The eternal question of the real estate market: what should you do when getting a new apartment? Should you buy that beautiful condo in NYC for $1 million dollars, and risk losing all your money when the housing market crashes again or Lindsay Lohan moves in next to you? Or do you rent, and inexplicably get kicked out of your apartment two months later for bringing pets into your apartment? Well, the folks over at Reuters have done the research, and your consensus is coming up, after the jump.
Rent or Buy? The Eternal Question in NYC
In order to determine which option is economically more feasible, we're comparing the average monthly mortgage payment to the average monthly rental price. Obviously, this is about as rough an estimate of current market conditions as you can get without using sandpaper, but it serves as a good measure to compare not only renting and buying, but the market in different cities as a whole.
If the rental prices are higher than the mortgage price, and you're looking to stay put for over 5 years, it's usually a better idea to just buy the house and pay off the mortgage; you'll spend less not only in the long run, but in the short run as well. However, if you don't plan on living in an apartment for the next decade, a rental price that is cheaper than the mortgage is generally an easier solution.
Here's the graph comparing U.S. mortgage and rental prices, as well as Manhattan mortgage and rental prices.
As you can see, for the entire U.S. as a whole, it's recently become just a little bit cheaper to buy a house and pay the mortgage than it is to rent an apartment. Consequently, we'd suggest that in most places in the country, you might as well go buy the house if you're looking for a long-term relationship with your building; it'll save you money both in the short and long run.
Manhattan is another matter. Firstly, as you can see, our home rental prices range from THREE TO FOUR TIMES the national average. The prices we pay for being connected, busy socialites....
Secondly, it's clearly still a much cheaper idea to rent, not to buy, even though the gap has shrunk dramatically since that recession that blew by a few years past. With average mortgage payments hovering around $3700 and average rental prices around $3000, it doesn't make much sense buying if you're only planning on staying in Manhattan for a few years. Also, with the housing market as unstable as it is now, you might not want to make that long term investment until you're sure of a future return.
Therefore, our consensus? If you're living in Manhattan and are looking for an apartment, we're going to recommend with reservations that you: