Hoboken Mom Condo Living
Planning the long-term & juggling the everyday

When we first thought about selling our 2BR, our immediate reaction was to rent since it would free up our equity and allow us to buy a bigger place (the down payment would be liquid and we wouldn’t have lender problems caused by owning two places.) It made sense to sell, rent a 3BR and then take our time buying a 3BR or 4BR. I took a look at rents on realtor.com and figured out it would cost us between $3k and $4k to rent in Hoboken.

Everybody knows that now is a great time to buy. Interest rates are incredibly low (we qualified for 4.5% with one point on a 30-year fixed-rate loan!), prices are down and the market is really slow. The problem is, nobody knows what is going to happen with housing prices. If the economy improves soon (before the end of 2009) then will housing prices rebound? What about 2010? And if the recession continues for another year or longer, how far will housing prices fall before they hit bottom?

Once you own real estate, you do not exist in a vacuum. You cannot expect the price of your 2BR to stay high and the prices to drop on 3BR units in the same area. If you can afford to either live in your unit until the prices improve or rent it out for enough to cover your mortgage, you are less vulnerable to the market, but a 2BR owner is in a unique position because we own a unit but have a finite timeline for how long we can live in it before we outgrow it, unlike most 1BR and 3BR owners.

A 2BR owner is in a very delicate position that could pay off or be disastrous. When I first started thinking about buying back in early December 2008, some realtors told me to rent my unit for a couple of years until the market improved and I would get what it is really worth while others told me to go ahead and buy and not worry about selling because it would be easier to show after we moved out plus the spring market would be stronger (that one scared me because a vacant apartment just screams distressed seller, plus we would have to sign a 12-month lease to qualify for a mortgage, so how would I get the tenant out if a buyer showed up in month 2? I would have to buy that tenant out, and that could be serious money. And mortgage lenders will not accept a lease from a family member, so renting to my brother was out.)

What really made us change our minds about renting was that we were seeing some amazing properties pop up in our price range. The other factor was, who knows how long interest rates are going to stay this low? It’s safe to assume another six months, but I doubt they will be this low in 12 months and once the economy recovers and we feel more comfortable buying, interest rates will go up. We need a bigger home, preferably yesterday, and I didn’t want to be competing with all the other families out there for the same homes at the same time. We could have gone for a short sale but the logistics were too complicated (would our buyer be willing to wait six months to close?) Plus, while there are great bargains out there, none of them were what we are looking for.

The other determining factor in our purchase was that we decided we definitely wanted to stay in Hoboken and we found our ideal home at sale price we never thought we’d be able to get (well under $1 million). We always thought we would have to move to the suburbs to get anywhere near enough space for our family, plus the schools there are excellent. The suburbs have also been cheap lately relative to Hoboken values.

We sat down and compiled a list of all the things we had to have in our next home. The list looked something like: 1700 sf or more, new construction (love that central air!), great schools, less than an hour away from NYC by car or mass transit, walking distance to the train and downtown stores, and great sun exposure. We would also prefer a culturally diverse area since we are an interracial couple. Then we went on realtor.com and started looking at the areas around Hoboken (Edgewater and JC for staying in the immediate area and Montclair and Tenafly for the suburbs).

We found properties that had some but not the majority of the attributes on our list. And the problem was that most of the items on that list were real dealbreakers. So even if we sold our 2BR and moved into a rental, there were no obvious places where we wanted to buy. We would solve our immediate problem of not having enough room, but then we would be stuck in a rental, dribbling away our savings because we lost all our deductions and possibly not even able to find our ideal home. And since we had a sale contingency clause in our purchase contract, if we did not sell our 2BR for the price we wanted, we were not obligated to purchase the 4BR. The worst case scenario was that we would wind up in exactly the same position; living in our 2BR.

We also do not like renting. We rented back in 2002 from the Applied Companies, and the quality of the units was much inferior to the ones we have owned, plus one of the wall-through AC/heaters was broken for 20 out of the 24 months we lived there. Between that and the long list of very high charges to do simple repairs ($17 to replace a light bulb?), we were not keen on becoming renters again.

You can rent from an individual owner or a luxury building, but an owner is not required to renew our lease and could sell or reoccupy the unit, and the rent on a luxury 3BR would be astronomical. There was no way I was going to pay upwards of $4k/month for rent, especially not if I could buy a comparable unit and pay the same amount for my mortgage, taxes and maintenance. And while the schools in Hoboken aren’t as good as the ones in the suburbs, they are decent and affordable. Hoboken also has free pre-k for 3 year olds.

No matter where you decide to buy, now is the opportunity to choose the perfect long-term home for your family at a monthly cost that is affordable. You also can buy a property that has attributes that would be desirable in any market (in our case, it is that fourth bedroom, which is incredibly rare in Hoboken.) Even if the price drops in the short term, we would be dealing with the same thing in our 2BR, plus since we now have enough space, we don’t have to worry about selling anytime soon so can wait until the prices come back up.

Next up: Applying a marketer’s perspective to real estate sales