Renting

Dear Friends and Family,

While many people would give anything for an acre in Manhattan, most of us settle for an apartment with good light. Owning land, let alone an acre, is about as realistic as buying the Brooklyn Bridge. Today, first-time homebuyers are struggling to make sense of a market that has drastically changed from just three years ago. As I said in the WSJ, “There are a lot of steps to the purchasing process, and entry-level buyers can easily feel overwhelmed by the administrative needs required.”

Those difficulties have pushed many would-be buyers toward the rental market. Rental units are moving quickly; rental inventory is a fast-paced and competitive market. Recently, my team rented four units, ranging in price from $4,600 to $17,000 per month, with very limited time on the market.

Renting is the New Buying

As I discussed in last month's newsletter, mortgages play a critical role in real estate and homeownership. For decades now, the prevailing wisdom has been that owning a home is essential to building long-term and generational wealth. With mortgage rates recently at historic lows, more people had the opportunity to get a foothold in the market. While ownership over the long term is still beneficial, the current situation facing potential first-time buyers has changed drastically. Rentals have become more attractive, as high home prices and elevated mortgage rates price out potential buyers.

No Yard to Mow

An oft-cited reason for renting—and a considerable one—is practicality. Unexpected home issues can be both frustrating and expensive. With no landlord to call for help, small problems, such as a water leak, can lead to larger ones. This is especially true in older properties that were not well-maintained. Meanwhile, surprises when renting, though unpleasant, often do not incur a financial cost. Additionally, the limited term of a lease provides the freedom to move out and up as incomes rise and job locations shift.

Breaking Even

When does it become cheaper to rent than buy? There is a threshold when the amount needed to purchase and finance breaks even with renting. There are many variables to calculate that breakeven point, from co-op fees to property taxes. When looking only at the numbers, it might surprise many people to learn that they are better off renting right now. It runs counter to the idea that most of us hold to be true, that buying is always better. Yet, that idea doesn’t consider different situations, which can change over time.

If you're curious about the right decision for you, it's best to seek advice from a trusted broker who can best consider all the options.

Sky Trophies

When thinking about rentals, most people think of starter apartments or rent-stabilized gems passed down from eccentric aunts, but the rental market spans all price points. Take for example the Penthouse at 100 Central Park that we rented last year. Monthly rent for the exquisitely designed home with sweeping views of the park and similar trophy properties outpace many first-time buyers' downpayments. With buildings offering condo-level amenities and features, the market for luxury rentals remains extremely competitive.

100 CENTRAL PARK SOUTH, PH

20% Threshold

Often the biggest challenge to home buying is the downpayment. In different areas of the country, first-time buyers might buy a home with 5% down, the median nationwide is 14.2%. Yet, in New York City, especially among co-ops, 20% is the minimum. Even high end rentals can be favorable compared to the capital needed to buy something. Saving for a downpayment, while perhaps a solid long-term goal, often requires sacrifice. Renting allows for mobility and flexibility.

40 EAST 80TH STREET, 25A

Life’s Lemons

As some of you might have seen on my Instagram, last month I came home to water pouring down from every light socket, pooling across my aparment floors. A mishap on an above floor trigged the sprinkler system, which drained all the way down to my unit. While I love my buidling and my apartment, I too have found myself in the (short-term) rental market while my apartment is repaired. Circumstances can change in an instant, and the flexibility of rentals are a necessary tool for maintaining a sense of "home."

What is correct for each person and family is different, and it changes over the years—or in my case, minutes. If you're curious about renting or buying, feel free to give me a call to discuss what might be the best option for you right now, and for the long-term.

All the best,

Toni Haber

Licensed Associate Real Estate Broker
Founder, Toni Haber Team | Private Client Advisors
TONI@compass.com | 917.543.1999