My Rant: real estate, the middle class, and the "next" neighborhoods. (apartments, insurance)

[NYCexpat]

I think this rant is a bit naive. The real estate price appreciation has been happening all over the 'hot' metropolitain areas in this country. I'm currently in the SF bay area, and am coming back to NYC, partially b/c, yes it is less expensive in NYC than out here in the cultural wasteland called San Jose.
Track homes, and 2-br condo's in sterile developments start at $500k here and then go up. Median home price here is $650k. Now Manhattan is no better, but like others on this board have stated, there are some fine, actually wonderful neighborhoods in NY that are actually middle class.
My point is that to specify the problems facing the middle class these days is not so localized. Unfortunately, the middle class are being left out of the 'american dream' all across the nation.

[mead]

I don't want to crush your hopes, but I think the prices are pretty much the same in the outerboroughs.

However I believe the rent is much cheaper over here than out in the SF bay area. You can easily find a 1 br in nice neighborhoods in the outerboroughs for around $1,000 - $1,200.

Originally Posted by NYCexpat

I think this rant is a bit naive. The real estate price appreciation has been happening all over the 'hot' metropolitain areas in this country. I'm currently in the SF bay area, and am coming back to NYC, partially b/c, yes it is less expensive in NYC than out here in the cultural wasteland called San Jose.
Track homes, and 2-br condo's in sterile developments start at $500k here and then go up. Median home price here is $650k. Now Manhattan is no better, but like others on this board have stated, there are some fine, actually wonderful neighborhoods in NY that are actually middle class.
My point is that to specify the problems facing the middle class these days is not so localized. Unfortunately, the middle class are being left out of the 'american dream' all across the nation.

[holden125]

Originally Posted by NYCexpat

I think this rant is a bit naive. The real estate price appreciation has been happening all over the 'hot' metropolitain areas in this country.

My point is that to specify the problems facing the middle class these days is not so localized. Unfortunately, the middle class are being left out of the 'american dream' all across the nation.

This is true and not true. It is true for the "'hot' metropolitan areas," but roughly speaking I'd put that as NY, Boston, DC, LA, SF, and to a lesser extent Chicago. Tier 2 would be Seattle, Portland, Denver, Minneapolis, and Miami. The rest of the country is still cheap housing land, which is why you've seen so many people heading off to North Carolina, Houston, Atlanta, and Phoenix. Nationwide, it's less of a pressing political matter because people in those areas just don't have the problem the way we have it here. Of course once I got out and saw more of the country I said that America was split into two categories: places I can't afford to live and places I wouldn't be caught dead living.

I was a little surprised to see this rant because last night we were discussing House Hunters on TV and Jeffcon seemed more sanguine about the high prices, but I agree that it's gotten ridiculous. Boston magazine had an article a couple of years ago about "What $1 million gets you in Boston" and it said that, while 10 years ago a million would get you an "uber-house" in a status location, today's buyers realize that for a mere million they might have to make do with a lousy kitchen or a questionable block. Something would have to give unless you had $1.5 million. They ended the story on the depressing note that, as crazy as that seemed, soon enough we'd be marveling that $2 million didn't buy much in Boston. I remember thinking that everything was so out of alignment with people's incomes that it was not sustainable and there are some signs now that I was right. The question is how much does it come down, and whether middle class incomes can start ticking upward to close the gap after remaining stagnant after inflation these past few years?

[Guywithacause]

Prices will come down..but it will not make areas more affordable..it will only make areas slightly less unaffordable...there's a difference. So long as there is a huge amount of cheap land/housing in this country (and about 80% of it is), the movement of people out of higher areas to less expensive areas will continue...making room for an even more moneyed crowd...which is what you are seeing in places like NYC, Boston, SF etc.

I agree with the great disconnect of prices, however what I see is that there are plenty of high income people to occupy the few prized location (SF, NYC etc)...so prices may come down...but is a $900,000 home more affordable than a $1,000,000 (10% drop)..nope...it is just slightly less unaffordable. And you can bet that the $900,000 "drop" will only last for so long before the next ridiculous run up.

[jeffcon0]

NYCExpat:
I agree that home prices in the bay area re insane but I still think a comparable in NYC is just as bad if not worse. I would argue that purchasing a row house in a desirable SF neighborhood would still be less than a comparable one in a desirable Manhattan neighborhood. I also believe that NY has more options if you re willing to look off the beaten path. A non-descript (in my opinion) area like San Jose is much more over priced than a comparable area in an outer borough of NYC. My cousin just bought a two bedroom, very "blah" condo in a 1970's two story condo development in San Jose for $450k. And he bought it only a few months ago which seems to me very bad market timing.

Holden:
I can see how I may have showed two opposing viewpoints in the HGTV thread. I think my feeling was more along the line of just not even caring anymore if a bunch of wealthy people want to speculate on real estate. I accept that there are plenty who make far more than me and I'm deeply confused by the places which they choose to drop $1MM but nonetheless I am not bitter about it. I wish I got in when I could buy a studio in Fort Greene 10 years ago for $60k but I was a college student and I didn't have the money. I don't hold it against those who can now buy in at the top of the market (though I have to wonder how long prices can stay that high). I think most of these neighborhoods are permanently out of reach for most of us and it just means the middle class will move elsewhere as they did when they started moving from Manhattan to Brooklyn. I constantly hear from my friends who have moved to places in Queens that "it's nice but there is nothing to do here". When the middle class could afford places like Park Slope 15 years ago there was also not much to do there. The migration has already started away from these areas. Rather than the middle class sulking about being priced out they are moving on.

[jjbradleynyc]

I do think prices are way-inflated in Manhattan and all over the city in general. What people should worry about is the resale value, especially in the new condos. Way too many condos are being built, while they all resemble the same model (cookie-cutter). We have a building that has sat stagnant (actually 2 now), and has not gone forward, due to overpricing and little interest. I hope this real estate "glut" and slow-down causes some developers to have a serious wake-up call.

[holden125]

Originally Posted by jeffcon0

Holden:
I can see how I may have showed two opposing viewpoints in the HGTV thread. I think my feeling was more along the line of just not even caring anymore if a bunch of wealthy people want to speculate on real estate. I accept that there are plenty who make far more than me and I'm deeply confused by the places which they choose to drop $1MM but nonetheless I am not bitter about it. I wish I got in when I could buy a studio in Fort Greene 10 years ago for $60k but I was a college student and I didn't have the money. I don't hold it against those who can now buy in at the top of the market (though I have to wonder how long prices can stay that high). I think most of these neighborhoods are permanently out of reach for most of us and it just means the middle class will move elsewhere as they did when they started moving from Manhattan to Brooklyn. I constantly hear from my friends who have moved to places in Queens that "it's nice but there is nothing to do here". When the middle class could afford places like Park Slope 15 years ago there was also not much to do there. The migration has already started away from these areas. Rather than the middle class sulking about being priced out they are moving on.

Got it. I agree completely with your take because I'm in the same generation and have spent much of the last 10 years trying to figure out where I can make it work. I feel sorry for those who will lose their shirts, but for people like us a slowdown or downturn is long, long overdue.

As I indicated on the other thread, my problem is not "that there are plenty who make far more than me" but that everyone buying anything in the areas in which I wanted to live seemed to be paying at least twice what I could ever see myself affording, and they were all my age. My grandfather went as far as high school and worked for ConEd and he was miles ahead of me in terms of ability to buy real estate in Brooklyn. As you said, it's the extent to which spending 800K or $1MM became "normal" that bothered me. And it did make me somewhat bitter though I've learned to shrug it off.

I agree people who bought high won't want to come down in price, but in the Boston area what you're seeing is buyers holding off until they do, and an increase of homes on the market eventually forcing them to lower price or just not move. As you and guywithacause say, even if prices come down in the Village or Park Slope, they won't come down the 60-70% necessary to be affordable to average people.

So the search continues for the "next" areas. It seems people will look for the best balance of affordability, proximity, safety, amenities and aesthetics, with some correction for perceived safety issues and borough bias. I'd therefore say that places like Bay Ridge and Midwood are on deck, with parts of Queens as well. Much of the Bronx will be slower because of real/perceived crime issues and because Bay Ridge is closer to lower Manhattan and will draw those working there.

On the side, I keep my cocktails well into single digits but to some people I know $11 is a Miller Lite. It's more like $18 cocktails these days.

[scatman]

Housing, as we all know, is always dictated by the market, or supply and demand. People (the demanders) will go to areas most affordable. The sellers, seeing increasing demand, will attempt to max out and inch the prices up. Also, consider other factors that are driving the prices up in New York, such as vacancy rates, running out of land and New York's construction costs. (can we call these externalities?).

Having said that, I and a few others I know recently made a move to the Bronx. The people that I spoke to all said the same thing....it's the last affordable borough! I moved to the Bronx after 15 years in Park Slope. There were people who thought I was crazy. However, there were others who knew better, and see reasons and see the vision. Will the Bronx be gentrified in 15 years? I don't think so. But will prices go up in that same time, you bet!

Two things I realized about homebuying: 1) Be open. Consider neighborhoods you normally wouldn't look at. It doesn't hurt to look. By being open, surprises may be in store; 2) Prepare for tradeoffs. Whether it is a longer commute, different taxes, different neighbors, different house than before, different cost of living, or required car; one has to consider the fact that they are in a new environment. Remember, opportunities are seldom perfect. Once those two factors are considered, homebuying becomes much easier.

[holden125]

Originally Posted by scatman

Two things I realized about homebuying: 1) Be open. Consider neighborhoods you normally wouldn't look at. It doesn't hurt to look. By being open, surprises may be in store; 2) Prepare for tradeoffs. Whether it is a longer commute, different taxes, different neighbors, different house than before, different cost of living, or required car; one has to consider the fact that they are in a new environment. Remember, opportunities are seldome perfect. Once those two factors are considered, homebuying becomes much easier.

100% true.

[Guywithacause]

If you seek affordability, diverse housing stock, growing amenities, lots of parkland, short commute to the city, and good upside potential, the Bronx remains the best bet...it is currently in transition...those that had the vision to buy in areas 10-15 years ago that basically sucked are those that are reaping the rewards now and buying places for top dollar and driving up prices for everyone else. Depends on what is important to you, and whether you are in the city for the long haul....but clearly the Bronx is it...my 2 cents.