Seasons Change, And So Do We

The week before Labor Day always carries a bittersweet quality, probably a reminder of those boyhood summers which seemed to stretch on forever but ended with the advent of September. Now that I am a grandfather rather than a schoolboy, the years pass the way months did in those years. Along with some diminished vigor, one does enjoy a wider perspective. Today I want to apply that questioning perspective to a number of New York City real estate truisms as we gear up for fall.

• It’s always best to buy. Actually, it’s not. Owning your own home is still a big part of the American Dream and, at least for now, the home mortgage tax deduction seems safe. That said, as prices rise ever higher in New York, the likelihood of enormous percentage gains in value decreases. So buying really only makes sense with a longer timeline. I tend to advise people in today’s environment that it’s best to have, at minimum, a 4 to 5 year ownership window in order to make a purchase financially worthwhile. If you only anticipate a 3 year sojourn here in the city, you should rent. And there are some great rental deals out there.
• Renovation is too complicated and costly to undertake. Renovation does require a particular mindset as it can be both complicated and expensive, especially in co-ops. That said, unrenovated apartments tend to offer the best value in New York at the moment. Since so many people DON’T want to renovate, prices for these unrenovated units reflect that lack of demand and can provide real opportunity for those who want everything their way, or who can tolerate renovations spread out over a few years, or who are real do-it-yourselfers. Or any combination of the above.
• Location, location, location. In cities all over the country, including New York, the choice of location has become a moving target. While its primacy as a marker of how best to invest still holds, the transformation of so many American urban landscapes over the past few decades makes it hard to know exactly what these best locations are. In New York, Fifth Avenue will always be Fifth Avenue, but what about Frederick Douglas Boulevard, now arguably the Fifth Avenue of Harlem? Or Prospect Park South, where values have doubled over the past 8 years or so? Yes, location matters, but we all need to keep a clear eye on WHICH locations matter.
• For most Americans, their home is their biggest investment. True, but it doesn’t really resemble any other kind of investment. Even in a hot market, you usually can’t get out fast. If there’s one thing the recession of 2008 taught us, it’s that your home is not a cash machine. Refinancing to take cash out is, in general, a really bad idea. Owners should regard their homes as bedrock, not liquid. It’s the base on which your other assets, including that most valuable asset – your personal life – rests.

We should all keep in mind, as we move into what will certainly be a finicky fall market, that even truisms have nuances. Smart real estate decisions depend on multiple factors: your moment in life, your financial and physical health, your ability to tolerate risk, and your short term and medium term life goals. All these factors inflect the real estate decisions we make.  As summer begins to fade into fall, it pays to consider the role our real estate plays in our life.