Very often, I am asked if now is the right time to buy.My answer is always the same. Maybe. Obviously everyone’s situation is different and if you are in 2 bedroom West Village rent stabilized apartment ala Monica and Rachel of Friends then now is probably NOT the right time to buy a Manhattan condo or co-op. But assuming you are renting a market rate apartment, making your first purchase of a Manhattan pad makes perfect sense. Here are a couple of reasons to pull the trigger now.
Reason 1- As far as interest rates, they will rise. The cost of financing is not getting any lower then it is right now. A $1 million mortgage at 4% will cost you $4800 but when that rate goes up 1%, now you will pay over $5,400 just for the mortgage.
Reason 2- In the last boom there were almost zero starter apartments built. Developers went after the super luxury buyer and larger ignored the first time buyer. So as a result, inventory under $2 million still remains low. So while the super luxury market is over supplied and likely to not appreciate until the excess is absorbed, starter homes are in a totally different category.
Reason 3- When you rent you lose money, whereas when you purchase you build equity and it is a forced savings. If you took out a $1 million mortgage today, by Feb 2027 you will have paid down $215,000 of it. In addition, the property will appreciate. Conservatively, let’s say a $1,250,000 property goes up 2.5% per year, that means the property will be worth $1.6 million in 10 years. So conservatively, you will have $565k in appreciation plus mortgage paid down. Not bad. If you rent that same apartment, you will pay approximately $3500 today and even if you paid that same amount for the entire 10 years (which you will not) then you will waste $420,000. That gives a net difference of nearly $1 million! ($565k positive if you buy $420k negative if you rent)
Reason 4- There is an interest deduction as well. Most of you what you pay in the beginning is interest so as a result, you get a deduction. When you rent you get zip.
Having said all of that, some purchases may more sense than others, so do your homework. Get a streeteasy account so you can see not only current listings but selling prices. Generally, streeteasy is more reliable than other listing sites especially for Manhattan. Find a skilled broker who can advise you on apartments and help navigate a process that can be very confusing at times.
There is certainly a lot to do when you are arranging your first purchase of a Manhattan condo or co-op but long term it will be worth it !