<p>With inflation?</p>
<p>Or is it better to own houses?</p>
<p>I am talking about cities like SF and NY.</p>
<p>I know this is a weird question considering what real estate is doing these days, but I am trying to look at the future.</p>
<p>A friend of mine wants to sell his house in the suburbs and buy a condo in SF or Manhattan, but he is a little worried that condo prices won’t keep up with inflation like housing will.</p>
<p>Thoughts?</p>
<p>We’re currently seeing a move from the suburbs back to the city - this trend has been in play for a while. I think your friend needs to figure out what the trend is going forward. Will the movement into cities continue or will it change and go back out to the suburbs as those moving to the city get older and have kids and want better schools?</p>
<p>I would think that prices would be on par with single family homes. It just gets a bit more complicated when dealing with homeowners’ associations.</p>
<p>
Why would your friend care as long as they don’t plan to sell it? Are they doing it as an investment or as a place to live in retirement?</p>
<p>I am not sure wage growth for most Americans will allow home prices to rise significantly. We were discussing the stress on the middle class and what our kids face and we had almost universal agreement that our spouses having careers hid stagnant wage growth for families. Now that 2 income families are the norm for a generation flat wages will not be hidden. I expect big ticket items, houses cars etc will have to account for that.</p>
<p>he needs to keep in mind how much the monthly fees are to live in NYC. NYC has been pretty decent with the market from my understanding - a buddy of mine bought an apartment there about 8 years ago and he just sold it last year for a profit - but he also had 900 a month in 'building fee’s. Mind you this was in a very good area of town.</p>
<p>It is called maintenance. A condo would have tax and maintenance fees. Properties in Manhattan would hold up in values better than single family homes outside of NYC. NYC gets a lot of foreign investors, so when Americans couldn’t afford to buy, there are still other buyers. </p>
<p>Unless your friend is extremely wealthy, he is not going to be buying a townhounse in NYC. It will either be a condo or a coop. On average, maintenance plus taxe for a 1000-1500 sqr ft apartment will be around 2000-2500/month. If he is considering a coop, he should make sure it’s not a land lease property, or pay a lot less for it.</p>
<p>We just moved back into NYC and decided not to buy because we want to wait to see a bit. We are renting until we know for sure where we want to live and see if prices would go down more.</p>
<p>streeteasy dot com is a good site to do his/her research for NYC.</p>
<p>I don’t know why I wrote townhouse. Maybe because I live in one.</p>
<p>He wants one floor.</p>
<p>My friend wants some inflation protection, just in case inflation picks up. He might not move for 10, 20, 30 years.</p>
<p>SF is more likely than Manhattan, but Manhattan is not out of the question.</p>
<p>I have never understood why it is so expensive to live in NYC. Although there are plenty of exceptions, most of the condos (they call them apartments even though they are individually owned and not rented) I have seen are very small, poorly maintained and noisy. It is simply amazing how little you get for so much money. I have to wonder if things would be different without rent control in NYC.</p>
<p>There are very few rent controlled apartments in NYC now. Rent controlled apartments are not condos. </p>
<p>The reason NYC is so expensive is because demand is much higher than supply. </p>
<p>One bedroom is ~800-1mill, two bedrooms 1-2 mill depending on the condition of the apartment and the board. Some coop boards want 50+% down, which makes it very hard for re-sale, and they want 1+years of mortgage and maitenance in cash.</p>
<p>3 bedrooms run 2 million to 40 million?</p>
<p>We’ve recently learned that Condo loans can take longer than home loans. We have several mortgages (one on our primary home and others for rentals), but we are buying a condo for a secondary home in another location that we frequent. Oh my. We had no idea that things had changed so much regarding condo loans (we have another condo in Calif, but that was bought in 1988…escrow was uneventful.) Based on prior house-buying experiences, we expected that we would close on this condo beginning of July, but were quickly corrected by our lender. We are closing this Friday…which our lender said was QUICK for a condo loan…based on her other condo loans, she thought we’d close later in August. ???</p>
<p>The loan isn’t even for very much…less than $100k…big down payment. What the heck??? We almost said screw it, we’ll just pay cash, but we’re building another home and didn’t want to tie up more cash. </p>
<p>I guess there were just too many people walking away from Condo loans??? Ok, I get that, but with a large down, shouldn’t that allay such fears???</p>
<p>I don’t remember all the jargon that our lender used, but something about condo loan pkgs get sent somewhere, then yours is put in some long queue behind all the others that are being processed. And, something about very few underwriters for condo loans. (I’m not sure if I’m using the right wording… I was too stunned at the time she was talking.) And, this isn’t in an area that has property selling issues. </p>
<p>That said, we’ll welcome some inflation of condo prices. 
We bought it for about $38k under market, but would welcome it becoming a better deal. lol</p>
<p>If your friend will be paying cash, then he won’t have loan issues. Then again, if he is taking out a mortgage, maybe condo loans for SF and NYC condos are more quickly had.</p>
<p>*3 bedrooms run 2 million to 40 million?
*</p>
<p>ok…yikes…I’m not in that ballpark…not even anywhere in that stadium. My situation was well below 7 figures.</p>
<p>Oh and yes, they want to see a years worth of payments…not a problem since - again- I’m not in THAT ballpark.</p>
<p>Financing is very difficult to get these days. I guess your experience, mom2collegekids, is a good example of this.</p>
<p>My friend is going to sell his house and use the proceeds to buy a condo, so no loans.
But maybe there are lurkers out here that are interested in this issue and would use loans.</p>
<p>If your friend is in the 40mill club then he could buy a townhouse.</p>
<p>The problem in NYC now is that people who bought 3+ years ago can’t get out without taking a loss, so some prices are still unrealistic. Since the MBS crash, banks are not giving out very many loans (coop or condo) in NYC. Most selllers are not willing to deal with anyone who needs a mortgage. Recently we were shopping for a new bank to have relationship with, the first thing they said to us was they could get us a mortgage if we need it as a big selling point.</p>
<p>I just threw the 40 million in for my information.</p>
<p>We are really talking 2 to 3 million…which is a lot of money.</p>
<p>Maybe you can’t get a nice 3 bedroom for 3 million which means Manhattan is out.</p>
<p>“The problem in NYC now is that people who bought 3+ years ago can’t get out without taking a loss, so some prices are still unrealistic. Since the MBS crash, banks are not giving out very many loans (coop or condo) in NYC. Most selllers are not willing to deal with anyone who needs a mortgage”</p>
<p>Very interesting.</p>
<p>Thanks.</p>
<p>Your friend could get a nice 3 bedroom apartment for 3 mill. I would strongly suggest for him/her to get a condo, not a coop.</p>
<p>Most people said we have hit near bottom in NYC.</p>
<p>Condo prices in Boston have risen. Part of that is lack of supply, both from limited new building and from people not selling. </p>
<p>But the basic question is why hard assets would do well in inflationary times. The answer is not mechanical and partly depends on why the inflation occurs. </p>
<p>Say the inflation is cost-push, such as when OPEC stopped oil shipments. Imagine, for example, an Iranian / Saudi war. Oil prices would skyrocket and that would push up costs and then prices throughout the supply system. If interest rates then go up - to suppress the inflation - we see a drop in demand. Note I said “if”; cost inflation can drive down demand so much that interest rates drop to stimulate the economy in a rough time - assuming we’re not like now at near 0 rates. If interest rates drop, then hard assets like housing become very attractive. If they go up in response to cost inflation, then real estate is less affordable.</p>
<p>If inflation is caused by excess demand, which isn’t coupled to the money supply, then a lot of course depends on the individual market’s supply restrictions. It’s much harder to build in SF or NYC so there is excess demand and prices rise toward the limit of what the more affluent component of the demand can afford. Sometimes inflation is driven by odd factors. Capital flowing out of Latin America and out of the far East has driven prices in some markets.</p>
<p>If inflation is driven by excess money, then it’s more generalized and the rise in asset values is more of a mirage because everything has been affected. It’s more a nominal than a real increase. Real estate has sometimes exceeded money supply inflation, meaning there is a real increase when you remove inflation, but not always and then you have to look at each individual market to see. This is what people tend to think of when you say “inflation” and “real estate” even when they actually mean supply and demand factors for that particular market.</p>
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<p>Maybe I should have said rent stabilized or some other phrase. It looks like only 39 percent of NYC rental units are not affected by some rent regulation. If this is correct, then it may be the case that fewer rental units are coming into the market because the price for them is restrained. </p>
<p><a href=“http://furmancenter.org/files/publications/HVS_Rent_Stabilization_fact_sheet_FINAL.pdf[/url]”>http://furmancenter.org/files/publications/HVS_Rent_Stabilization_fact_sheet_FINAL.pdf</a></p>
<p>Oldfort, thanks.</p>
<p>Lergnom, that is a very good post.</p>
<p>My friend wants to protect himself from hyper inflation. Not that hyper inflation is going to happen, but if it does, he wants his real estate covered. He is a little worried because condos used to have a reputation of not having the price appreciation that houses have.
I don’t think this is really true in NY, SF, maybe Boston. I don’t know Boston that well, and he isn’t moving to Boston.</p>
<p>The money supply is growing 8.5 percent year over year, but the velocity of money has
fallen so we are not seeing inflation at anywhere near those levels. Someday, the velocity of money will increase And once the velocity starts increasing, inflation could become a real concern. Could.</p>
<p>Anyway, I am curious on the condo vs home debate as far as price appreciation goes.</p>
<p>The townhouse I live in did not drop in price as much as homes in the surrounding area, but I would bet if inflation started rising at a 5 percent clip, the townhouse won’t see the price increases the surrounding homes will see.</p>