Source : Sunday Times - 5 Apr 2009
A few days ago, the Standard & Poor’s/Case-Shiller index reported the largest decline in home prices in metropolitan areas in the United States since records began - a steep 19 per cent.
In the face of such horrendous news, we reacted like most Singaporeans would. ‘Maybe we should look-see, look-see, and find a place to buy,’ said the Wife, flipping through the real-estate listings.
Theoretically, it made sense. Ever since we moved to New York, we’ve been renting - a process my parents once described as ‘throwing your money down a hole’. But it wasn’t by choice. We just never had enough money to acquire anything during the bonanza that has been New York city’s property market for the past 15 years or so.
If only we had enough cash or if only we had enough credit history to qualify for a mortgage, we would often moan to each other, gnashing our teeth as we watched the values of various properties we were eyeing double, sometimes triple within five years.
But now a window seems to be opening for us to belatedly get in on the game, albeit a small one, because New York’s real estate prices remain strong relative to the rest of the US. According to the index, it fell only 9.6 per cent. So, even if we bought a place, it would mean we were buying something that was overpriced by a factor of three instead of a factor of four.
House hunting in New York is an exercise in distrust and double entendres: If the ad says the place is ‘cosy’, it means it’s a miniscule Hobbit hole, If it’s ‘near to nature’, it’s probably rat-infested. And heaven help you if it says it needs ‘tlc’ (tender loving care), because it probably means you have to gut and rebuild it.
Consistent with this, the Wife and I have been finding that anything within our price range invariably comes with caveats attached.
There was the lovely house with a lovely garden and lovely kitchen, but with a not-so-lovely crack circling the foundation. There was the affordable duplex condo - its affordability no doubt owed something to the floodwater stain that ringed its lower level. We got all excited over one particular property, but this faded once we saw it had been converted, illegally, into a boarding house for illegal immigrant workers, and that it would cost at least an additional hundred grand to break down the warren of tiny subdivisions and restore the place to habitability.
And don’t get me started about the quintessential New York system of co-op housing, where you own a share of the entire building proportionate to the space taken up by your apartment, and have to be grilled by your prospective neighbours in a way that is more intrusive than an IRAS audit and marginally less demeaning than Abu Ghraib.
Irritatingly, the big bargains were also proving highly equivocal - they were either in super-luxe areas of Manhattan (down $1.5 million to a mere $9 million!) or in subprime neighbourhoods, that is, those areas where poor people were conned en masse by predatory banks and mortgage lenders into purchasing properties they couldn’t actually afford, resulting in this global mess we’re all in.
Some of these properties were nice and also affordable. But the neighbourhoods were often sketchy, and your new home could well be sharing a row with houses abandoned by their impecunious owners, including those broken into by squatters or drug users or both.
In less blighted neighbourhoods, the price falls were far more modest, either because the owners, being more stable financially, didn’t really need to sell in a hurry and could ride out the market, or they were still delusionary.
Our search was also muddied because we didn’t know whether we should be cool or kan cheong. Would prices continue to slide and we wind up paying more than the market rate if we moved in too soon? Or was the worst over, meaning we’d soon be priced out yet again?
The Associated Press says prices haven’t been this low since 2003, but we couldn’t afford anything in 2003 either. Asking property agents for their prognosis of the market also proved unhelpful. Their default advice is always to buy: In a bad market, buy to pick up a bargain. In a good market, buy before prices go up even higher. Of course, they’re hardly impartial.
I guess it’s hardwired into our DNA to think of realty as the best form of long-term investment, but really, after another tiring weekend of trudging through open houses, and all the conflicting data, I’m tempted to say ‘bye’ to buying.
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