For many city families, especially those with young children, the question of where to live is not merely a matter of lifestyle. It’s often the single most important financial decision they will make. And underpinning all of their considerations—what neighborhood to live in, what size living space they need, what amenities are a must, what the nearby schools are like—is the often bedeviling question of whether to rent or buy.
With so many real estate options around the city, and so much swirling around the news about the economy, the task can become overwhelming if you’re not prepared. The good news is that city families tend to become informed real estate shoppers. “I think the market has changed in that people are more educated now than ever before,” says Laurie Zucker, a Principal at Manhattan Skyline, a developer and real estate management company that has both rental and condo properties. “I think they do a lot of homework.”
If that sounds like you, then think of this story as extra credit. We asked a number of well-regarded figures in local real estate for their take on the market, along with their advice for families. Hopefully, it’ll help you clarify your own ideas and inclinations.
“Rents are rising,” says Jonathan Miller, President and CEO of Miller Samuel, a real estate appraisal and consulting firm. “The rental market is at or near historic highs.”
David Stern, the Downtown Leasing Manager for Glenwood—the luxury residential development and property management company—echoes Miller’s claims. “Rents have been going up, [although] I think seasonally now we’ll see them level off,” Stern says. “Inventory is [low]. And I think people are waiting to see what the sales market does [while] staying with rentals.”
With rents rising and mortgages rates at a low, some families might prefer buying a home because the mortgage payments may actually be lower than monthly rent. Unfortunately, many buying hopefuls simply don’t qualify financially, and mortgage qualification can be unattainable. These families must continue to rent.
The big picture?
Perhaps not surprisingly, New York City seems to have swung to a “middle zone,” says Miller, where both buying and renting are common. The current market reminds him of a game show, in which a bank chooses between two doors. Behind door number one, the bank can borrow from the federal government at low rates and participate minimally in mortgage lending. Behind door number two, the bank can lend to a home-buying family for, say, 30 years at historically low mortgage rates. Of course, door number two is less favorable to banks, which means that they make buyers jump through a lot of hoops to obtain mortgages.
Which may, of course, drive buyers back to the rent market.
Buy & Sale Markets
Another aspect to consider is the market for selling. A family who already owns and would like to upgrade first needs to know if their condo sale is feasible.
Right now, Jonathan Miller of Miller Samuel says, “There’s no urgency to sell.” According to him, if a family would be putting themselves under water post-sale, it’s not the time to do it. Common sense rules the day. If the condo isn’t currently worth what they once paid for it, chances are they can’t afford to sell.
But Sofia Song, Vice President of Research at StreetEasy, thinks that a person wanting to sell right now is probably in a favorable position. With inventory shrinking—and continuing to shrink—certain property types are desirable and are getting bought up quickly. If a person knows they’re in a popular area or have a beautiful property, they can be relatively confident it will sell.
Laurie Zucker from Manhattan Skyline sees the current climate as favorable to both buyer and seller. “In a way, it’s a buyer’s market because mortgage rates are so low,” she says. “But [it’s also a seller’s market] because there’s very little on the market. Because there is so little product, the prices have really held high. It’s an interesting time.”
With the family perspective in mind, Diane Ramirez, President of Halstead Property, a leading real estate brokerage firm in New York, assessed some of the city’s most popular family neighborhoods for us. As she sees it, the Upper West Side is a very tight sale market, while the Upper East Side is looking a bit flatter. Larger sized post-war condos are selling at lower prices than pre-war ones in the Upper East Side, but all apartments are highly sought-after. This is, in part, due to the collection of public and private schools in the area.
Looking at other neighborhoods around the city, Zucker reports that the Flatiron district is becoming more appealing, based on her experience thus far with The Story House—a new condo development in the area. “The neighborhood has definitely become more family friendly,” she says, adding, “The Murray Hill area will probably be the next up and coming area for young families.”
Our experts also indicate that downtown neighborhoods (the Financial District in particular) are becoming more popular for younger families, especially as the area begins to make headway in addressing its perennial shortage of school space.
To be sure, the competitive inventory in both the buy and rent markets make it increasingly difficult for many city families as they grow in number and their square-footage needs increase (so to speak). But if you’re going to sell, just be aware that trading up is not that easy right now, and you may end up having to rent.
What The Future Holds
In the buying market, the median two-bedroom, two-bathroom condo final sale price in Manhattan was recently $1,547,500 (July, August, and September), which is almost a 12% increase from the third quarter in 2009, according to Sofia Song at StreetEasy. In the rental market, the same type of living space was a median price of $5,872/month in summer 2012—also almost a 12% increase from the third quarter in 2009. It’s clear—prices have been going up on both fronts. But what does the future hold?
Looking at the entire real estate market, Miller sees this middle ground of equal buys to rents remaining for another year or two; however, he forecasts more buying in the future. “I see the next five to ten years of homeownership rates expanding as credit eases and people can make the transition from rent to buy,” he says.
On selling, Ramirez believes the average seller won’t be able to profit hugely off the sale of a current condo to use towards a new one right now—and that we probably won’t return to the pre-bubble days when you can trade up any time soon.
Accordingly, David Stern at Glenwood sees the value in renting. “Families are able to hold on to the money that they would otherwise use towards a down payment. I think people like to have that extra money. [And] I think people like the flexibility of renting,” he says. “In the next year, I still think that rents are going to hold where they are.”
The monthly sums that come with renting make for a much more liquid situation, Song adds. The worry of a layoff or life’s other financial surprises aren’t so threatening.
However, a rental isn’t the same as a home, and, given the option, many families would still like to nourish a co-op or condo because it’s a longer-term commitment and investment.
“To me, it’s about where you are at in your life,” Ramirez says. “If [buying a condo] is something you think will work for your family for at least five years, then I think it’s absolutely the right time.”
But regardless of what you ultimately decide, doing your research is key to a successful apartment search. “I think StreetEasy is a great resource, [as is] the New York Times. I think you can do a lot of searching online, but you do have to get out there and look at the product,” Zucker recommends. “DNAinfo is a great resource for neighborhood-centric information. And word-of-mouth is very big.”
That being said, talk to your friends and family and anyone else you may know who’s been in the market recently. But don’t let their experience dictate your own choices too much. Do your homework as thoroughly as possible to help you make the right decision for your family.
Now & Then: 2-Bedroom Prices
Median Condo Sale Prices
Median Apartment Rental Prices
|Upper East Side||2009: $1,400,000
|Upper East Side||2009: $5,250
|Upper West Side||2009: $1,589,043
|Upper West Side||2009: $5,300
Courtesy of StreetEasy