As prices continue to escalate in the hottest market on record, interest rates have increased. A little explanation is necessary at this point to make everyone know the gravity of our financial situation. The most recent increase last week was 1/2 percentage point (1/4 point on 3.16.22) by Jerome Powell, our Fed chair. A while back he said that inflation would be transitory as we know how that prediction went. He should have started the increases in 2021 with1/8 of a point, anticipating the future with the supply chain the way it was morphing into an extremely challenging time.
I am quite surprised that the inflation factor was not taken seriously enough. As I mentioned in last week’s column, it is definitely not running at 8 percent when you add into the CPI, food and energy, but closer to 18 percent. Just look at your food, heating and gasoline bills, which are up substantially.
I remember getting gas out on the North Folk for $1.97 a gallon in 2019 prior to the pandemic. Now it’s $4.24-$4.49. Maybe they should open up the Alaska pipeline right now to ease the price for those who can least afford it. What is occurring right now may just really slow down our economy, adding to our already bloated national debt of $22.3 trillion. But actually if you add up all the IOUs, our debt is probably much higher.
Now we get onto whether purchasing a co-op or a condo is a better path to pursue. If you have been priced out of the home market, then either one will work. However, you need to sit down and think which approach will be the better investment over the long run. The only answer from my perspective is a condo, which is usually a luxury entity with a 24/7 doorman, indoor parking, sometimes an exercise room and always an elevator.
If you have the budget to purchase and possibly plan to keep it as an investment for the future, then you’ll have it when you’re ready to buy a single or multi-family home. However, the differential between an often less expensive one-bedroom and one-bath co-op and a one-bedroom, 1.5-bath condo (standard for condos) ranges from $100,000-$300,000, depending on which building you are considering comparing it to.
A one-bedroom condo usually has 1.5 baths, while the co-op has only one bath. Condos are considered real property and pay monthly common charges plus real estate taxes separately. One pays monthly maintenance fees when owning a co-op, which includes real estate taxes, daily maintenance in and around the building, salaries of the super and porters, payment of principle and interest on the underlying mortgage on the building and land.
A co-op also has stock ownership attached to it. There could be a flip tax and other expenses associated with a coop. However, as long as the financials of the cooperative building are solid, you should have no problem eventually selling. It is imperative for you and your attorney to check the current and last year’s financials, which will reveal the stability of the building, e.g., how much cash is in the working capital account, which is used to pay daily bills as well as the reserve fund, too.
You can also determine if there are any capital improvements that are noted currently or in the immediate future in the minutes that are taken when there is a board or building meeting. You or your attorney has the right to review them in the management’s office. This can determine an assessment or an increase in monthly maintenance and whether or not it is a short-term obligation or much longer.
Checking the offering plan with all the up-to-date amendments will also be very helpful. For the most part your co-op is somewhat restricted for renting out after you move on to a home. A condo has very little restrictions, but there may be some rules that you would have to abide by.
As you can see there are differences between co-ops and condos. However, your financial situation will determine which one is not only affordable, but which one will provide you the best return in the long run.
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Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 in Great Neck. He has 40 years of experience in the Real Estate industry and has earned designations as a Graduate of the Realtor Institute (G.R.I.) and also as a Certified International Property Specialist (C.I.P.S). For a “FREE” 15 minute consultation, a value analysis of your home, or to answer any of your questions or concerns he can be reached by cell: (516) 647-4289 or by email: [email protected] Just email or snail mail (regular mail) him with your ideas or suggestions on future columns with your name, email and cell number and he will call or email you back.
Too many errors to count: ” Maybe they should open up the Alaska pipeline right now to ease the price for those who can least afford it.”
You are no doubt referring to the Keystone pipeline, which emanates out of Alberta, Canada, not Alaska. All of it’s output was for export, not domestic consumption.
The Trans-Alaska pipeline has not stopped operating. In any case, none of this affects the price. Petroleum distillates are the nation’s #1 export product. If we kept it for ourselves, producers would pay us to take the stuff off their hands. Same with natural gas.
“As I mentioned in last week’s column, it is definitely not running at 8 percent when you add into the CPI, food and energy, but closer to 18 percent. Just look at your food, heating and gasoline bills, which are up substantially.”
I wrote an entire piece that appeared in this paper how the CPI is calculated, and how it is indexed. Food costs aren’t up THAT much, and like gasoline, takes up a far smaller amount of “wallet share” than they did as recently as 10 years ago.
https://www.flomartin.com/single-post/inflating-inflation
If you’re driving a two bedroom apartment on wheels, that’s on you.
The biggest factor in the rise in CPI, by far, is real estate. Which you somehow didn’t mention.
” What is occurring right now may just really slow down our economy, adding to our already bloated national debt of $22.3 trillion.”
The national debt isn’t a factor in any of this. However, according to CBO, not only has the deficit been slashed, but we will record our first surplus since the Clinton Administration this year. However, if you’re still concerned, we could still raise taxes and phase out the Mortgage Interest Deduction.
“A while back he said that inflation would be transitory as we know how that prediction went.”
Unfortunately, that prediction was made prior to the launch of the Ukraine War. Supply chains were on their way to equilibrium prior to that in response to the disruptions the COVID outbreak had on Chinese shipping.
Good Morning David,
I appreciate you comments. However, as I am always asking and discussing our current economic situations with my clients and so many others that although you say gasoline and food has had less impact on inflation and consumers, unfortunately, maybe it’s not only the costs but the psychology of those, what you call “minor increases” that have effected them. Are we just spoiled with lower prices compared to other industrial countries?
When it comes to oil, that was my error in labeling the Alaska pipeline, which should have been the Keystone Pipeline. However, wouldn’t you agree, the fact that we are the largest producer of oil and natural gas, that those companies or the government should insist that at least 10% of those supplies should stay here so the price of gasoline could be reduced substantially? If we have the resources, does it always have to be about how much $$$$$$$ can be earned, but instead should consider the U.S. consumers and the benefits to us as a country? Money is the root of all evil as it has been throughout history. Our empire, in order for it to survive, must make some drastic changes over the next 3 years & 54 days as the average age of an empire throughout history has been 250 years. Those that are average seem not to take care of those that are most in need. Do we really take care of our lowest denominator groups. Yes, I know that there is welfare and all the vouchers and benefits that are given out. Also, we’ll see how fast inflation comes down going forward and I do agree real estate prices have escalated way way to far. However, there are still approximately 35% of our population that are renters and a portion of them are not educated enough to learn how to buy and many are paid wages that will always keep them as tenants. But what about proper education to raise their economic status. I think we should go out for breakfast, lunch and dinner for a further in depth discussion as I normally don’t interact with people that have your knowledge. So call me if interested. (516) 647-4289
“Are we just spoiled with lower prices compared to other industrial countries?”
Yes. $8.00 a gallon is not unusual in most G-7 countries right now. We’re CONDITIONED to overconsume because policy encourages it. And it doesn’t take much to buy a Senator Manchin. Or 10 like him.
“that those companies or the government should insist that at least 10% of those supplies should stay here so the price of gasoline could be reduced substantially?”
Good luck getting THAT legislated. We can’t even regulate insulin. Why would any producer agree to voluntarily sell a product for a lower price domestically than they would get exporting it?
“However, there are still approximately 35% of our population that are renters and a portion of them are not educated enough to learn how to buy and many are paid wages that will always keep them as tenants. But what about proper education to raise their economic status.”
That’s not the problem. In fact, some people are paid wages that keep them on the street, which I’ve pointed out several times in this paper. In Berkeley, adjunct professors are reduced to living in their cars. “Think they’re uneducated?” Supply is artificially constrained, and prices are artificially propped up by tax policy. You think there’s a moral failure on the part of the people who are affected by this.
They’re not the ones who have failed. The people who PUT them in such precarity are responsible.
Correction: Those that are above or way above average e.g. much higher income than most, seem not to take care of those that are most in need. Do we really take care of our lowest denominator groups.
To quote Roland Barthes, “try for a society based on justice, not charity.”
People who live in this bubble of ours don’t realize it, but the economy stopped working for tens of millions of people decades ago.
And that was deliberate policy.
You just may be correct, but to me education and proper paying jobs brings more people out of poverty. It all depends on the motivation of each individual. Blaming others isn’t productive and if you want or need something bad enough you will succeed and that is how our country was built. It is why everyone wants to come here, get our superior education and unfortunately those that leave to go back to their own countries may seek out a different lifestyle and those that stay see the tremendous opportunities before them.
The average life of an empire throughout history has been approximately 350 yrs and we are fast approaching that number as 3 years an 48 days to go to where become even more mediocre as a society. Something could be done, but it’s always been about the $$$ and not about our people. They haven’t worked for us in so so so many years as we work for them!
“Blaming others isn’t productive and if you want or need something bad enough you will succeed and that is how our country was built”
This is an incredibly naive view. Not wasting my time.
Conversation over.