The housing market has shown massive improvement, nearing pre-recession values around the country; still, less people are willing to buy and choose to rent instead.
According to Bloomberg, the homeownership rate across America is at its lowest in 19 years at 64.4 percent. This fall can be attributed to the much smaller percentage of first-time buyers, which currently comprises only 29 percent of all purchasers, "compared with 40 percent historically."
This phenomenon, however, is not the most economically sound. Trulia, a real estate website, has found that homeownership is cheaper than renting throughout the country's 100 largest urban cities. Even when factoring in mortgage, maintenance, taxes, and insurance, the average costs of homeownership are 38 percent less than those of renting.
While it does make more fiscal sense to buy, the influencing factors of the decision have not caught up with the real estate market. Chris Matthews of Fortune explains that for first-time buyers, the unemployment rate is "higher than what it was during the worst point of the recession during the early 2000s," making it difficult for young adults to buy. Even those with current financial stability may fear future repetition of the past economic downfall. "People don't want to be tied down to a mortgage they can't get out of quickly," said Joshua Solomon of DSF Group.
In Manhattan it can be even trickier for first-time buyers, or even any level of buyer, because of the high number of co-ops in the city and the board's ability to turn down a prospective buyer who does not qualify under their strict rules. For example, a typical co-op in Manhattan "may insist that one have two to three years of maintenance and mortgage payments in the bank," according to The Cooperator. The financial requirements for buying in Manhattan deter many young professionals from purchasing, making it even more difficult for them to accrue the needed assets for future homeownership.
Despite the rough times, it is still a great time to buy in New York City, especially for those veteran buyers -- if you were able to hold onto your property through the recession and not sell, now you will make a significantly higher profit. Even Knight Frank, the world's leading real estate consultancy, predicts that New York will surpass London to become the leading real estate market in the world within the next ten years. As a result, buying now would result in high likelihood that selling in the next ten years would result in a large profit margin.
First-time buyers may be deterred from purchasing today, but if you have the means, it is a wise decision. It can be the right time to stretch for the future, especially with interest rates remaining at historical lows... for now.