Average Manhattan Home $1.6 Million

Housing slump my a$$. The average Manhattan home now sells for $1.6 million. The city average is $853,000.

What does this tell us? It tells us that the wealthy remain unscathed by the national economic turmoil, and the rest of us are left with even less affordable housing than before. And the before wasn't so great to begin with...

Thank god for Brooklyn.

Housing Bust = Higher Rent

As the housing market fizzles, rents are on the rise.

According to a recent Business Week article, Cautious Buyers Squeeze Rental Markets, during the past three months rents are up across the country. The highest spike is 3% in San Francisco for an average rent of $1757. It's not not much brighter here. In NYC it rose 2% so far this year, for an average rent of $2657.

Of course, if renters are really paying attention to the housing market, they might want to look at what's happening in their own recently gentrified neighborhood- because if prices fall the competition for that 2BR rental is going to be fierce.

Finding an Apartment in Manhattan for Elvis

A good friend of mine, who shall be called Elvis, recently told me she was curious to know what it would take to buy in Manhattan. She co-owns her own fashion line, is married, and currently lives in a studio rental apartment in the East Village. The thing is, because she has lived there for a very long time, her rent is around a grand. Also, because she has a businees that's profitable relatively recently, I'm going to assume that she doesn't have a whole lot of cushion. So it got me thinking, is it even possible for those with piggy bank blues to be able to buy an apartment in Manhattan?

So the non-negotiable thing is location, she won't move to Brooklyn. She also stated that she wants to remain at $1,000 a month. I used Bankrates's mortgage calculator and if she found an apartment for under $150k she could pay close to a grand in monthly mortgage payments. Elvis, I love you to bits, but this is not realistic. As you know. But not to fear, all is not lost!

Option #1, Buy a 2 BR and rent out one bedroom. If Elvis got a 2BR for $440,000 (yes, it's possible, but not easy to find), put $40,000 down, and took out a $400,000 mortgage, she would pay around $2660 a month. And I'm telling you right now, you're living so far uptown you'll get nosebleeds. So for the love of god, will you just get over your disdain for the subway, and recognize that a commute from Inwood to midtown is no better than a commute from Brooklyn. The difference in quality for your price range is significant. But fine, okay, I'm talking to a wall. At least the food is good. So moving along, then she should rent out the other bedroom to her sister. Or some other sucker. This seems a little high for Elvis, and $40k down is nothing to sneeze at, but if she could increase the downpayment and lower the mortgage, this is an ideal situation. Nobody buys an apartment thinking it's going to be the only one they ever own. But there is something to be said for buying something and being able to grow into it as your life grows. What if there's baby Elvises? What if Mr. Elvis wants his own music studio? While you don't ever want to buy more home than you can afford, you want to buy as much home as you possibly can.

Option #2- Stay in a studio. Studios can be had in Manhattan for $300k. I don't like this idea, frankly. It drops your monthly payment by less than a thousand, it's still a studio, and while it is an investment it's not like you're exactly moving on up. It may even be one of those cases where it is cheaper for you to rent than to own, given your particularly low rent.

Option #3- Stay where you are and save for option #1, without having to rent out the second bedroom. Hopefully by then your business will have flourished to the point where you can afford to carry the whole mortgage. Use a savings calculator to determine how much you can save in 2 years. For example, $500 a month at 4% is over $12,000. Of course, to get that $40k downpayment, you'd have to save $800 a month at 4% for three years.

And last but not least, just like getting an apartment isn't just paying first month's rent, buying an apartment isn't just about the mortgage. New York City has the highest mortgage fees, $3830 for $200k, so if you doubled that you're looking at $8,000 in closing costs. Also, you must include maintenance in your monthly mortgage calculations. Which means it matters what the maintenance is when you're looking at places to buy. And obviously, the 10% down is an ideal situation, it's not always the norm. All in all, just research up the wazoo while you're dreaming big. One place to start- even though she's an occaisional nut job, Suze Orman has an informative piece on Rent vs. Buy.

So short answer to a long post- it's possible. It may not be easy or quick, but it is defintely within your grasp.

Bubble? What Bubble?

New Yorkers like to think that they are immune to the housing bubble bursting because, well, quite frankly, have you looked at the cost of a two bedroom co-op in Brooklyn? But for those who are really paying attention beyond the affordability of half a million dollars and still not enough closet space, it's not about if the bubble will burst, it's about how painful it will be. And if you rent? There's no bubble because there's no space. Rents climbed 7.2% last year. Make nice with your landlord.

This week's New York Magazine's cover asks The $1,333,316 Question: How Long Before Our Real Estate Bubble Pops? What's with the price tag, you say? Well, that's the average sale price of all co-ops and condos and Manhattan, so you'll forgive us for choking on our leftovers, but for those with PiggyBankBlues that's a little too Lifestyles of the Rich and Famous. The article goes on to break down the risk factor expensive neighborhood by expensive neighborhood (it is real estate obsessed New York Magazine, after all). Williamsburgh prices are down by almost 10 percent, Bed-Stuy/Bushwick has 225 properties on the auction block, while Park Slope has zero.

"But brownstone Brooklyn’s real hedge comes from its mix. Park Slope and its ilk are home to a highly mixed demographic, with bankers next to teachers next to Safran Foers, notes Corcoran’s Deborah Rieders. That lends stability if, say, financial-industry bonuses go south next year. The locals are also stable in another way: Though plenty of residents cashed out during the recent run-up, many more have been here a while, which means not everyone bought at the top. In other Brooklyn hot spots, Gallant says, quite a few recent buyers could soon “wake up and say, What was I thinking?” (The wild card, of course, is Atlantic Yards. If 6,000 apartments are slammed into the neighborhood in a few years, they’ll play havoc with both the area’s makeup and its supply-and-demand equations.) The danger zones are likely to be areas that have glommed onto the cachet of these old reliables, where asking prices may be overreaching: the bottom edge of the Slope, say, or the fringe where Carroll Gardens fades into Red Hook."

* photo of David Blaine at the Lincoln Center by Knut Vidar Siem