Thursday, July 28, 2005
Trading up is hard to do in a bubble
With incomes rising only 10% between 2000 and 2004 but average condo and co-op prices rising over 40% in New York, your windfall won't buy you a better home, according to this New York Times story (registration required). Unless of course you move to an area that's much cheaper usually in the middle of the country rather than the coasts.
"You often think, 'Geez, I have this huge windfall,' but your neighbors and the people in the building next door have the same windfall," said Christopher J. Mayer, a professor of real estate at the Columbia Business School in New York. "There are a lot of people who want to trade up, so that's really the problem they are facing."
In some places prices of bigger homes are hitting records, putting them out of the reach of even those who, on paper at least, have accumulated considerable wealth. In Manhattan the average price of a two-bedroom apartment is now $1.5 million, according to Miller Samuel, a New York real estate appraiser, while three-bedrooms average $3.6 million. In Cupertino, Calif., the average price of a four-bedroom house is nearly $1.1 million, according to the Silicon Valley Association of Realtors.