The 'rent or buy analysis' - (Bushwick) Brooklyn, NY
The 'rent or buy analysis' - (Bushwick) Brooklyn, NY
In Bushwick Brooklyn, defined as zip codes 11221 (east of Broadway) and 11237, prospective residents can save money by paying to rent their living spaces, as opposed to buying them. Apartments rented through StreetEasy within the last 3 months offered renters deep discounts at a time when Americans still find themselves concerned about inflation and rising costs. This finding holds across high end 1 beds, 2 beds, and 3 bedroom apartments. This also supports the research from Redfin that says that in 46/50 major metro areas in the U.S homeownership comes at a 25% premium.
Below, I have compiled some data comparing the rental prices with the monthly expenses associated with owning a property.
What is the rental landscape like now?
Average Manhattan rents have reached a record high this past July. If this feels like déjà vu, that’s because it is. Manhattan rents have hit their third record high in the last 3 months. According to Miller Samuel and Douglas Elliman, average apartment rents in the borough of Manhattan are 30% higher than in 2019. That means everyone not willing to pay an average Manhattan rent of $5,588, will come knocking on your door if you own property in Brooklyn, or Northwest Queen
The takeaway
While the run up in rents in NYC the last few years can’t be expected to continue so vociferously, one can expect the rents to continue to rise. Here’s why:
The cost of homeownership is up. From June 2022 to June 2023, 30 year mortgage rates have increased from ~5.0% to over 7.0%, meaning larger monthly payments for new homeowners.
Current rent growth supports continued growth. July 2023 average rents in Manhattan represented a 9% increase from July 2022. Rents don’t usually go from a near 10% growth rate to negative growth in a short span of time. Rents will continue to rise.
Construction and new building permitting are at standstill, historically speaking. According to Mark Levine of the City Council of NY, Manhattan did not approve a single new building in the month of July, and the five boroughs of NYC approved only 10 buildings, representing 279 new apartments. Levine pointed out that in July 2013 the city of NY approved 2,525 new housing units, and in July 2022, 527 new units citywide.
Until the 421A tax abatement comes back to spur on more development, owners of existing, fair market multifamily will continue to benefit from rent growth and renters will continue to rent. Everything else is noise.
Rent vs. Buy – told through pictures – Brooklyn, zip code 11237
1 Bedrooms
1503 Jefferson Avenue apt. #1B
1 Bed 1.5 bath duplex rental with garden access Rent this for $3,050 / month (no fee)f
373 Palmetto Street apt. #2B
1 Bed 1.5 baths duplex condo with garden access
Buy this for: $4,381 / month
Total Cost: $620,000
2 Bedrooms
419 Evergreen Avenue apt. #4B
2 Bed 2 baths rental with terrace
Rent this for $4,500 / month (no fee)
959 Madison Street apt. #2B
2 Bed 2 baths condo with terrace
Buy this for $7,986 / month
Total Cost: $1,100,000
3 Bedrooms
518 A Evergreen Avenue #2
3 bed 2.5 baths rental with roof access
Rent this for $5,875 / month (no fee)
449 Evergreen Avenue #2
3 bed 2.5 baths condo with roof access
Buy for $7,855 / month
Total cost of $1,249,000
Note: Mortgage payment figures were arrived at by using:
20% cash down for 373 Palmetto St. and 449 Evergreen Ave. 10% down for 959 Madison st
7.11% interest rate
30-year loan terms / amortization
Common charges and taxes were added in to create all-in cost figures under’ buy this for XYZ / month”
Sources: StreetEasy