Friday, October 17, 2008

Renting vs. Owning (part 2 of 2)

In Renting vs. Owning part 1, I referenced a Wise Bread article that reminded us that buying real estate is not (by default) the solid investment your mom and dad may have told you it was. However, done correctly, it can be a great vehicle for creating equity. In the state of our economy and the current housing debacle we're in, those of us who would like to own could be hearing opporunity knock in the next year.

CNN Money recently ran an interesting article titled "Manhattan real estate prices headed downward". It says that the average price of an apartment in Manhattan has not dropped (yet) but the number of buyers is certainly thinning out. For the past several years, JC and I have watched real estate sites for a 2-bedroom apartment (within a certain price range) in the upper west or upper east side. A year ago it was a laughable idea that anything might come up, though now that same search is yielding results. Since we're bringing in so much less income than a year ago, that price range is even more outlandish for us, but it's still encouraging and helps keep the dream alive. Manhattan real estate has historically been a safe investment, and this was the first I'd ever heard of prices dropping here.

One thought that keeps coming back to me in the past few months is, "has Manhattan seen it's heyday?" Giuliani did a lot to clean up the town. When I came here in 1995, it was already starting to change for the better. I vaguely remember "old times square" and its strips of closed theaters whose marqees told a story as you walked across 42nd street. Now, it's a Disney wonderland and filled with tourists willing to drop massive amounts of cash at Toys R Us, pop-music derived musicals and high-priced chain restaurants. My neighborhood has forced out a lot of smaller shops with gourmet chocolate shops, luxury apartment buildings, and banks at every corner. If the economy should slow down any more, there will be no one to shop at this red-carpet mall that NY is turning into. With a failing economy, crime will also resurface. I don't think we're in for an immediate return to 1970's NYC, but I also don't know how we'll fare in the wake of financial turmoil now that we've gotten rid of the little shops that are able to survive in tough times.

Even with Manhattan's financial future in limbo, we would like our next move to be to a home that we own rather than rent. Since our current financial situation is still new to us, our ability (or inability) to stay in the black will influence our chances of affording a home. Of course, if the market should turn suddenly upwards, our ability to afford staying in our safe nabe could be a moot point anyway.

1 comment:

I. M. Bitter said...

Good luck with your plans to eventually buy!!

I often wonder how people can afford to live in the City (they must all be brokers lol), especially when you take into account how rents have soared (along with the cost of buying) but wages have not.

I think (hope) that there will eventually be a correction, but I'm not sure when it will come or how far it will go.