COMMENT OF THE DAY: THE RENT ISN’T TOO DAMN HIGH “People who think that $3,000 plus for rent in a luxury high-rise in Houston is ‘outrageous’ have not been paying attention for the last 10 years. Museum Tower and several others have been at 95%-plus occupancy for years with similar rates. I think a lot of Houstonians have NO idea just how wealthy hundreds of thousands of their fellow Houstonians actually are today.” [Jon, commenting on Ashby Highrise To Start Rising on Bissonnet This Year]
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I agree. It does require a person with money that they can just throw away though. You are paying a lot extra for that view. You can get a much nicer place where you don’t have to ride an elevator everyday for far less in Houston. I choose to throw away my money on other things. I get the high rise view all day at work.
I think a lot of Houstonians have NO idea just how BROKE hundreds of thousands of their fellow Houstonians actually are today. $3000 a month is high bro
That’s my entire month’s take home pay, and I’m smack dab in the middle class. I wonder how the other half lives…
I also think a lot of people fail to understand the true meaning of luxury. Unfortunately, every high-rise and mid-rise in Houston that goes up claims to be luxury, diluting the meaning of the word for the average Houstonian. True luxury is expensive. True luxury also isn’t for the average person, much as we’d like it to be.
That’s 36,000 a year. Or… The a downpayment on a $300,000 condo with a similar view.(at least the way I see it
Let’s compare the cost of a new highrise apartment against a new highrise condo.
Consider the cost of a downpayment, the closing costs, principal and interest, insurance, property taxes, the HOA fee, repair and maintenance, and risks inherent to ownership, and then closing costs again when you try to sell…combined with the inescapable FACT that the value of a highrise is primarily having to do with improvement value (which depreciates like a car) relative to land value…combined with the illiquidity of the asset and the immobility that this can impose on a household.
What gets paid toward principal or that has any possibility of appreciating is an abysmally small percentage of the total cost of ownership. Highrise residential condos are the shittiest asset class of real estate that I’m aware of…with one exception, and that’s highrise office condos.
Given the option if you value the view from a tall building, ALWAYS rent your highrise residences.
This place isn’t for me. It isn’t for you. The people who will pay these rents are not financially affected to any significant degree by the money they may be losing by not buying the property outright. Perhaps they are wealthy healthcare tourists for whom renting is simply more practical than the hassle of finding and buying a home for a year or two. Or, it’s a consulting company that rents a few condos to house project managers who will only live in Houston for a few months or a year.
No matter what the case may be, the entity paying the checks prefers to keep its finances liquid and ready to invest in opportunities with better potential for returns than what they might expect out of a condo in Houston. These renters are not missing a chance to make money with this residential property; for them, it’s just an expense.
There was an interesting article in GQ where the author interviewed people who earned five times less than himself, five times more than himself, five times more than that, etc. etc. It was quite eye-opening, and for me it highlighted the fact that what may be a critical and obvious financial decision at one income level, becomes an inconsequential nuisance at the next one up the ladder. For some people, the decision to buy vs. rent is equivalent to the decision this blog’s readers make when they decide to buy the $3.50 gallon of milk at Kroger instead of the slightly cheaper gallon at CVS. There are people who cannot spare that “chump change”. Maybe you and I of the former middle class can’t spare a few hundred or a few thousand dollars. The people who will live in the Ashby highrise are those who call that chump change.
@Purdue,
Actually monthly costs in your new $300,000 condo will get to within a few hundred dollars of the $3,000 a month rent.
P&I $1,200 (after your $36k down)
Taxes $750
Insure $250
Maint.fee ?
Add your closing costs and commission when you sell and many folks are deciding to rent w/ no strings attached, plus $300k condos in Houston historically don’t appreciate much, unless you bought right (Post Oak Lofts or the Mosaic a year or 2 ago). Just my 2 cents.
People are still clueless; these prices aren’t limited to high-rises. A two-bedroom apartment in most of the new “luxury” garden apartments and mid-rises inside the loop are almost all more than $2K/mo and units pushing $3K/mo can be found in most every one of them – except that they are usually rented. For a two-income professional household, couple or roommates,this is not a big deal. In most of these properties the amenities are the big draw, and people are willing to pay for them. This site is overrun with people who think that any decision that they wouldn’t make must be a bad one. Get over yourselves. Many, many people don’t want to buy a house for all kinds of reasons. Buying isn’t for everyone and is NOT always a better investment than any other – ask the millions who are in foreclosure.
I stand corrected then.
Apologies!
@ Rodrigo: Can you link to that article in GQ? You’ve piqued my interest.
We can debate the relative merits of renting versus owning. We can come up with scenarios of the kind of person who rents luxury apartments in Houston. But ultimately the real questions are, how many people in Houston are willing to rent $3,000 a month apartments, and how many apartments are available at that price point? As long as the two numbers are close, we’re OK. But with all the new apartments being added at the top of Houston’s rental market, it seems like we’re at risk of overbuilding.
A lot of these high-end apartments are filled with executive and high-salaried workers on relocation assignments. If they will only be here for 2-4 years, it is often not worth buying a home. If they’re staying longer, they still often rent until they get to know Houston. Also, these properties are ideal for people who travel frequently and for long periods of time, as amenities often include concierge service, housekeeping, mail service, dog walking, etc. Not to mention the kind of security you don’t usually find in a single-family home.
@ ZAW: I feel good about the Ashby site because it will be on an irreplacable site in the best residential neighborhood out of any of the proposed apartment highrises.
And after all, there aren’t that many proposed apartment highrises.
Niche, here’s a link to the GQ article. I remembered reading it too; it’s fascinating.
http://www.gq.com/news-politics/big-issues/201207/amber-waves-of-green-jon-ronson-gq-july-2012
If anything it sounds like these guys are something akin to originalists — they buy expensive condos to live in, not to sell.
To the extent that that’s true, I can’t find much wrong with it.
@TheNiche: Jon beat me to it!
@The Niche. There are several projects breaking ground/going up soon: the 21-23 story Sovereign, the 21 story Ashby and the 30 story project at the North East corner of West Alabama & Weslayan.A monstrosity designed by an architectural firm burnt out on acid/coke/crack.Developed by a company from (hold your noses) Dallass!! it gets douchier every day.
I can confirm the temporary living accomodations for short term assignments. I’ve been expated to Asia and Europe and the company budget for my place is way beyond what I would spend myself, even though I could afford it. This is not to make me happy, it is to make the wife and family happy. An unhappy wife on an expat assignment means moving back early and that costs a fortune. Better to live in the nicer parts of town to avoid that issue completely.
@ Jon:
Yes new apartment prices are high too. I recently went apartment shopping with a friend. When he saw the prices he bought a townhouse instead. The townhouse costs less per month, is larger and has an attached garage. He has excellent credit though. Maybe many of these people paying so much for apartments can’t get a loan.
All these people in fancy apartment complexes a 20 minute drive from downtown, and the Third and Fifth sit stagnant even though you can walk downtown from there.
while you can walk to downtown from the third and fifth, you may not get there with your wallet or life. . . .
@Spoonman: Anyone who can afford to live in Southampton is not going to be walking anywhere in the 3rd and 5th. The lofts at the edge of downtown look nice, but the area is way too gritty, and not in an “urban chic” sort of way. Also, I doubt many people in Houston have walking commutes more than two blocks long, what with our weather.
The competition for a $3000/mo apartment is a $400,000 townhouse, which, at 10% down has a PITI of ~$2400. Add on your maintenance and upkeep costs (plus the value of your time), and the difference is probably not that much.
Now, assume you’re not sure how long you’ll be living in Houston (or in a particular neighborhood, or whether or not you’ll move if you have kids, etc.): If you sell after three years, 6% commission on $400k over 36 months is $670/month, which makes the rented apartment look pretty attractive by comparison.
If there’s a market for $400k+ townhouses (and there apparently is) then there must be one for $3000/mo apartments, too.
I’m not saying I’d want to live in the Third or the Fifth either. But someday the math will start making sense for a group of people.
Spoonman, http://www.youtube.com/watch?v=xlA9bNk3b5Q
“That is the worst idea I’ve ever heard in my life, Tom.”
“Yes…this is horrible, this idea.”
To be fair to you, lots of people walk into downtown from the 5th ward side. They’re called homeless dudes HEYO
—
When I went looking for condos, I rarely found one with maintenance/HOA fees less than $500, and found a few pushing over a thousand, just for maintenance. Assuming these luxury apartments have similar amenities as the condos I was looking at, you can mentally deduct ~700-1200+ from the rent as you would have been paying that much in fees at a condo anyway.
Spoonman: I think the math is already starting to work for some people. Remember the guy who was concerned that he had 30 days to vacate the Andover Richmond property in Montrose? The 3rd and 5th Wards may be a good option for tenants like him, – as older, more affordable properties continue to disappear from Montrose. Of course it’s a while before anyone would drop $3,000 a month for an apartment in that area.
.
The New York Times had an article in January titled “So You’re Priced Out, Now What?” They looked at neighborhoods, sometimes miles from each other, in very different price points, but that looked like each other. They had pictures of a street of gorgeous brownstones in Manhattan’s Upper West Side; and an equally gorgeous street in more reasonable Prospect Heights Brooklyn. You’d swear they were side by side; not miles away. The same thing happens in Houston, and Montrose versus the 3rd and 5th Wards is starting to be like that.
The third and fifth are rough but I think I would prefer to live in north side since its relatively hispanic. By the time I graduate the neighborhood will be in the early stages of gentrification, especially considering that the rail will be finished next year. You couldn’t pay me to live in the third again, I did a stint living there and when i saw a man with his face wrapped with a bandana carrying an ak47, I got out as fast as I could. Riverside terrace is beautiful though.
@ Patrick: So, aside from Ashby, there are only two other new apartment highrises going up that would be competition. And one of those will have already been leasing for a while by the time that Ashby delivers; the other one isn’t in as awesome a neighborhood as Ashby.
@ Jon & Rodrigo: Reading that article was a waste of my time. I could write a totally antithetical article to that one provided I got to cherrypick my interviewees and the places they lived.
@TheNiche: I’m sorry you felt your time was wasted. I didn’t think of the interviews as cherrypicked; they’re just one of many possible stories within that income bracket.
@ Rodrigo: The lowest-income interviewee was hand-picked for the author from the Haitian community in Miami by a union. The interviewee only worked part-time. That sends up several red flags. That guy isn’t typical; his case is the worst of the worst.
I’ve hired people part-time for minimum wage in the past. They lived waaay better than I did (or do, even now, arguably). Their circumstances are not luxurious, but they’ve got time to enjoy themselves and to be human. They have girlfriends, wives, families, relationships that they can be proud of. OTOH, as an entrepreneur (which made me poorer than that Haitian, I kid you not), I had no time for myself or others, lived with roommates in a cramped apartment; as a decently-paid consultant, I still have no time for myself or others and live in an apartment that I might spend three or four nights a week in. But at least I’m well-respected…right?
Maybe I’m not typical for my income bracket, either. But neither is a poor Haitian in Miami.
Idiots,
In 30 years you get all your money back, plus about three or four times the amount you paid for the piece.
People wants to live luxurious life at any cost. but they don’t know what actually the luxury is, they think that having all the facilities in the apartments.