Rent or Buy in New York? Compare the Costs
In Manhattan’s East Village, buying an apartment beats renting within four years. In the Soho area just a few blocks away, it would take 31 years before owning makes more financial sense.
That analysis of the so-called tipping point—the amount of time it would take for the cost of renting to equal or exceed the cost of buying a comparable home—is based on Bloomberg’s new exclusive, interactive map of real estate prices by neighborhood in Manhattan and Brooklyn, using fourth-quarter data from StreetEasy. The map, to be updated every three months, offers a view of areas with the biggest listing discounts, the greatest number of sales and the largest price increases—or decreases—from a year earlier, among other data points.
In a market weighed down by a glut of new luxury developments and resale listings that continue to pile up at ambitious prices, buyers have more choices and negotiating power. How they exercise that leverage, while it will vary from neighborhood to neighborhood, will shape New York’s housing story in coming years. The leasing market too is facing a supply surge, and as landlords offer concessions and cut prices to keep vacancies in check, renters looking to buy have added reason to delay a purchase—or bargain harder.
The median price of East Village properties that sold in the last three months of 2016 was $1.15 million and asking rents centered around $3,050 a month, leading to a tipping-point calculation of 3.8 years. In the combined districts of Soho, Little Italy and Nolita, where the median sale price was $2.65 million, renting is more affordable for 31 years.
In midtown Manhattan, where new skyscrapers such as 432 Park Ave. and 220 Central Park South are competing for the attention of ultra-wealthy investors, sales in the three months that ended Dec. 31 carried median discounts of 8.3 percent from their initial asking price—the biggest reductions in the borough.
Buyers in the West Village, a downtown neighborhood of historic brownstones and tree-lined streets, got median reductions of 5 percent. In Chelsea, home to the High Line elevated park, sellers whittled a median of 4.6 percent from their asking prices to strike a deal.
In many of Manhattan’s established neighborhoods, more than 40 percent of sales listings in the quarter got a price cut. On the Upper West Side, 42 percent of listings were discounted, and on the Upper East Side, the portion was 45 percent. The Lenox Hill area, in the East 60s, had the highest share, with 51 percent. The lowest was in East Harlem, where prices were trimmed on just 10 percent of listings.
In northwest and central Brooklyn—including the neighborhoods of Park Slope, Brooklyn Heights and Bushwick—some listings had their prices cut, but most buyers couldn’t rely on that to meaningfully reduce their costs. The median listing discount in many of those areas was zero. And in the trendy waterfront neighborhood of Williamsburg, sellers got a median of 1.5 percent above their StreetEasy-listed asking price in the fourth quarter.
“There are a lot of neighborhoods in Brooklyn that are really popular right now, and they favor sellers relative to buyers,” said Grant Long, senior economist at StreetEasy. “That means that buyers don’t have as much negotiating power in that part of the city.”
Brooklyn buyers willing to venture farther from Manhattan will find their investment trumps renting quite quickly. While closer-in Cobble Hill and Boerum Hill have a tipping point of 19 years, it would take only 1.6 years of renting in Sheepshead Bay to equal or exceed the cost of purchasing a home there.
“You can get a pretty good value for your money in these areas,” Long said.
StreetEasy’s tipping-point calculation takes into account homeownership costs including taxes and the principal and interest payments on a 30-year fixed-rate mortgage, and rental costs such as renter’s insurance and the broker’s fee.