Renting vs. Buying in NYC
Many New Yorkers are recently facing this serious question; “Should I buy or should I rent?” While there is no simple answer, there are a series of steps you can take, before feeling confident you have made the right choice. Currently, in the Manhattan real estate market there is low rent vacancy (under 1%), therefore, with a low supply of apartments, landlords can charge much higher rents. If you want to avoid paying these high rents and if you have the means, buying seems favorable. In combination with historically low interest rates, this would entice most people to seriously consider buying. Along with the low interest rates, there is a very low inventory of apartments for sale currently in Manhattan, which causes an influx bidding wars.
With property prices significantly lower from the housing boom and these low interest rates, it is an optimal time to buy. However, you should always consider your current stage in life; think about if you should be making a huge commitment to buy an apartment.
There are a few calculations to make before you decide to continue renting or buying.The first step is to calculate your rent ratio. A rent ratio shows the average
home price divided by the annual rent. Higher numbers mean that home values are high, relative to the cost of renting’. If you do indeed calculate a rent ratio below 15, safest bet is to buy. A good rule of thumb: if your ratio is greater than 20, than your monthly mortgage payment is usually higher than rent for a similar home.
Beyond any calculations you can make it all comes down to if you are ready to make such an important commitment in your life. If you buy, are you willing to stay in this place for 5 years? If you need to move, selling your apartment is much harder than simply going on to rent another. However, many buyers are satisfied with the thought that they do not have to move if the rent increases, are locked into a comfortable payment and can enjoy a more owner occupied environment/neighborhood. Ultimately it’s a personal decision. If you are seriously considering this option, your best bet is to contact your broker and seek their opinion; they will be able to help you either way.
Check out this New York Times Article Answering the Same Question for the Whole Country- while the article may be a bit outdated the facts and suggestions are still relevant.
