership makes sense, it only really does so after 15 or so years, as everyone keeps saying. Maybe my 'hood will go to shit, or for whatever million other reasons I may have to relocate. It's a hell of a lot harder to sell a house on the spot than break a lease.

like most decisions, buying property has almost nothing to do with logic and almost everything to do with emotion.

whats it worth to be master of your house? play your music as loud as you want, paint your apartment whatever color you want, have a bbq in your backyard, have whomever over, whenever, do whatever you want in your own space?

I think RE is overdone, but people will always pay a premium to own, its not just a place to live, its space you own, and that feels different than being a renter.

also most folks will lose money if they invest in themselves and very few would save the same way a making a mortgage payment makes them.

also location changes a lot. house in jersey city in 1980 25K. House in gowanus 25K. today the house in jersey is 300K. the house in gowanus is a million. rents in nj, maybe 1200. rent is gowanus is 2K. calculators cant predict this stuff. every piece of property is unique. calculators. logic. they'll mislead you when you comes to re.

Maybe if rent to own could become an option I would become interested, otherwise I will resist the American myth of homeownership for all. This was (and still is) a way to trap people into debt.

Uh, the default amount listed on the calculator is 34,400 as a down payment on a place to buy in NYC? How is that even possible?

You've always dreamed of living in Canarsie, right?

Congrats to Gothamist on breaking this one- this tool has been available on the nytimes site for at least 5 years :)

This tool is awesome because unlike most tools out there, it doesn't force you to assume every dollar you aren't paying into a mortgage is being blown on booze, and allows you to factor in condo maintenance, even the deductibility of the maintenance for taxes! Every quantitative factor that goes into buying a house that I can think of is accounted for.

It was brought up before- but I am not sure if the default settings for annual home value and rent increases are based on historical averages, which in my opinion are the most important factors. I searched for data on both for the NYC area, and came up empty (if you have real numbers, please share).

Another thing to note on this calculator is that the "lost opportunity cost" aka the rate of return you could have otherwise made on money you saved, is set to a very conservative 4% annually (its hidden in the advanced options). Adjusting that even a percentage point to 5% makes renting, at least in NYC look a lot more attractive.

I am fairly surprised the NYTimes real estate section would even create a tool that could possibly show renting is better. Maybe the rental brokerages are starting to advertise w/ them? Just as an FYI, with 20% down, a 600k price with a 5.5% mtg and a $700/mo maintenance fee, and a 5% opportunity cost, 2% annual home appreciation and 3% rent appreciation, the tool reports back it never makes sense to buy. at 3 and 4% for appreciation, the breakeven is 15 years.

Ah I forgot to mention the rent I input was $2500/mo.

You are absolutely right -- the average American has no concept of opportunity cost (or time value of money) and believes the only way to build savings is through home ownership because that is what the government and the real estate industry tells them. Unfortunately, at a macro level it results in ridiculous over investment in residential assets (hey, why stop at one home, when I can have a second or third?) and underinvestment in real, productive assets like roads, schools, corporate R&D, manufacturing facilities (through stocks, bonds).

In the long run, it will always make more sense to buy than rent. I just went into contract for a small space in Midtown and when looking out over 20 years, my current stabilized rent will exceed the mortgage and maintenance by more than $1000 a month. That's before taking into consideration tax deductions and equity. If I stay a renter, I will eventually be priced out and have to leave the city due to housing costs... But as an owner I can likely pay the mortgage off by retirement and then I will only have maintenance. No brainer.

If I I take your 20% down payment and invest it in the stock market at 8% rate of return, it'll be worth as much as your entire apartment in 20 years.

Not really. Sure, in NY that may have been that case (and maybe still could be the case), but if you look at historical housing price data, it is usually closely correlated with the CPI. Only staring around 2000 do housing price start to shoot up.

http://www.marketoracle.co.uk/images/2009/June/housing-prices.gif

http://www.debtdeflation.com/blogs/wp-content/uploads/2008/10/IMG0004_14611312.PNG

In general, houses cost money. The only way your house could even keep up with the CPI is if you spent money maintaining it. You had o update the appliances, fix broken pipes, paint, etc. The real benefit of buying a property is not as a monetary gaining investment, but in the sense that you are paying rent to yourself. After 30 years when you pay off your mortgage you can live rent-free and retire. So there is a benefit to owning, but it's not necessarily monetary gain from rising housing prices.

Interesting.

Well, that's just fantastic! Now can someone please create a calculator that will tell me how in the heck anyone with a normal job is supposed to save for a down payment while also paying the inflated rent it costs to live in this city? That would be great! Grrrrr.

You're welcome to go find cheaper rent and homes in the midwest - your salary will decrease proportionately.

People making an average of $8-10/hr in Alabama are asking the same questions.

The problem isn't limited to New York City.

Completely untrue. People in Alabama making that much already own their home on wheels.

I think you mean blocks.

Actually price to income ratios are also higher in New York / West Coast. The average home is 2-3x in NYC vs the Midwest, but salaries are probably 1.5-2x.

That's probably the case for some industries, but I can tell you with absolute authority that my Director of Sales position in the industry in which I work pays the exact same amount here, if not less, than it does in other cities in this country.

And, thanks, Buttface for your incredibly original offer for me to move to the Midwest. As hospitable as it was, I believe I'll pass. Perhaps it is a 'catch 22' situation about which no one should complain, but I'm sure you've had a moments of disillusion as well. If not, then you're a lucky man.