|Is now the right time to BUY in New York City? Let me give you some food for thought.
Besides being a very expensive thing to do, buying real estate in Manhattan always came with a question: is that the best thing do with my money? Followed by: does buying make more sense than renting?
While this argument has been going forever, and both sides make valid points, we can’t argue with the fact that many people have been buying in Manhattan all the time, and over time they made lots of money because of that.
The answer to this question was somewhere 50-50 Yes and No. Today it would be 100% YES.
The reason is simple.
Throughout the past 20 years or so, buying in Manhattan would get you a modest annual return of about 2.5% give or take, not impressive indeed, but also very common for big metropolises. And that’s because rent is “sticky” as they say in economics, and rent keeps purchase prices from rising any faster (and you thought the rents were high).
But what we are witnessing in 2021, is that although the deal volume went up to all time high, sale prices are still far from the records we saw in 2016-2017. HOWEVER, rent picked up to a record all time high! That means that potential return on your investment has climbed up, and now a more attractive annual return of 4% can be achieved. That’s something that we haven’t seen here in decades!
And for those who debate if they should buy or rent: rent went up so much that buying started to make so much more sense. With current mortgage rates at record lows, your monthly payment (all together including your mortgage) will be very similar to what you’d pay in rent. Therefore, to someone like me who has been in this market for 15 years, buying has never been so attractive. The alternative is literally throwing money down the drain on rent.
And here is something else to consider. Sale prices have stayed low due to the high inventory in the past 3 years; now that we are witnessing a record volume in purchases, it is only a matter of time before inventory goes low again, and that’s when prices go up.
Don’t miss the train.
Itay Gamlieli, CEO